Non Profit Organizations:

Introduction

A non- profit organization is also known as a non- business entity. It is an organization whose purposes are other than making a profit. It includes- churches, public c schools, public charities public hospitals etc.

A nonprofit organization (also known as a non-business entity) is an organization that has been formed by a group of people in order "to pursue a common not-for-profit goal", that is, to pursue a stated goal without the intention of distributing excess revenue to members or leaders. A nonprofit organization is often dedicated to furthering a particular social cause or advocating for a particular point of view. In economic terms, a nonprofit organization uses its surplus revenues to further achieve its purpose or mission, rather than distributing its surplus income to the organization's shareholders (or equivalents) as profit or dividends. This is known as the non-distribution constraint. The decision to adopt a nonprofit legal structure is one that will often have taxation implications, particularly where the nonprofit seeks income tax exemption or charitable status.

NGO in India

A non profit organisations can be registered in India as a Society, under the Registrar of Societies or as a Trust, by making a Trust deed, or as a Section 8 Company, under the Companies Act, 2013.

Whether a trust, society or Section 8 company, the Income Tax Act, 1961 gives all categories equal treatment, in terms of exempting their income and granting 80G certificates, whereby donors to non-profit organisations may claim a rebate against donations made. Foreign contributions to non-profits are governed by FC(R)A regulations and the Home Ministry.

For an organisation to be termed as charity it requires Income tax clearances under 12 A Clause of Income Tax Act. Section 2(15) of the Income Tax Act defines ‘charitable purpose’ to include ‘relief of the poor, education, medical relief and the advancement of any other object of general public utility’. A purpose that relates exclusively to religious teaching or worship is not considered as charitable.

Registration

Registering a Non Profit in India can be done in a total of five ways:

·         Trust

·         Society

·         Section-8 Company

·         Special Licensing

·         Section-25 Company (old companies Act - Companies Act,1956

Trusts

A public charitable trust is usually floated when there is a property involved, especially in terms of land and building.

Society

According to section 20 of the Societies Registration Act, 1860, the following societies can be registered under the Act: ‘charitable societies, military orphan funds or societies established at the several presidencies of India, societies established for the promotion of science, literature, or the fine arts, for instruction, the diffusion of useful knowledge, the diffusion of political education, the foundation or maintenance of libraries or reading rooms for general use among the members or open to the public, or public museums and galleries of paintings and other works of art, collection of natural history, mechanical and philosophical inventions, instruments or designs.’

Section-8 Company

According to section 8(1)(a), (b) and (c) of the Indian Companies Act, 2013, a section-8 company can be established ‘for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object’, provided the profits, if any, or other income is applied for promoting only the objects of the company and no dividend is paid to its members.

Special Licensing

Society, Charitable societies, military orphan funds or societies established at the several presidencies of India, societies established for the promotion of science, literature, or the fine arts, for instruction, the diffusion of useful knowledge, the diffusion of political education, the foundation or maintenance of libraries or reading rooms for general use among the members or open to the public, or public museums and galleries of paintings and other works of art, collection of natural history, mechanical and philosophical inventions, instruments or designs

In addition to registration, a non-profit engaged in certain activities might also require special license/permission. Some of these include (but are not limited to):

1.   A place of work in a restricted area (like a tribal area or a border area requires a special permit – the Inner Line Permit – usually issues either by the Ministry of Home Affairs or by the relevant local authority (i.e., district magistrate).

2.   To open an office and employ people, the NGO should be registered under the Shop and Establishment Act.

3.   To employ foreign staff, an Indian non-profit needs to be registered as a trust/society/company, have FCRA registration and also obtain a No Objection Certificate. The intended employee also needs a work visa.

4.   A foreign not-for-profit may be registered as a branch, liaison or project office [and not necessarily as an Indian entity] after the requisite permission has been granted by the RBI. Upon receipt of approval from the RBI, the foreign office must within 30 days seek registration under the Companies Act, 1956. Alongside of these permissions, the office must acquire tax registrations.