Types of NGO – Trust, Society and Section 8 Company

426+ Clients Served Globally

Tejaswini Jagatap
Tejaswini Jagatap@Client
Read More
The team is so responsive and always solve the questions that we have regarding work. They are professional and the quality of work is best. I'll definitely recommend this team to everyone!
Ankit Itoria
Ankit Itoria@username
Read More
The owner has wide knowledge about setting up a Business and their service is very prompt and delightful. If you are looking for experienced consultancy for your business you should try this out.on
Harshal Thakare
Harshal Thakare@Client
Read More
Called on Sunday evening to help me with trademark registration and Udyog buddy team filled it in less than 24 hrs. One phone call and few messages back and forth and the work was done.

The three types of organizations that are about to be discussed within this article are Non-Governmental organizations NGOs. These organizations are generally formed to promote social welfare, social development, and other charitable purposes.

In India, such an organization may be established as a Section 8 Company, Trust, or Society. Bear in mind that these are not the same. They have different purposes and uses depending upon what you intend to achieve through the establishment of the organization.

NGO – TRUST, SOCIETY OR COMPANY

Section 8 Company

Section 8 companies are governed by the Companies Act 2013.  A company under this section can be formed for promoting charitable objects relating to art, commerce, science, health, and so on. These companies enjoy all the privileges and are subject to all obligations of Limited Companies.

Trust

Trust is considered to be the oldest form of Charitable Organization. Trust can be either private or public. It is primarily created for the benefit of a section of people. Trust is governed by the Indian Trust Act 1882. The main instrument for Registration of Trust is Trust Deed. The creator of the Trust also appoints trustees. The trustees are given control or powers of administration of property in trust with a legal obligation to administer it solely for the purposes specified.

Society

Societies are governed under Society Registration Act 1860. It is generally formed by seven or more people who come together for a common charitable purpose. The main instrument for the Registration of Society is the Memorandum of Association.

The registration process of NGOs under the Indian Trust Act, Society Registration Act, or The Companies Act, 2013 is different, but the status of the organization is equal an NGO. There is no difference in getting funding from the Sources mentioned above.

Basis

Section 8 Company

Trust

Society

Statute/ legislationThe Companies Act, 2013Relevant state ActSocieties Registration Act, 1860
JurisdictionRegistrar of CompaniesDeputy Registrar/Charity CommissionerRegistrar of Societies
Registration documentsMemorandum and articles of associationTrust DeedMemorandum Of A Society
Stamp DutyDiffer from stateTrust deed to be executed on non-judicial stamp paper, vary from state to state.Differ from state
Members requiredMinimum 2Minimum 2 trusteeMinimum seven committee members. No upper limit.
Board of ManagementBoard of directorsTrustee/Board of trusteeGoverning body of council/Managing or executive committee
Grants and subsidies from the governmentConsiderable (possible)Not muchNot much
Preference in registration under  FCRA PreferredLow preferenceLow preference
Transparency HighLowLow
Legal right over the propertyHeld in the name of the CompanyHeld in the name of the TrustHeld in the name of the Society
Annual compliance requirementAnnual compliance of filing of accounts and filing of annual return of Section 8 company, with the Registrar of Companies (ROC).There is some annual compliance requirement depending on whether the trust is Private trust or Public Trust.

 

 

Annual filing of a list of names, addresses, and occupations of members of the Managing Committee of the society, with the Registrar of Societies.

 

 

 

What Should You Choose?

  1. Section 8 Company – Executing a wide range of activities and gaining reliability and credibility.
  2. Trust – More than one family member is running the business. Privacy in activities is much needed.
  3. Society – Ideal organizational body if you want an elected body to manage it. It also allows for an easy exit of its members.

An NGO can avail exemption under the Income Tax Act by getting itself registered and complying with certain other formalities, but such registration does not provide any benefit to the persons making donations. The Income Tax Act has certain provisions, which offer tax benefits to the “donors”. All NGOs should avail the advantage of these provisions to attract potential donors. Section 80G is one of such sections.

By virtue of 12A registration, Trusts and NGOs and other Section 8 companies enjoy exemption from paying income tax. NGOs are basically organizations that are meant for charitable and non-profit activities. However, they do have income and would be required to pay tax as per normal rates if not registered under section 12A of the Income Tax Act. Section 12A of the Income Tax Act, 1961 does not differentiate between charitable and religious Trusts. Hence 12A registration is applicable to both kinds of organizations.

Conclusion

From the above comparison, we get an overview of the important points that need discussion before choosing from the proper type of organization. Apart from these, there are some other important matters that need to be taken into consideration for choosing a better option for your business- Trust, Society, or Section 8 Company.

We, at Udyog Buddy, help entrepreneurs globally launch, manage, and grow their businesses.

Contact Details

Copyright © 2023 Udyog Buddy. All rights reserved.