NGO Laws in India and its Legal Compliance

Last Updated at: October 22, 2019
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NGO Laws

The word NGO (Non-Government Organization) in India refers to a body that remains detached from the Government and profit framework of usual businesses. These bodies work towards the broad advancement of the society bylaws and operate as small units which fill the gaps at places where the government cannot reach efficiently and business cannot be done with eloquent returns governed by certain NGO laws.

The term NGO is used as an umbrella to cover all legal entities that seek philanthropic and charitable funds and utilize them towards the advancement of the society without the motive to originate profit from it or use the profit from the business of the NGO and utilise the same in the implementation of its objects. An NGO can either be a Trust, a Society or a Section 25 Company.

NGO can register itself as a legal entity in three ways in India-

1)   Trust

2)   Society

3)   Section 8 Company (same as section 25 Company under Indian Companies act 1956)

Trust Registration-

Trusts are formed when the settler of the property transfers any property and offers its benefits for the well-being of recipients or for the practice of public purposes. The main aim of the person who registers a trust in India is to make use of the assets of the trust to attain welfare of the public at large and promote a charitable cause called a Public Charitable trust. Such trust does not possess a fixed beneficiary, but the public in huge, generally established with the common trait. A trust is irrevocable without the intervention of the court. 

Know how to register your NGO

Society Registration-

A society possesses the Memorandum of Association and Rules and Regulation or bylaws. The Society registration fees and processes need to be registered with the Registrar of Society or Commissioner of Trusts appointed by the State Government. A Society has a chance to alter its MOA and increase or decrease its objectives and working from time to time. A society must inform the Registrar annually about the changes in the quorum of the society. A society can be terminated as per the termination clause in the Bylaws and after termination, the Society will be merged with a Society of a similar object.

Section 8 Company

MOA and AOA form the legal document of a Section 8 Company. Section 8 company registration needs to be filed under the Central Government through the Registrar of Companies with required approvals. The process is similar to the formation of a Public Limited Co. or Private Limited Co. A Section 8 company is required to do the annual compliances similar to other companies.

NGO COMPLIANCES-

Many NGOs feel that they are immune to all form of taxation, as they exist as a, not for profit entity, this, however, is only a myth. The following section talks about important compliances that an NGO is required to do to prove its genuine in accordance to the NGO Laws:

PAN

After registration of NGO with respective Authority, the first thing is to apply for PAN of the NGO. It is mandatory to apply for the PAN after registration of NGO.

Registration under section 12A of the Income Tax Act

The registration of NGO under Section 12A is necessary for getting some benefits of taxation. However, section 12A certificate is not a mandatory registration. The main reason for getting this registration under section 12A is to get the benefit of exemption from the Income Tax on the income of the NGO if all the rules and regulations laid down in this section are fulfilled.

Registration under section 80G of the Income Tax Act

Even the registration under this section is not mandatory. However, to give the benefit of 50% or 100% exemption on the donations to the donors, it is required to get the registration under section 80G of Income Tax Act. It is indirectly an advantage to NGOs to raise funds.

FCRA Registration

If there are opportunities to receive Foreign Funds for the missions of NGO once the registration process for an NGO is done. Post which the registration with the FCRA department, Ministry of Home Affairs is essential. Without FCRA registration, NGO cannot receive any kind of foreign donation or funds.

TAN

During the functioning of NGOs at any point of time, if NGOs become liable to remove the tax from a source, it has to first apply for TAN.

GST Registration

If the NGO is providing services like research activity or consultancy work etc. and if the gross revenue from such work crosses the basic exemption limit of GST, then NGO has to first apply for the GST.

Professional Tax

Professional Tax is the liability of NGO to deduct from the pay of employee and deposit to the Government. Professional Tax is State Government thing and thus different states of India having different rules and regulations for Professional Tax.

Retirement Benefit

Retirement benefits like Provident Fund, Gratuity, ESIC etc. are applicable to the NGO when it develops and the size of employees are more than the prescribed limit in this acts.

Shops and Establishment License

According to the NGO laws in India, if an NGO employs any individuals in their office to carry out any work pertaining to the NGO, then the said NGO shall obtain a License under the Shops and Establishments Act.

