What are the Differences Between Trust and NGO Registration?

For a normal person, there are not many differences between a Trust and an NGO, but, they are both very different. Read on to know more about them!

An NGO is a non-profit organisation that runs on its own. Depending on the type of activity a person wants to engage in, NGOs can be registered in India as societies, trusts, or section 8 companies. A non-profit organisation is a volunteer group or establishment that works for a cause.

On the other hand, Trusts are established when a person wants a specific entity to handle their assets. Trusts also help in charitable work for humankind, including medical, educational, labour, etc.

An NGO usually assists the government with initiatives that are outside the scope and capabilities of the latter.

However, trusts are not dependent on governmental initiatives. Because they can be either public or private. Trusts have their own set of rules in which the help from government or other organisations is not required. Trusts cannot receive financial support from the government, but NGOs can.

In this blog, we will discuss the differences between Trust and NGOs.

Difference between Trust & NGOs

The following table shows the difference between NGOs and Trust

Basis	Trust	NGO
Statute	Indian Trust Act,1982	Companies Act, 2013
Time required for registration	It takes 2 days to a week to get registered.	It takes from 15 days to 1 month to get registered.
Authority of registration	Charity Commissioner/ Sub-registration of Registration	Registrar of Company
Transfer of Directorship/trusteeship	The Trusteeship cannot be transferred as per the Indian Trust Act for Charitable trust as an NGO.	Directorship in an NGO can be transferred.
Can the members get funds	Trustees are not eligible to receive funds. But only if the provision in the trust deed states it.	After approval from the General body of the NGO, payment can be given.
Issue of Name Approval	Approval is not required under trust.	The name of an NGO must be acquired by making an application to the registrar of companies.

These are the main differences between Trust and NGO.

 

What is Trust?

It is considered to be the oldest type of charitable organization. It essentially involves a contract between parties whereby one party retains ownership of property on behalf of another party.

Trust should be formed in the following circumstances, such as

• If the business is run by more than one member of the family.
• If you prefer that the trustee continues without being put up for election for life.
• Along with flexibility in the way benefits are distributed, privacy is also important.

Registration of Trust Deed

The value of the non-judicial stamp paper used to execute the trust deed will depend on how much is valued in the trust property. To trust registration, an application must be submitted to the relevant sub-registrar with jurisdiction over the desired registration area.

When a charitable or religious trust owns the immovable property, the trust deed must be registered in order to qualify for the exemption under Section 11 of the Income Tax Act.

The Settlor or Trustees, at least two witnesses, and their pictures and Identity Proofs must be physically present at the Registrar’s Office for a Trust Deed to be registered. The settlor or trustees should sign the trust deed with their approval after two witnesses have witnessed it.

Essential Contents of a Trust Deed

• The name of the author/settlor(s) of the trust. 
• The name of the trustee(s). 
• The name, if any, of the beneficiary or whether it is for public/charitable purposes.
• Name of the trust by which it will be known. 
• A place where its trustees, principal & other offices shall be situated. The property shall devolve upon the trustees under the trust for the benefit of the beneficiary. 
• An intention to divest the trustee of the trust’s assets.
• The main & incidental objects of the trust.
• The procedure for appointment, removal, or replacement of a trustee, their rights, powers, duties, etc. 
• The rights & duties of the beneficiary/ies.
• The mode & method of establishment of trust.

Trust and NGOs serve different purposes.

What are NGOs?

NGO stands for “Non-governmental Organization,” and the term “trust” itself is “NGO.” They are in charge of improving certain causes in the sectors of health, education, the workforce, the environment, and other aspects of daily life.

NGOs are usually expected to operate without making a profit (notably, Section 8 companies have prohibitions from paying out dividends, and are expected to reinvest profits back into the promotion of the objects).

However, NGOs typically receive a variety of tax advantages because they essentially stand in for an active member of civil society.

NGO registration in accordance with the following laws:\

1. Trust can be registered under the Indian Trust Act, of 1882.
2. Society can be registered under Societies Registration Act, 1860.
3. Section-8 Companies can be registered under the Companies Act, 2013.

NGOs in India function as 

• Trust Registration – NGOs with very few members or permanent institutions like orphanages and nursing homes prefer this type of organization since trusts are irrevocable and cannot be amended or terminated without the beneficiary’s consent. While no Central Act regulates trusts, certain States do, and as a result, so do NGOs.
• Society Registration – Societies are member-based organizations that are governed by a committee chosen by the members, according to self-established rules. According to the Societies Registration Act of 1860, associations are registered.
• Section 8 Company Registration – Section 8 Companies that are established for the advancement of societal goals and the general good are limited liability companies.

This recommended organisational structure, governed by the Companies Act of 2013, encourages trust in both the government and contributors.

NGOs are a crucial component of a well-functioning society. They not only help people in need but also close the gap between the populace and the government by making their problems prominent.

NGOs have often demonstrated their value in situations where they have contributed significantly to the welfare of people and the protection of their rights.

Conclusion

We hope that after reading the information above, one has a clear understanding of the differences between Trust and NGO.

For more clarity, you can visit the Vakilsearch website. Our expert team of legal professionals can also help you in registering your NGO. With decades of experience, Vakilsearch can make all your legal needs simple.