NGO Registration Methods - 1
1. Trust 2. Society, and 3. Non profit Company
In India non profit / public charitable organisations
can be registered as trusts, societies,
or a private limited non profit company, under section-25
companies. Non-profit organisations in India (a) exist independently
of the state; (b) are self-governed by a board of trustees or ‘managing
committee’/ governing council, comprising individuals who generally
serve in a fiduciary capacity; (c) produce benefits for others, generally
outside the membership of the organisation; and (d), are ‘non-profit-making’,
in as much as they are prohibited from distributing a monetary residual
to their own members.
Section 2(15) of the Income Tax Act – which is
applicable uniformly throughout the Republic of India – 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. Thus,
in ascertaining whether a purpose is public or private, one has to see
if the class to be benefited, or from which the beneficiaries are to
be selected, constitute a substantial body of the public. A public charitable
purpose has to benefit a sufficiently large section of the public as
distinguished from specified individuals. Organisations which lack the
public element – such as trusts for the benefit of workmen or
employees of a company, however numerous – have not been held
to be charitable. As long as the beneficiaries of the organisation comprise
an uncertain and fluctuating body of the public answering a particular
description, the fact that the beneficiaries may belong to a certain
religious faith, or a sect of persons of a certain religious persuasion,
would not affect the organisation’s ‘public’ character.
Whether a trust, society or section-25 company, the
Income Tax Act 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 FC(R)A regulations and the Home Ministry.
CAF would like to clarify that this material provides only broad guidelines
and it is recommended that legal and or financial experts be consulted
before taking any important legal or financial decision or arriving
at any conclusion.
Formation and Registration of a Non -Profit organisations in India
3) Section-25 Company
Additional Licensing/ Registration
A public charitable trust is usually floated when there is property
involved, especially in terms of land and building.
Legislation : 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.
Main Instrument : 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.
Trustees : A trust needs a minimum of two trustees;
there is no upper limit to the number of trustees. The Board of Management
comprises the trustees.
Application for Registration :
The application for registration should be made to the official having
jurisdiction over the region in which the trust is sought to be registered.
After providing details (in the form) regarding designation by which
the public trust shall be known, names of trustees, mode of succession,
etc., the applicant has to affix a court fee stamp of Rs.2/- to the
form and pay a very nominal registration fee which may range from Rs.3/-
to Rs.25/-, depending on the value of the trust property.
The application form should be signed by the applicant before the regional
officer or superintendent of the regional office of the charity commissioner
or a notary. The application form should be submitted, together with
a copy of the trust deed.
Two other documents which should be submitted at the time of making
an application for registration are affidavit and consent letter.
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.’
Legislation : Societies are registered under the Societies
Registration Act, 1860, which is a federal act. In certain states, which
have a charity commissioner, the society must not only be registered
under the Societies Registration Act, but also, additionally, under
the Bombay Public Trusts Act.
Main Instrument : 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.
Trustees : A Society needs a minimum of seven managing
committee members; there is no upper limit to the number managing committee
members. The Board of Management is in the form of a governing body
or council or a managing or executive committee
Application for Registration :
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).(2)
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.
III. Section-25 Company
According to section 25(1)(a) and (b) of the Indian Companies Act, 1956,
a section-25 company can be established ‘for promoting commerce,
art, science, religion, charity or any other useful 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.
Legislation : Section-25 companies are registered under
section-25 of the Indian Companies Act. 1956.
Main Instrument : For a section-25 company, the main
instrument is a Memorandum and articles of association (no stamp paper
Trustees : A section-25 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
Application for Registration :
1.An application has to be made for availability of name to the registrar
of companies, which must be made in the prescribed form no. 1A, together
with a fee of Rs.500/-. It is advisable to suggest a choice of three
other names by which the company will be called, in case the first name
which is proposed is not found acceptable by the registrar.
2.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 typewritten 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 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 thereunder 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
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
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.
3.The applicants must also furnish to the registrar
of companies (of the state in which the registered office of the proposed
company is to be, or is situate) a copy of the application and each
of the other documents that had been filed before the regional director
of the company law board.
4.The applicants should also, within a week from the date of making
the application to the regional director of the company law board, 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.
5.The regional director 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.
6.The regional director 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.
IV. Special Licensing
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 non-profit setting up an office in India and wanting staff
from abroad needs to be registered as a trust/society/company, needs
permission from the Reserve Bank of India and also a No Objection Certificate
from the Ministry of External Affairs.
Comparision among Trust,
Society and Non profit Company
|| Relevant State Trust Act or Bombay Public Trusts Act, 1950
||Societies Registration Act, 1860
||Indian Companies Act, 1956
||Deputy Registrar/Charity commissioner
|| Registrar of societies (charity commissioner in Maharashtra).
||Registrar of companies
In Maharashtra, both as a society and as a trust
| As a company u/s 25 of the Indian Companies Act.
| Registration Document
|| Memorandum of association and rules and regulations
|| Memorandum and articles of association. and regulations
|| Trust deed to be executed on non-judicial stamp paper, vary from
state to state
|| No stamp paper required for memorandum of association and rules
|| No stamp paper required for memorandum and articles of association.
| Members Required
|| Minimum – two trustees. No upper limit.
||Minimum – seven managing committee members. No upper limit.
||Minimum three trustees. No upper limit.
|Board of Management
||Trustees / Board of Trustees
||Governing body or council/managing or executive committee
||Board of directors/ Managing committee
| Mode of Succession on Board of Management
|| Appointment or Election
|| Appointment or Election by members of the general body
|| Election by members of the general body
(Source: Caf India)