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NGO or Trust Registration

  • Incorporating an NGO is a noble step towards making a positive societal impact. With the right guidance and expertise, the process can be seamless and efficient. Let ONE CALL TAX be your trusted partner in this journey.

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Overview of NGO

A Non-Governmental Organization (NGO) is a non-profit entity that operates independently from the government to address social, cultural, legal, environmental, or humanitarian issues. NGOs play a crucial role in societal development by providing resources and services to those in need.

Key Characteristics of an NGO:

  • Operates for charitable or social purposes.
  • Does not distribute profits among members.
  • May receive grants and donations.

Benefits of Incorporating an NGO

Benefits:

  • Legal Recognition: Gives credibility and trust among donors and stakeholders.
  • Tax Benefits: Eligible for tax exemptions under Section 12A and 80G of the Income Tax Act.
  • Grants and Funding: Eligible to receive foreign and domestic funding.
  • Limited Liability: Members’ liability is restricted.
  • Perpetual Succession: Continues to exist regardless of member changes.

Checklist Pre and Post Registration

Pre-Registration Checklist:

  • Define the objective of the NGO.
  • Select an appropriate name.
  • Decide on the legal structure: Trust, Society, or Section 8 Company.
  • Identify the founding members (minimum 2-7 members required).
  • Prepare documents: PAN, Aadhaar, utility bills, etc.

Post-Registration Checklist:

  • Open a bank account in the NGO’s name.
  • Apply for PAN and TAN.
  • Obtain Section 12A and 80G registration for tax exemptions.
  • Register under FCRA if foreign contributions are expected.
  • Maintain proper financial records and filing.

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Documents Required for NGO Registration

1. For Individuals:

  • PAN card
  • Aadhaar card/Passport/Driving License
  • Passport-sized photographs

2. Address Proof:

  • Rent agreement and NOC from the landlord (if rented)
  • Utility bill (not older than 2 months)

3. Organizational Documents:

  • Trust Deed (for Trust)
  • Memorandum of Society (for Society)
  • Memorandum and Articles of Association (for Section 8 Company)

Comparison NGO vs Trust vs Section 8 Company

CriteriaNGOTrustSection 8 Company
Legal StructureSociety or TrustTrust deed-basedCompanies Act, 2013
Registration AuthorityState RegistrarSub-RegistrarRegistrar of Companies
Governing DocumentMemorandum of SocietyTrust DeedMemorandum of Association
Tax BenefitsYesYesYes
Compliance RequirementsModerateLowHigh
FlexibilityModerateHighModerate

Step-by-Step Process for Registering an NGO

  1. 1Decide the Type of NGO
    • Choose between Trust, Society, or Section 8 Company based on the objectives and requirements.
  2. 2Draft Governing Documents
    • Trust Deed for Trusts.
    • Memorandum of Society for Societies.
    • Memorandum and Articles of Association for Section 8 Companies.
  3. 3Apply for Registration
    • Submit the required forms to the respective authority (State Registrar/Sub-Registrar/Registrar of Companies).
  4. 4Get Certification
    • Receive the Trust Deed, Society Registration Certificate, or Certificate of Incorporation.
  5. 5PAN and Bank Account
    • Apply for the NGO’s PAN.
    • Open a dedicated bank account.
  6. 6Tax Exemptions
    • Apply for Section 12A and 80G registration to avail tax exemptions.
  7. 7FCRA Registration (Optional)
    • If receiving foreign funding, register under the Foreign Contribution (Regulation) Act (FCRA).

Requirements and Benefits of Section 12A and 80G Registration

Requirements for section 12A Registration:

  • NGO must be registered as a Trust, Society, or Section 8 Company.
  • Submission of application in Form 10A to the Income Tax Commissioner.
  • Maintenance of proper books of accounts.

Benefits of section 12A Registration:

  • Exemption from paying income tax on surplus income.
  • Eligibility to apply for grants and funding.
  • Recognition as a legitimate charitable organization.

Requirements for Section 80G Registration:

  • NGO must have Section 12A registration.
  • Submission of Form 10G to the Income Tax Commissioner.
  • Maintenance of proper financial records and donation receipts.

Benefits of Section 80G Registration:

  • Donors receive tax deductions on contributions made.
  • Encourages more donations due to tax benefits for donors.
  • Enhances the credibility of the NGO.

