Government Scheme and Non-Profit Organizations

Trust

Public Trust is the most convenient way of starting a non-governmental organization or NGO. A trust functions on the objective of eradicating poverty, providing education to the underprivileged and offering medical relief apart from the generalized aim of promoting arts, science and literature. It is to be noted that trusts are irrevocable which means they cannot be amended or terminated without the permission of the court. NGO Worlds helps in providing you with the trust registration certificate with a few documents like a deed of trust, rental agreement, etc.

In India, there are no specific laws to govern the public trust, however, some states like Maharashtra and Tamil Nadu have their own public trust Act. A trust can be made by completing a trust deed; the trusts are of two types. A private trust which is created for the benefit of an individual also know as a beneficiary or particular group and the second one is a public trust also known as charitable trust is created or made for the benefit of the general public.

Advantage

  1. Easy to start: Procedure to start a trust is easy than the society and section 8 company.
  2. Tax Benefit: A trust can take 12A & 80 G certificate from income tax department and can avail exemption benefits.
  3. East Compliance: Annual compliances of trust is too easy procedure than society or section 8 company.
  4. Foreign Contribution: A trust can take foreign contributions from any country after getting approval of FCRA.

Content of Trust

The trust deed is the primary and the most essential document of the trust which states the reason for forming a trust, its functions, to its working, and until its closure. Following are the important clauses in the Trust Deed:

  1. Name of the Trust.
  2. The registered office of the Trust.
  3. Area of operation of the Trust.
  4. Objectives of the Trust.
  5. Details of the Author of the Trust.
  6. Corpus/Assets of the Trust.
  7. Details of the Board of Trustees.
  8. Quorum of the Board with their qualification, terms and tenure.
  9. Powers and functions of the Managing Trustee and other Trustees.
  10. Closure and amendment of the trust deed and the applicability of the Act.

Process:-

Choose an Appropriate Name for the Trust

This is the first step in registering the Trust. Additionally, the name so suggested should not come under the restricted list of names as per the provisions of the Emblems and Names Act, 1950.

Submit to registrar of trust and signature over the documents

At the time of registration, the settler with 2 witnesses will be personally present along with original identity proof. The registrar kept the photocopy & returns the original registered copy of the trust deed to parties. Settlor will put his sign on all the pages of photocopy of trust deed.

Obtain the Registration Certificate

After submitting the Trust Deed with the registrar, the registrar retains the photocopy and returns the original registered copy of the Trust Deed.

PAN, TAN And Bank Account

The final step in the process of registration is to apply for allocation of PAN number and TAN and afterwards apply for a bank account.

Society

A society is a group of people involved with each other through persistent relations, or a large social grouping which voluntarily joins together. The Society Registration Act, 1860 regulates and administers the societies. A society is the Non-Governmental Organization in India which can be registered on state level or national level for educational, charitable, religious, welfare or for promotion of art, music, culture and many more. In a society at least seven people is required and such person adopt a memorandum of association and bylaws for the functioning of the society. There are two types of society, one is for National level, and another one is State Level of society. Minimum of seven people must come together with a common purpose of being formed into society. However in the case of national level society, the members must represent eight different states. The process of registering NGO as society differs from state to state.. It is mandatory to get registered. A professional firm like Sure Consult can help you with this.

Advantage

Legal Entity

As every society is a legal entity separate from its members it is capable of filing suits against any person or any member.

Similarly, the suits can also be brought against the society.

Annual Compliances

Annual compliances of Society is too easy procedure than section 8 company.

CSR Funding

A society is eligible to take CSR Funding.

Members Liability

Society members are not personally liable for any debt or obligations. Unless the debt is obtained for activities undertaken to make a profit. Or the activities undertaken are illegal in nature.

Tax Benefit

A Society can take 12A & 80 G certificate from income tax department and can avail exemption benefits.

Foreign Contribution

A Society can take foreign contributions from any country after getting approval of FCRA.

