Introduction
Non-Governmental Organizations (NGOs) play a crucial role in addressing various socio-economic issues. They operate on various levels and can be registered in India as trusts, societies, or Section 8 companies. Each of these has its own set of advantages and disadvantages, and the choice depends on the specific needs and resources of the NGO.
Forming an NGO in India
Forming an NGO in India involves several steps:
- Determine your NGO’s mission and cause.
- Form the Board of Directors/Members.
- Choose a name for your NGO.
- Prepare and complete the required Articles of Incorporation or Memorandum.
- Register your NGO.
- Collect Funds.
- Establish a wide network.
Types of NGO in India
Charitable Trust
A Charitable Trust is a form of organization which is formed by obligation annexed to the ownership of the property, and arising out of confidence reposed by the owner. It can be formed by various means and is subject to various Acts or legislation. A charitable trust can be formed by registering as a trust by executing a trust deed or as a society under the Registrar of Societies.
Cooperative Society
A Cooperative Society is a voluntary association of people, whose motive is the welfare of the members. It needs to be registered under the Cooperative Societies Act, 1912 in order to function as a legal entity. The membership of a cooperative society is open to all, irrespective of their caste, creed, and religion.
Section 8 Company
A Section 8 Company is established under the provisions of the Companies Act, 2013 which has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other objects.
Tax Benefits for Non-Governmental Organizations (NGO).
NGOs in India can avail various tax benefits. As per Section 80G of the Indian Income Tax Act, donations to Central and State Relief Funds, NGOs and other charitable institutions can be deducted from your total income to arrive at your taxable income. NGOs that are 12A-registered can apply for a tax exemption from the IRS.
Foreign Contributions and FCRA
NGOs can raise foreign contributions in India through FCRA registration. It’s mandatory for all associations, groups and NGOs that intend to receive foreign donations to register under FCRA.
The Foreign Contribution Regulation Act (FCRA) regulates the acceptance and utilization of foreign contributions in India. The act aims to ensure that such contributions do not threaten national interests and are used for the welfare of society.
Comparative Analysis of Trust, Society, and Section 8 Company
Analysis
- Trusts: Trusts are the oldest form of not-for-profit organization in India. They are easy to form and operate due to minimal regulatory oversight. However, they are generally irrevocable and difficult to wind up1.
- Societies: Societies provide a more democratic setup with an elected body to manage them. They allow for an easy exit of its members. However, their governance and public filing requirements vary from state to state1.
- Section 8 Companies: These entities are more robust, transparent, and accountable than trusts or societies. They offer greater credibility but come with higher costs and more complex formalities4.
Each type of NGO formation has its own advantages and disadvantages. The choice depends on various factors such as the nature of work, scale of operations, funding requirements etc.
Conclusion
Forming an NGO (Non-Governmental Organizations) in India involves careful consideration of various factors including the type of registration (trust, society or Section 8 company), understanding tax benefits and regulations around foreign contributions. It’s important for NGOs to understand these aspects to effectively carry out their mission and cause.
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