Vakilsearch & NGO Compliance

The rise and collapse of the covid pandemic have made us all realise the need and importance of organisations (NGOs). In this post, our team at Vakilsearch would like to recognise the effort done by volunteer groups by assisting them in understanding the many legal compliances they must be aware of.

Role of NGOs in India

NGOs are the bulwarks that protect society against uncertainty. In times of need, it is NGOs that are able to mobilise the funds, manpower and energy required to help people tide over a crisis.

India boasts of one of the world’s most active networks of non-governmental organisations, and these organisations work on everything from fundamental research to healthcare.

This has never been more evident than during the current Covid pandemic, in which NGOs have played a major role, filling in for other institutions and wholeheartedly saving lives.

Images of life-saving oxygen canisters being transported in a humble auto-rickshaw are etched in the nation’s collective memory.  The efforts of Indian NGOs especially during the pandemic are praiseworthy, and we as a society should be grateful to them.

Need for NGO Compliance in India:-

The Indian government has made a few regulatory amendments in order to develop a dependable and trustworthy legal superstructure for the governance and management of these NGOs.

Most of these are required for any NGO seeking financing or grants. Hence, this article will be most helpful for those who work for or support any social service organization. 

First Comes NGO Darpan Registration

Every NGO must first opt for the Darpan Registration service provided by NITI Aayog. It is the Darpan registration that makes NGOs eligible for applying for government subsidies and grants.

The goal of this latest initiative is to better track existing NGOs and ensure that they have access to funding sources if necessary.

An additional benefit of NGO Darpan registration is increased credibility. Any VO/NGO that is registered as a Trust, Society or Non-Profit Organization under Section 25 of the Indian Companies Act, 1956, is eligible to register for the NGO Darpan service. You can get the Compliance Expert Help Online so that there should not be any Confusion on this.

The Next Comes CSR 1 

CSR – 1 or Corporate Social Responsibility – 1 is a registration that allows NGOs to get access to CSR funds. 

Corporate Social Responsibility funds are derived primarily from rules that require larger corporations to contribute a small percentage of their average net profit to social causes. These are then directed to NGOs that have registered with the CSR-1 scheme.

With effect from 1 April 2021, NGOs have to register through Form CSR-1 in the MCA portal to be able to avail of such funds. 

The following are the prerequisites for an NGO to get CSR donations from a company:

  • A Section 8 company registered per Sections 12A and 80G of the Income Tax Act, with at least three years of charitable activity.
  • A publicly registered trust registered per Sections 12A and 80G of the Income Tax Act, with at least three years of charitable activity.
  • An incorporated society registered per Sections 12A and 80G of the Income Tax Act, with at least three years of charitable activity.

The goal of this CSR-1 certification is to provide transparency regarding how a CSR fund is being used to further an NGO’s mission.

Finally, Registration (or Revalidation) Under Sections 80G and 12A

This is yet another criterion imposed by the government to ensure the elimination of defunct NGOs and the promotion of transparency.

Without obtaining registration for Section 80G and 12A Tax exemptions, an NGO contributor cannot claim tax advantages for their donation, and the NGO as well cannot claim tax exemptions for the donations received. 

While such restrictions on NGOs have been in place for many years, even the NGOs that already have Section 80G and 12 A registrations must get their certifications revalidated by June 30, 2021. 

This regulation has been introduced so that the government will be able to identify and eradicate defunct and fraudulent NGOs that do not abide by the current centralised systems put in place for non-governmental organisations. 

The Takeaway

Vakilsearch would like to conclude by expressing its heartfelt appreciation to the NGO ecosystem as well as all those people who have selflessly volunteered and donated to noble causes – it is your unselfish devotion that has held the globe together during these uncertain times.

Even though all of these compliance requirements might seem intimidating at first, and undoubtedly so the process can be quite time-consuming and tedious. With the help of our experts, the entire process of ensuring NGO compliance can be made fairly straightforward and can be completed online.

If you would like to speak to our team or require assistance, you can always reach out to us here and we will be happy to help and schedule a consultation over call. 

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