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Steps for Section 12A and 80G Registration

  1. 1Prepare Documents
    • Registration certificate and MoA/Trust Deed.
    • PAN card of the NGO.
    • Financial statements (past 3 years, if applicable).
    • List of governing body members.
  2. 2File Application
    • For Section 12A: Submit Form 10A.
    • For Section 80G: Submit Form 10G.
  3. 3Verification
    • The Income Tax Department reviews the application and documents.
    • Additional clarifications may be sought during scrutiny.
  4. 4Approval
    • Upon successful verification, the approval certificates for Section 12A and 80G are issued.

Benefits and Steps for Darpan and FCRA Registration

Benefits of Darpan Registration:

  • Enables NGOs to receive government grants.
  • Facilitates smooth collaboration with various ministries.
  • Adds credibility to the NGO.

Steps for Darpan Registration:

  • Visit the official Darpan portal
  • Create a login using the NGO’s PAN details.
  • Fill in the required details about the organization and governing members.
  • Upload supporting documents such as registration certificates and PAN.
  • Submit the application and receive a unique Darpan ID.

Benefits of FCRA Registration:

  • Legally receive foreign contributions for organizational activities.
  • Enhances the scope of funding for charitable activities.
  • Builds trust with international donors.

Steps for FCRA Registration:

  • Visit the FCRA portal
  • Create an account and log in.
  • Submit Form FC-3A (for prior permission) or FC-3B (for regular registration).
  • Upload required documents, including registration certificates, audited financial statements, and activity reports.
  • Pay the prescribed fees and submit the application.
  • The Ministry of Home Affairs reviews the application and issues the FCRA certificate upon approval.

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Post-Incorporation Compliance and Annual Filings

  • Maintain Financial Records

    Record all income and expenses.

  • File Annual Returns

    File annual income tax returns.

  • Board Meetings

    Conduct at least two board meetings annually.

  • Statutory Audit

    Get accounts audited if income exceeds specified limits.

  • Renew Registrations

    Renew FCRA and other applicable registrations.

Taxation and Advance Tax Rules for NGOs

  • Income Tax Exemptions: Eligible under Sections 12A and 80G.
  • Advance Tax Rules: Applicable if annual receipts exceed the threshold.
  • GST Compliance: Mandatory for NGOs providing taxable services.

Other Registrations Required

  • FCRA Registration (for foreign donations).
  • Professional Tax Registration (if applicable).
  • GST Registration (if turnover exceeds limits).
  • Shop and Establishment Act Registration (if employing staff).

Important Points to Note While Drafting MOA and AOA for a Section 8 Company

When drafting the Memorandum of Association (MOA) and Articles of Association (AOA) for a Section 8 Company under the Companies Act, 2013, it's essential to ensure compliance with the provisions of Section 8 of the Companies Act. A Section 8 company is typically set up for charitable purposes or for promoting arts, science, education, research, social welfare, etc., and does not seek profits.

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Sample Clause for MOA (Memorandum of Association)

Clause 3(A) – Objects of the Company

The objects for which the company is established are

  • To promote and undertake activities relating to education, research, health care, social welfare, environment protection, and community service.
  • To raise funds through donations, grants, subscriptions, etc., to carry out activities that benefit society and community development.
  • To promote artistic and cultural activities, research, and support underprivileged groups.

Clause 3(B) – Application of Income

Application of Income Clause

  • The income and property of the company shall be used exclusively for promoting its stated objectives.
  • No part of the company's income or property shall be distributed or transferred to its members or directors.
  • Members or directors may only receive compensation for services rendered or expenses incurred.

Sample Clause for AOA (Articles of Association)

Article 5 – Non-Profit Distribution

Prohibition of Profit Distribution

  • The income and profits, if any, of the company shall not be distributed among the members.
  • All income, profits, and surpluses will be applied only toward the achievement of charitable and social objectives outlined in the MOA.

Article 20 – Audit and Accounts

Financial Reporting and Transparency

  • The books of account shall be maintained as per the provisions of Section 128 of the Companies Act, 2013.
  • Auditors will be appointed as per the provisions of Section 139 and subsequent sections of the Companies Act, 2013.
  • Financial statements, along with the audit report, shall be circulated to all members before the Annual General Meeting (AGM).

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