Voluntary organizations (VOs) / Non Governmental Organizations (NGOs) include organizations engaged in public service, based on ethical, cultural, social, economic, political, religious, spiritual, philanthropic or scientific & technological considerations. VOs include formal as well as informal groups such as: community-based organizations (CBOs); non-governmental development organizations (NGDOs); charitable organizations; support organizations; networks or federations of such organizations; as well as professional membership associations.
VOs / NGOs should broadly have the following characteristics:
- They are private, i.e., separate from the Government.
- They do not return profits generated to their owners or directors.
- They are self-governing, i.e., not controlled by Government.
- They are registered organizations or informal groups, with defined aims and objectives.
- In India a Voluntary Organization / Non Governmental Organization can be registered as Trusts, Societies, or a private limited non-profit company, under section-25 Company of the Indian Companies Act, 1956.
What are the Common Guidelines for Implementation of Centrally Sponsored Schemes (CSS) / Central Sector (CS) Schemes through NGOs?
Refer this document: http://mha1.nic.in/pdfs/ForeigD-ForeigD-FCRA_FAQs.pdf
Non profit organisations can be registered in India as a Society, under the Registrar of Societies Act or as a Trust, by making a Trust deed. A third option is registration as a section-8 Company under the Companies Act, 2013 or section 25 (as old act).
Registering a Non Profit in India can be done in a total of five ways:
- Section-8 Company
- Special Licensing
- Section-25 Company (old companies Act)
Whether a trust, society or section-8 company, the Income Tax Act, 1961 gives all categories equal treatment, in terms of exempting their income and granting 80G certificates, whereby donors to non-profit organisations may claim a rebate against donations made. Foreign contributions to non-profits are governed by FCRA regulations and the Home Ministry.
For an organisation to be termed as charity it requires Income tax clearances under 12 A Clause of Income Tax Act. Section 2(15) of the Income Tax Act defines ‘charitable purpose’ to include ‘relief of the poor, education, medical relief and the advancement of any other object of general public utility’. A purpose that relates exclusively to religious teaching or worship is not considered as charitable.
A public charitable trust is usually floated when there is a property involved, especially in terms of land and building. Different states in India have different Trusts Acts in force, which govern the trusts in the state; in the absence of a Trusts Act in any particular state or territory the general principles of the Indian Trusts Act 1882 are applied.
The main instrument of any public charitable trust is the trust deed, wherein the aims and objects and mode of management (of the trust) should be enshrined. In every trust deed, the minimum and maximum number of trustees has to be specified. The trust deed should clearly spell out the aims and objects of the trust, how the trust should be managed, how other trustees may be appointed or removed, etc. The trust deed should be signed by both the settlor/s and trustee/s in the presence of two witnesses. The trust deed should be executed on non-judicial stamp paper, the value of which would depend on the valuation of the trust property.
According to section 20 of the Societies Registration Act, 1860, the following societies can be registered under the Act: ‘charitable societies, military orphan funds or societies established at the several presidencies of India, societies established for the promotion of science, literature, or the fine arts, for instruction, the diffusion of useful knowledge, the diffusion of political education, the foundation or maintenance of libraries or reading rooms for general use among the members or open to the public, or public museums and galleries of paintings and other works of art, collection of natural history, mechanical and philosophical inventions, instruments or designs.’
Societies are registered under the Societies Registration Act, 1860, which is a federal act. However, every state has its own legislation of Societies Act, which lays down the procedures for registration, management and dissolution of the Society.
The main instrument of any society is the memorandum of association and rules and regulations (no stamp paper required), wherein the aims and objects and mode of management (of the society) should be enshrined.
Memorandum of association is the charter of a society. It is a document depicting and describing the objects of the its existence and its operations. However, article of association includes rules and regulations of the society under which it works.
A Society needs a minimum of seven managing committee members; there is no upper limit to the number of managing committee members. The Board of Management is in the form of a governing body or council or a managing or executive committee
Registration can be done either at the state level (i.e., in the office of the Registrar of Societies) or at the district level (in the office of the District Magistrate or the local office of the Registrar of Societies).
The procedure varies from state to state. However generally the application should be submitted together with: (a) memorandum of association and rules and regulations; (b) consent letters of all the members of the managing committee; (c) authority letter duly signed by all the members of the managing committee; (d) an affidavit sworn by the president or secretary of the society on non-judicial stamp paper of Rs.20-/, together with a court fee stamp; and (e) a declaration by the members of the managing committee that the funds of the society will be used only for the purpose of furthering the aims and objects of the society.
