Introduction to Laws Governing NGOs in India
The term NGO or Non-Government Organization in India refers to a private agency that remains disconnected from the Government and not typically for-profit. These organizations are pivotal in promoting social welfare and the betterment of Indian society, working at the local, national, and international levels to uplift socio-economically and politically weaker sections of the community. NGOs operate under various legal frameworks, contributing to the advancement of charitable and public utility objectives. In this article, we will explore the types of registrations and tax laws applicable to NGOs in India.
Types of Registrations for NGOs in India
In India, NGOs can be registered under three primary legal frameworks:
1. Trust Registration
Trust registration under the Indian Trusts Act 1882 is one of the common methods of establishing an NGO. Public charitable trusts are usually formed when land or property is involved. The registration can be done through the Indian Trusts Act 1882. Indian public trusts generally cannot be changed, and no national law governs public charitable trusts, although many states have their own Public Trust Acts.
Papers Mandatory for Trust Registration: Aadhar Card, Driving License, Passport, Voter ID, Address proof (water or electricity bill), and a bill stating the address to be registered.
2. Society Registration
Societies Registration Act 1860 allows the registration of NGOs as membership organizations, typically managed by a governing council or managing committee. Societies can be registered for charitable, scientific, or other purposes. Unlike trusts, societies can be dissolved under Section 20 of the Societies Registration Act.
Papers Mandatory for Society Registration: Two copies of the Memorandum of Association and by-laws, identity proof of members, Aadhar Card, Voter ID, Passport, Driving License, and address proof (water or electricity bill).
3. Section 8 Company Registration
The Section 8 of the Indian Companies Act 2013 enables the registration of NGOs as companies with limited liability. The earnings of a Section 8 company are used for social welfare work, and not by the shareholders. Individuals can register as a public limited company with three directors or a private limited company with two directors.
Papers Mandatory for Section 8 Company Registration: Memorandum of Association (MOA), Articles of Association (AOA), Company’s name for approval, Aadhar Card, Voter ID, Copy of passport, Driving License/identity proof of all directors, address proof (water or electricity bill or tax receipt).
Tax Laws Affecting NGOs in India
The tax laws applicable to NGOs in India can be quite extensive, impacting their financial operations. The income from certain activities can be exempt from corporate income tax, while unrelated business income may be taxable under specific circumstances. Below is a brief overview of the tax laws affecting NGOs:
Exemptions and Benefits
Indonesia’s tax laws affecting NGOs are similar to those of other Commonwealth nations. India subjects sales of certain goods and services to the Goods Services Tax (GST), but education and healthcare services are exempted. The rates range from 5% to 28%, with most goods and services taxed at 18%. NGOs involved in relief work and distribution of relief supplies to the needy are exempt from Indian customs duty on the import of items such as food, medicine, clothing, and blankets.
Tax Advantages
Registered NGOs can benefit from tax exemptions, and donors can also benefit from tax exemptions for their donations. NGOs are exempt from stamp duty, and there is no need for a title. Furthermore, Section 8 companies do not require the use of a suffix (public limited or private limited) in their name. When compared to trust or society structures, Section 8 companies are more credible and secure.
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