Overview
In India, the term NGO (Non-Governmental Organization) refers to an organisation that operates independently of the government and the profit motives of conventional enterprises. These organisations operate in places the government cannot reach directly and efficiently to fill in the gaps created by its inability to do so. The word NGO is used as an umbrella to encompass all legal entities that seek philanthropic and charitable contributions and use them for the benefit of society without the intention of earning a profit or that use the profit from the NGO’s operations to further its mission. These organisations have a well-defined cultural, educational, religious, or social mission. Nongovernmental organisations are not “owned” by anyone and cannot distribute income as dividends. Profits from economic operations are reinvested or spent on activities consistent with their missions. Donations, financial grants from unilateral and multi-lateral agencies, membership fees, rentals from leased immovable properties, various sources, and interest and profits on investments are typical sources of revenue for non-governmental organisations.
| COMPLIANCES OF A TRUST | |
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| Compulsory Audit of Accounts | A Chartered Accountant must audit a Private Trust if its income exceeds the Income Tax Act, 1961’s non-taxable income limit. |
| Annual Return of Income | After the accounts of the Trust are audited by the Chartered Accountant, the audit report should be filed along with the Annual Return of income under Form ITR-7 on or before the due date. |
| Report of Foreign Contributions | Every Trust which receives foreign contributions needs to submit information duly certified by a Chartered Accountant and accompanied by an Income and Expenditure Statement, Receipts and Payments Account and Balance Sheet within 9 months of the closure of the financial year to the Secretary, Ministry of Home Affairs, Government of India, New Delhi. A ‘Nil’ report must be submitted if no such contribution is received during the last financial year. |
| Submission of Annual Account Statement of FC A/c | Duly certified copy of the Account Statement of FC A/c needs to be furnished within 9 months of the closure of the financial year along with the Report mentioned above in point 3. |
| Issue of Certificate of TDS | Where any Private Trust is deducting tax at source for payment of salaries to the staff or employees (kept for managing the Trust Property), it needs to furnish certificates of TDS to the persons on whose behalf TDS was being collected. It should be done within 1 month from the financial year’s closure date. |
| Publication of Accounts in newspaper | Where annual income or receipts of the Trust (generated from the Trust Property) exceeds Rs. 1,00,00,000 (INR One Crore). |
Documents/Details Required for GST Registration of a Trust after registration
- PAN card of the Trust.
- PAN card and photo of settlers.
- Certificate of Registration.
- Details of the bank.
- In the case of leased property, the copy of the lease deed for the registered office premises and a NOC from the Landlord and electricity bill/property tax receipt/water bill copy of the registered office property.
- In the case of owning property, a copy of the sale deed and the electricity bill/property tax receipt/water bill copy of the registered office property.
- Appointment Proof of authorised signatory.
Compliances as per GST Law
- The company is registered with the GST Department and has a valid GSTN; then it has to furnish details of Sales & Purchases every month in a prescribed form to the GST department on the GST Portal.
- Have to maintain records of Sales & Purchases regularly.
- Have to collect GST on Sales Invoices and deposit through GST Returns with the GST Department.
- If required, have to furnish Annual GST Returns or cross the threshold limit for Annual Return.
Exemptions for a Trust:
- Charitable and religious trust income is tax-exempt under specific conditions. Section 10, Section 11, etc., exempt trusts.
- Section 11 exempts revenue from trust property used for charitable or religious purposes in India. This exemption is conditional.
- Under Section 12, voluntary contributions received by a trust or organisation solely for charitable or religious purposes are tax-exempt (subject to certain conditions).
- An electoral trust’s income does not include voluntary contributions (subject to certain conditions).
- Sections 10(23C)(iiiab)/(iiiad) exclude educational institute income (vi).
- Hospital or other institution income that meets Sections 10(23C)(iiiab)/(iiiad) requirements is exempt (vi).
Additional Certificates:
80G Certificate
The 80G Certificate exempts donors to charitable trusts or the Section 8 Company from taxation. A 12A-registered charitable organisation or trust can provide tax exemption under Section 80G. Deductions are limited. Donations over 10% of gross income are not tax-deductible.
| Who can avail of tax savings under 80G? | Who cannot avail of tax savings under section 80G? |
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How to obtain an 80G Certificate? The commissioner of Income-tax will process registration under this section after receiving an application from the applicant in Form 10 G. The following documents should accompany the application.
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SOCIETY
According to section 20 of the Society Act 1860, a society registration can be done for the following purposes:
- Promotion of fine arts.
- Diffusion of political education.
- Grant of charitable assistance.
- Promotion of science and literature.
- Creation of military orphan funds.
- Maintenance or foundation of galleries or public museums.
- Maintenance or foundation of reading rooms or libraries.
- Promotion or diffusion or instruction of helpful knowledge.
- Collections of natural history.
- Collections of mechanical and philosophical inventions, designs, or instruments.
| Requirements for the creation of a Trust | |
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PAN Card |
Of all the members of the proposed society has to be submitted along with the application. |
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Residence Proof |
Of all the members of the society also has to be submitted. The following can be used as valid residence proof:
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Memorandum of Association |
The memorandum of association has to be prepared, which will contain the following clauses and information:
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Rules & Regulations of the Society |
The rules and regulations of the society also have to be prepared, which will contain the following information:
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Covering letter |
A covering letter mentioning the objective or the purpose for which the society is being formed will be annexed to the beginning of the application. It will be signed by all the founding members of the society. |
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Proof of Address |
A copy of the proof of address where the registered office of the society will be located, along with a NOC from the landlord, if any, has to be attached. |
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List of all the members |
A list of all the governing body members has to be given along with their signatures. |
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Declaration |
The president of the proposed society has to give a declaration that he is willing and competent to hold the said post. |
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Registrar's Process |
The Registrar of Societies requires two copies of the above documents and fees. The registrar will sign and return the first copy after receiving the application and keep the second copy for approval. The registrar issues an Incorporation Certificate with a registration number after evaluating the documents. The signed Rules & Regulations and Memorandum must be filed with the society or state registrar for a fee. The registrar will register the society if the application is satisfactory. |
COMPANY NOT FOR PROFIT / SECTION 8 COMPANY
Registered under The Companies Act, 2013, where it is proved to the satisfaction of the Central Government (Power delegated to ROC) that a person or an association of persons proposed to be registered under this Act as a limited company—
- has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
- intends to apply its profits, if any, or other income in promoting its objects; and
- intends to prohibit the payment of any dividend to its members.
The Central Government may, by licence issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word “Limited” or “Private Limited,” and the Registrar shall, on application, in the prescribed form, register such person or association as a company unde “Limited” or “Private Limited.”
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