All the aforesaid documents which are required for the application for registration should be submitted in duplicate, together with the required registration fee. Unlike the trust deed, the memorandum of association and rules and regulations need not be executed on stamp paper.
According to section 8(1)(a), (b) and (c) of the Indian Companies Act, 2013, a section-8 company can be established ‘for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object’, provided the profits, if any, or other income is applied for promoting only the objects of the company and no dividend is paid to its members.
For a section-8 company, the main instrument is a Memorandum and articles of association (no stamp paper required)
A section-8 Company needs a minimum of three trustees; there is no upper limit to the number of trustees. The Board of Management is in the form of a Board of directors or managing committee and should preferably be Indian nationals.
Application for Registration
- 1An application has to be made for availability of name to the registrar of companies, which must be made in the prescribed form no. INC-1, together with a fee of Rs.1000/-. It is advisable to suggest a choice of five other names by which the company will be called, in case the first name which is proposed is not found acceptable by the registrar.
- Once the availability of name is confirmed, an application should be made in writing to the regional director of the company law board. The application should be accompanied by the following documents:
- Three printed or type written copies of the memorandum and articles of association of the proposed company, duly signed by all the promoters with full name, address and occupation.
- A declaration by an advocate or a chartered accountant (Or practicing company secretary or cost accountant) that the memorandum and articles of association have been drawn up in conformity with the provisions of the Act and that all the requirements of the Act and the rules made there under have been duly complied with, in respect of registration or matters incidental or supplementary thereto.
- Three copies of a list of the names, addresses and occupations of the promoters (and where a firm is a promoter, of each partner in the firm), as well as of the members of the proposed board of directors, together with the names of companies, associations and other institutions in which such promoters, partners and members of the proposed board of directors are directors or hold responsible positions, if any, with description of the positions so held.
- A statement showing in detail the assets (with the estimated values thereof) and the liabilities of the association, as on the date of the application or within seven days of that date.
- An estimate of the future annual income and expenditure of the proposed company, specifying the sources of the income and the objects of the expenditure.
- A statement giving a brief description of the work, if any, already done by the association and of the work proposed to be done by it after registration, in pursuance of section-25.
- A statement specifying briefly the grounds on which the application is made.
- A declaration by each of the persons making the application that he/she is of sound mind, not an undischarged insolvent, not convicted by a court for any offence and does not stand disqualified under section 203 of the Companies Act 1956, for appointment as a director.
The applicants should also, within a week from the date of making the application to the registrar of the companies, publish a notice in the prescribed manner at least once in a newspaper in a principal language of the district in which the registered office of the proposed company is to be situated or is situated and circulating in that district, and at least once in an English newspaper circulating in that district.
The registrar of companies may, after considering the objections, if any, received within 30 days from the date of publication of the notice in the newspapers, and after consulting any authority, department or ministry, as he may, in his discretion, decide, determine whether the licence should or should not be granted.
The registrar of companies may also direct the company to insert in its memorandum, or in its articles, or in both, such conditions of the licence as may be specified by him in this behalf.
Society, Charitable societies, military orphan funds or societies established at the several presidencies of India, societies established for the promotion of science, literature, or the fine arts, for instruction, the diffusion of useful knowledge, the diffusion of political education, the foundation or maintenance of libraries or reading rooms for general use among the members or open to the public, or public museums and galleries of paintings and other works of art, collection of natural history, mechanical and philosophical inventions, instruments or designs.
In addition to registration, a non-profit engaged in certain activities might also require special license/permission. Some of these include (but are not limited to):
- A place of work in a restricted area (like a tribal area or a border area requires a special permit – the Inner Line Permit – usually issues either by the Ministry of Home Affairs or by the relevant local authority (i.e., district magistrate).
- To open an office and employ people, the NGO should be registered under the Shop and Establishment Act.
- To employ foreign staff, an Indian non-profit needs to be registered as a trust/society/company, have FCRA registration and also obtain a No Objection Certificate. The intended employee also needs a work visa.
- A foreign not-for-profit may be registered as a branch, liaison or project office [and not necessarily as an Indian entity] after the requisite permission has been granted by the RBI. Upon receipt of approval from the RBI, the foreign office must within 30 days seek registration under the Companies Act, 1956. Alongside of these permissions, the office must acquire tax registrations.