A Non Government Organization is a organization whose aim is to give benefit to the general public without any profit motive. As per the Income Tax Act the NGOs are to be assessed as association of persons or a body of individuals. An association of persons with non-profit motive may be registered under any of the following Indian Acts
As a Charitable Trust
As a Society registered under the Societies Registration Act
As a Company licensed under section 25 of the Companies Act.
Procedures of Formation
"Trust" is defined as an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another, or of another and the owner.
Trust Deed is required to be drafted by the author which shall contain at least the prescribed information/clauses. A charitable trust is not required to obtain registration under the Indian Registration Act.
Society A society may be defined as a company or an association of persons united together by mutual consent to deliberate, determine and act jointly for same common purpose. Minimum seven persons, eligible to enter into a contract, can form society. When an NGO is constituted as a society, it is required to be registered under the Societies Registration Act, 1860.
A society has to prepare its
Memorandum of Association
Rules and Regulations.
For the Purpose of registration, following documents are required to be filed with the registrar of societies
Covering letter requesting for registration stating in the body of the letter various documents annexed to it. The letter is to be signed by all the subscribers to the memorandum or by a person duly authorised by all of them to sign on their behalf.
Memorandum of Association, in duplicate neatly typed and pages serially numbered.
Rules and Regulations/Bye-Laws, in duplicate, certified by at least three members of the governing body.
An affidavit of the president/Secretary of the society, on a non-judicial stamp paper of prescribed value, stating the relationship between the subscribers, duly attested by an oath commissioner, notary public or 1st class magistrate.
Documentary proof such as house tax receipt, rent receipt in respect of premises shown as registered office of the society or no objection certificate from the landlord of the premises.
An authority duly signed by all members of the managing committee.
A declaration by the members of the managing committee that the funds of the society shall be used only for the purpose of furthering the aims and objects of the society.
Under Section 25 of the company's act, an association formed or to be formed
For the purposes of promoting commerce, art, science, religion, charity to any other useful object
With intention to apply its profits or other income for promoting its objects
Which prohibits payment of any dividend to its members
Is permitted to be incorporated without addition of the word "Limited" or "Private Limited". Procedure for applying is same as applicable in the case of all companies.
If the registrar is satisfied that all formalities have been complied with, he will issue a certificate of incorporation from which date the company comes into existence. INCOME TAX EXEMPTION FOR NGO The Income Tax Department of India has given exemption from income tax to the NGOs mentioned above. The exemption is subject to the various compliances mentioned in the Act. TRUST For getting exemption under Income Tax Act the Assessee has to apply to the income tax department in form no. 10A within a prescribed time limit Under section 11(1)(a) to (c) of the Income Tax Act, 1961, income derived from property held under trust is exempt if the following conditions are satisfied
The property should be held under trust wholly for charitable or religious purposes.
Income from such property should be applied to charitable or religious purposes. (Exemption is available to the extent of such application)
Income should be applied in India
At least 85% of the income derived from property held under trust, should be applied to charitable or religious purposes in the relevant previous year in order to claim full tax exemption.
TAX EXEMPTION FOR NOTIFIED CHARITABLE SOCIETIES U/s 10(23C) (iv) and (v)
Any income of any institution established for charitable purposes is exempt. For getting exemption under these clauses, following requirement must be completed
Making an application in Form No. 56
Applying its income or accumulating it for application, wholly & exclusively to its objects
Notice of accumulation u/s 11(2) will have to be given to the assessing officer in Form No. 10