Different Forms of Non-Government Organization in India

Non-government organizations in India can be structured and incorporated as one of the following three forms:

1. Trust
2. Society
3. Non-Profit Company under Section 8 of The Indian Companies Act, 2013

Comparison between a trust, a society and a non-profit company

	Trust	Society	Section 8 Company
Statute	Indian Trust Act, 1882	Societies Registration Act, 1860	The Companies Act, 2013
Jurisdiction	Concerned state where registered	Concerned state where registered	Concerned state where registered
Authority	Charity Commissioner / Deputy Registrar	Registrar of Societies	Registrar of Companies
Registration	As Trust	As Society	As Section 8 Company
Main Document	Trust Deed	Memorandum of Association and Rules & Regulations	Memorandum and Articles of Association
Stamp Duty	Trust deed to be executed on a non-judicial stamp paper of prescribed value	No stamp paper required for Memorandum of Association and Rules & Regulations	No stamp paper required for Memorandum and Articles of Association
Number of persons needed to register	Minimum two trustees; no upper limit	Minimum seven; no upper limit	Minimum three; no upper limit
Board of Management	Trustees	Governing body or council/managing or executive committee	Board of directors/Managing Committee
Mode of succession on board of management	Usually by appointment	Usually election by members of the general body	Usually election by members of the general body

Registration of a Trust

A Trust is formed when an owner of a property (trustor) transfers it to a person who is known as trustee, for the benefit of third party who is known as beneficiary. There are two types of Trusts- Public Trust and Private Trust. It is governed by Indian Trust Act, 1882 across India.

NGOs in India can be registered as a Trust, Society, or Section 8 Company, each with its own legal framework and purpose

Eligibility/Requirements of Trust Incorporation:-

• Minimum of two trustees.
• Forming Trust Deed.

Documents required for Trust Incorporation:-

1. Proof of identity of the shareholder. Such documents include Aadhaar, PAN, Passport, Driving license or any other Government-issued identity document would be required.
2. Proof of address of the shareholder. Such documents include bank statements, electricity bill, water bill, gas bill and telephone bill.
3. NOC (Non Objectionable Certificate) from the landlord if the registered office is a leased property.
4. Proposed registered office’s utility bill which includes EB bill, property tax receipt, water bill copy.
5. Trust deed on stamp paper.
6. Scanned copy of Sale deed if the registered office is owned property.

Process of incorporation of Trust:-

1. Selection of Name and getting it approved
2. Forming a Trust deed
3. Getting the trust registered by submitting documents required to the registrar
4. Getting PAN number, TAN number and opening bank account of the Trust

Advantages of Trust:-

1. Management continues even after the disability of the member.
2. Better control over assets.
3. Investment management remains uninterrupted.
4. Flexibility of using funds.

Disadvantages of Trust:-

• High incorporation cost.
• Cash can be accessed by creditors.
• Not so responsive to changes.
• Property has to be reregistered in the name of trust which involves cost.

Registration of a Society

A society is a business done to serve society by group of members and not to earn profits. It is registered as a legal entity under The Societies Registration Act, 1860. It is generally formed for charitable activities.

Eligibility/Registration for registration:-

• The objective shall be legal and for charitable, scientific and literary purpose.
• Minimum of 7 members.

Documents required for registration of Society:-

1. NOC from the landlord if the registered office is a leased property.
2. In case of own property, copy of sale deed along with the EB bill/property tax receipt/water bill copy of the registered office property.
3. Proposed registered office’s utility bill which includes EB bill, property tax receipt, water bill copy. (Address proof)
4. Proof of address of all the directors and the shareholders. Such documents include bank statements, electricity bill, water bill, gas bill and telephone bill.
5. Proof of identity of all the partners. Such documents include Aadhaar, PAN, Passport, Driving license or any other Government-issued identity document would be required.
6. Affidavit no. 1 for NOC of registered office and its ownership.
7. Affidavit no. 2 for name of the society and members not being related to each other.