PROCESS

Choose an Appropriate Name for the Society

This is the first step in registering the Society. Additionally, the name so suggested should not come under the restricted list of names as per the provisions of the Emblems and Names Act, 1950.

Formulate MOA & Rules and Regulation of your Society

MOA is legal evidence of your Society existence and it contains the objectives and rules & regulations of your Society. This document also contains the bylaws regarding the changes, removal or addition of the Members.

Submit the files to registrar of Society and signature over the documents

The file has to submit along with the documents like MOA, Affidavit, NOC and Covering Letter at the registrar of society for getting approval of registration.

Obtain the Registration Certificate

After submitting the MOA with the registrar of Societies, the registrar retains one copy and returns the original registered copy of the MOA with certificate of Registration.

PAN, TAN And Bank Account

The final step in the process of registration is to apply for allocation of PAN number and TAN and afterwards apply for a bank account.

12A & 80G Registration

About 12A Registration

12A Registration is the most initial step NGO’s need to follow to seek a Certificate of Exemption from Income Tax Department. It is important to note here that notwithstanding the fact that trust, society and section 8 companies are registered as per their respective acts, the registration under section 12A is necessary to claim exemption under Income Tax Act. Companies registered under Section 12A doesn’t need to pay income tax as they are exempted from it. Furthermore, 12A Certificate helps you to seek permission from the government and the organizations abroad as 12A Registration acts as a legitimate proof of your NGO’s existence.

About 80G Registration

80G Certificate is issued under Income Tax Act, 1961 to NGO’s by Income Tax Department. It is important to note that when registration is granted under section 12A, it does not mean that section 80G approval is to be given i.e. registration under section 12A will not provide automatic approval under section 80G. Section 80G applies only to charitable trusts or institution. It does not apply to religious trust or institutions. The primary objective behind the grant of 80G Registration is to motivate more donors to the organizations for donating funds. Furthermore, the donors receive a 50% tax exemption on his total taxable income. To avail this exemption, the donor must attach the stamped receipt against the donation issued by the NGO.

ADVANTAGES

Exempted Income

After getting 12A & 80G Certificate all the received income will be exempted from taxation.

FCRA

After getting 12A & 80G an organization can apply under the Foreign Contribution Regulation Act, 2010 or FCRA.

Government Grants

NGO’s receives various grants from government and other agencies. They are eligible to get grants and financial funding from various agencies. These agencies generally make grants to 12A registered NGO’s.

Attracts Donors

After getting 12A & 80G an organization attracts the donor to make a donation.

Donors get deduction

After getting 80G the donor can avail deduction from its taxable income after donation

CSR Funding

For CSR funding it is mandatory to get registration certificate of 12A & 80G.

ELIGIBILITY FOR 12A & 80G

Not all NGOs or trusts are eligible for 12A & 80G registration. There are certain rules that need to be followed to obtain it. These have been listed below:

  1. Charitable Trust, Religious Trust, Society, and Section 8 Co., that has been formed to provide benefits to the public.
  2. Private or family Trusts are not eligible.
  3. Donation made to charities that have been prescribed u/s 80G,
  4. The NGO has been duly constituted as a Public Charitable Trust or registered under section 8 of the Companies Act, 1956. It may be a registered society or a Section 8 under the Companies Act’2013 or is a University established by law Or is any other educational institution recognized by the Government or by a University established by law. An affiliation to any University established by law. An institution financed wholly or partially by the Government or local authority.

Following are the details under which the government can reject your claim for an 80G certification:

  1. Separation of Business and Charity: If the entity is involved in any business/financial transactions that do not account for donations alone, you would have to keep both separate. Else, your business may not qualify for 80G registration.
  2. No Misuse:The donations received towards the cause must not be used for any other purpose, even within the organization. A strict accounting is mandatory.
  3. No Religious Activity:The charities involve religious preaching, or are done towards a particular caste or creed.
  4. Diversion of funds: If the NGO is found funding a political party or gifts are made to trusts operating outside India, your 80G certification request will get rejected.
  5. The registered trust/institution/ Section 8 Co. should not hold any Non-Exempt.