 

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NGO Laws in India and its Legal Compliance

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The word NGO (Non-Government Organization) in India refers to a body that remains detached from the Government and profit framework of usual businesses. These bodies work towards the broad advancement of the society bylaws and operate as small units which fill the gaps at places where the government cannot reach efficiently and business cannot be done with eloquent returns governed by certain NGO laws.

The term NGO is used as an umbrella to cover all legal entities that seek philanthropic and charitable funds and utilize them towards the advancement of the society without the motive to originate profit from it or use the profit from the business of the NGO and utilise the same in the implementation of its objects. An NGO can either be a Trust, a Society or a Section 25 Company.

NGO can register itself as a legal entity in three ways in India-

1)   Trust

2)   Society

3)   Section 8 Company (same as section 25 Company under Indian Companies act 1956)

Trust Registration-

Trusts are formed when the settler of the property transfers any property and offers its benefits for the well-being of recipients or for the practice of public purposes. The main aim of the person who registers a trust in India is to make use of the assets of the trust to attain welfare of the public at large and promote a charitable cause called a Public Charitable trust. Such trust does not possess a fixed beneficiary, but the public in huge, generally established with the common trait. A trust is irrevocable without the intervention of the court. 

Know how to register your NGO

Society Registration-

A society possesses the Memorandum of Association and Rules and Regulation or bylaws. The Society registration fees and processes need to be registered with the Registrar of Society or Commissioner of Trusts appointed by the State Government. A Society has a chance to alter its MOA and increase or decrease its objectives and working from time to time. A society must inform the Registrar annually about the changes in the quorum of the society. A society can be terminated as per the termination clause in the Bylaws and after termination, the Society will be merged with a Society of a similar object.

Section 8 Company

MOA and AOA form the legal document of a Section 8 Company. Section 8 company registration needs to be filed under the Central Government through the Registrar of Companies with required approvals. The process is similar to the formation of a Public Limited Co. or Private Limited Co. A Section 8 company is required to do the annual compliances similar to other companies.

NGO COMPLIANCES-

Many NGOs feel that they are immune to all form of taxation, as they exist as a, not for profit entity, this, however, is only a myth. The following section talks about important compliances that an NGO is required to do to prove its genuine in accordance to the NGO Laws:

PAN

After registration of NGO with respective Authority, the first thing is to apply for PAN of the NGO. It is mandatory to apply for the PAN after registration of NGO.

Registration under section 12A of the Income Tax Act

The registration of NGO under Section 12A is necessary for getting some benefits of taxation. However, section 12A certificate is not a mandatory registration. The main reason for getting this registration under section 12A is to get the benefit of exemption from the Income Tax on the income of the NGO if all the rules and regulations laid down in this section are fulfilled.

Registration under section 80G of the Income Tax Act

Even the registration under this section is not mandatory. However, to give the benefit of 50% or 100% exemption on the donations to the donors, it is required to get the registration under section 80G of Income Tax Act. It is indirectly an advantage to NGOs to raise funds.

FCRA Registration

If there are opportunities to receive Foreign Funds for the missions of NGO once the registration process for an NGO is done. Post which the registration with the FCRA department, Ministry of Home Affairs is essential. Without FCRA registration, NGO cannot receive any kind of foreign donation or funds.

TAN

During the functioning of NGOs at any point of time, if NGOs become liable to remove the tax from a source, it has to first apply for TAN.

GST Registration

If the NGO is providing services like research activity or consultancy work etc. and if the gross revenue from such work crosses the basic exemption limit of GST, then NGO has to first apply for the GST.

Professional Tax

Professional Tax is the liability of NGO to deduct from the pay of employee and deposit to the Government. Professional Tax is State Government thing and thus different states of India having different rules and regulations for Professional Tax.

Retirement Benefit

Retirement benefits like Provident Fund, Gratuity, ESIC etc. are applicable to the NGO when it develops and the size of employees are more than the prescribed limit in this acts.

Shops and Establishment License

According to the NGO laws in India, if an NGO employs any individuals in their office to carry out any work pertaining to the NGO, then the said NGO shall obtain a License under the Shops and Establishments Act.

 

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