Process of registration:-

It includes-

1. Selection of name.
2. Creation of MoA and signing MoA by all members after required document submission.

Advantages of Society:-

1. Having contractual rights being a separate legal entity.
2. Exempted from income tax.
3. Limited liability of members.
4. Having secured assets.

Disadvantages of Society:-

1. Transparency leads to lack of secrecy.
2. Undue government interventions.

Registration of Section 8 company

These are limited companies, which are registered under the Companies Act, and will be treated as limited companies without the phrase “limited” being added to their name. They may have been registered either as “private limited or public limited companies”.

Features/Eligibility of a Section 8 Company:-

1. Is incorporated for the promotion of commerce, art, science, education, research, sports, charity, social welfare, religion, protection of environment or any such other object.
2. It intends to apply all it’s profits, income, or other earnings, in promoting these objects.
3. Pays no dividend or income to its members.

Requirements of a Section 8 Company:-

1. Registration under The Companies Act, 2013 and get licensed.
2. Minimum 2 directors for Private Limited Company and 3 directors for Public Limited Company must be there.
3. At least 1 director must resident in India, means a person who has stayed in India for a period of not less than 182 days during the immediately preceding 1 financial year.
4. MOA and AOA.
5. All directors must have their valid DIN and DSC.
6. Annual returns, filings and other compliances should be done.

Advantages of Section 8 company:-

1. Distinct Legal Identity
2. Zero Stamp Duty
3. No Minimum Capital Requirement
4. CARO requirements don’t apply here
5. Many tax benefits
6. More credibility
7. Exemption to the donors

Documents required:-

1. Copy of PAN Card
2. Aadhaar Card
3. Address Proof (Bank Statement, Electricity Bill, Telephone Bill)
4. 2 Passport Sized Photographs
5. Ownership Proof of registered office(House Tax etc.)
6. Utility Bill (Electricity Bill, Gas Bill)
7. NOC(from the owners – if the premises is rented)

Process of registration:-

1. Apply for name approval
2. Get DIN & DSC
3. Name Approval
4. Apply for License & Certificate of Incorporation
5. Some other forms on ROC

Particulars	Form of Business
Sole Proprie-torship	Partner-ship	Limited Liability Partner-ship	One Person Company	Private Limited Company	Public Limited Company
Minimum Person Required	1	2	2	2	2	7
Approximate Minimum Cost of Registration (in Rs.)	1,000	2,500	5,000	5,000	5,000	9,500
Approximate Minimum Cost of Annual Compliance (with GST Returns)	6,000	7,500	8,500	10,000	12,500	15,000
Nature of Liability	Unlimited	Unlimited	Limited	Limited	Limited	Limited
Eligibility for DPIIT (Start-Up India Recognistion)	NO	NO	YES	NO	YES	YES
Annual Statutory Compliances	Minimal	Minimal	Slightly High	Slightly High	Slightly High	High
Advantages in term of GST	Same in All Forms	Same in All Forms	Same in All Forms	Same in All Forms	Same in All Forms	Same in All Forms
Advantages in term of Income Tax	Less Advantage	Very Less Advantage	Very Less Advantage	Some Advantage	More Advantages	More Advantages
Beneficial For	Single Owner	Short Term Ventures	Professional Firms	Sole Promoter with Corporate Form	New Start-ups & growing businesses	High Investment Business
Perpetual Existence (Unlimited Term of Existence)	NO	NO	YES	YES	YES	YES
Minimum Person Required as Director	N.A.	N.A.	2	1	2	3
Can Shareholder & Director be same?	N.A.	N.A.	YES	YES	YES	YES
Possibility of Change of Management	NO	YES	YES	YES	YES (Easiest)	YES
Possibility of Transfer of Shares (Ownership)	NO	YES	YES	YES	YES (Easiest)	YES
Number of Nominee Required	N.A.	N.A.	N.A.	1	N.A.	N.A.