FCRA Registration

The Foreign Contribution (Regulation) Act, 2010, is intended to consolidate the law regulating the acceptance and utilization of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith. The Act extends to the whole of India, to its citizens outside India and also to associate branches or subsidiaries outside India, of companies or body corporate, registered or incorporated in India.

The organizations seeking foreign contributions for definite cultural, social, economic, educational or religious programmes may either obtain registration to receive foreign contribution from Ministry of Home Affairs by making application in the prescribed format and furnishing details of the activities and audited accounts. The FCRA registration is granted only to such association, which has proven track record of functioning in the chosen field of work during last three years, and after registration, such organization is free to receive foreign contribution from any foreign source for stated objectives. The FCRA registration is granted thorough security vetting of the activities and antecedents of the organization and office bearers thereof. On the other hand, such organizations which are newly established and do not have proven track record of functioning may also receive foreign contribution for specific activities, for a specific purpose from a specific source after seeking project based previous permission (PP) from the Ministry of Home Affairs.

Niti Aayog

In the period of Digitalization, now Government is focusing on maintaining a centralized database of all NGO/Society/Trust which want to avail government grant/funding to achieve their objectives. For that purpose, government has now, made it mandatory for all NGO/Society/ Trust to take registration in Niti Aayog before approaching any government department to present their project/ apply for government welfare scheme funding from them.

The Government of India, in keeping with its reform agenda, constituted the NITI Aayog to replace the Planning Commission instituted in 1950. This was done in order to better serve the needs and aspirations of the people of India. An important evolutionary change from the past, NITI Aayog acts as the quintessential platform of the Government of India to bring States to act together in national interest, and thereby fosters Cooperative Federalism.

ADVANTAGES

Government Grant

If you want to avail the grants offered by the government then it is mandatory to get registered under Niti Aayog.

Credibility

It increases the credibility of the NGO/trust/society which helps them to get a donation from the general public.

FCRA

At the time of FCRA registration, a Niti Aayog unique ID is required, however, at present it is optional.

CSR Funding

At the time of getting of CSR Funding, a Niti Aayog unique ID is required, however.

Start Up Registration

Under the Startup India Action Plan, startups that meet the definition as prescribed under G.S.R. notification 127 (E) are eligible to apply for recognition under the program. The Startups have to provide support documents, at the time of application.

Eligibility Criteria for Startup Recognition:

  1. The Startup should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership
  2. Turnover should be less than INR 100 Crores in any of the previous financial years
  3. An entity shall be considered as a startup up to 10 years from the date of its incorporation
  4. The Startup should be working towards innovation/ improvement of existing products, services and processes and should have the potential to generate employment/ create wealth. An entity formed by splitting up or reconstruction of an existing business shall not be considered a “Startup”

Startup India: 80 IAC Tax exemption:

  1. Post getting recognition a Startup may apply for Tax exemption under section 80 IAC of the Income Tax Act. Post getting clearance for Tax exemption, the Startup can avail tax holiday for 3 consecutive financial years out of its first ten years since incorporation.
  2. Eligibility Criteria for applying to Income Tax exemption (80IAC):
  3. The entity should be a recognized Startup 
  4. Only Private limited or a Limited Liability Partnership is eligible for Tax exemption under Section 80IAC
  5. The Startup should have been incorporated after 1st April, 2016

Startup India: Tax Exemption under Section 56 of the Income Tax Act (Angel Tax)

  1. Post getting recognition a Startup may apply for Angel Tax Exemption.
  2. Eligibility Criteria for Tax Exemption under Section 56 of the Income Tax Act:
  3. The entity should be a DPIIT recognized Startup
  4. Aggregate amount of paid up share capital and share premium of the Startup after the proposed issue of share, if any, does not exceed INR 25 Crore.