Last Updated On:
July 14, 2020, 11:46 a.m.
NON GOVERNMENTAL ORGANISATIONS
NGO stands for Non-Governmental Organization. Non-profit organization means that operates independently of any government, typically one whose purpose is to address a social or political issue.
Non-Governmental Organization is a non-profit organization that works towards the betterment of the society. NGO’s enables people to work together voluntarily to promote social values. They promote local initiative and problem-solving.
In the present pandemic situation, NGO take initiative in providing food, health facilities to people in rural areas. NGO’s main aim will be to provide better health structure immensely.
The government encourages such types of initiatives by providing some relaxations, benefits, or subsidies. As a result, various exemptions are given in the Income Tax Act, 1961.
NGO’s can be constituted in various forms they are as follows:
- Charitable Trust under “The Indian Trusts Act, 1882”:
- The public charitable trust is governed by the public trust Act of that state and The Indian Trusts Act, 1882. Trust can be constituted by Trust deed. In the case of the formation of trust, there are no specific statues available.
- Charitable endowment act’1890 and Charitable and religious act’1920 have bearing on the formation of a charitable trust. Few states such as Maharashtra, Rajasthan, Gujarat, and Madhya Pradesh, etc. have their own state Acts
- Society under “The Societies Registration Act, 1860”:
- Society is an association of persons who come together by mutual consent to act jointly for a common purpose. The compliance has to be made under the Societies registration act’1860. For the formation of the society minimum of 7 members at the state level and a minimum of 9 members at the National level are required.
- Section 8 Companies under “Companies Act 1956”.
- As per Subsection 1 of Section 8 of Companies Act 2013, Registrar shall, on the application, in the prescribed form, register such person or association of persons as a company under this section. Company Act 2013 applies in case of a registration of Section 8 Company.
- The main object of the company is to give benefits to the public. It is a company formed for charitable objects.
- Minimum 2 members are required in a Private and 7 members in a public company. 2 directors are required for the formation of the private company and 3 directors in a public company.
Each form of the constitution has its own enactment and the provisions contained therein would apply to the respective form.
APPLICABILITY OF INCOME TAX ACT ON NGO’s:
- The word “ Charitable purpose” is defined under section 12(2) of Income Tax act As per the section, “charitable purpose” includes relief of the poor, education, yoga, medical relief, preservation of environment preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility.
- Carrying out in the nature of trade, commerce or business or any activity of rendering any services to any trade, commerce or business is not considered as “Charitable purpose” under this section.
- Sections 11, 12, 12A, 12AA and 13 of the Income-tax Act, contains the provisions that deal with tax exemption applicable to the income of charitable or religious trusts or Institution.
- The exemption under the Income-tax Act is available to the assessee irrespective of the type of the constitution he constituted i.e. trust, society, or section 8 companies.
PROCEDURE FOR REGISTRATION:
Procedure for registration under Section 12A has been defined in section 12AA of the Income tax Act 1961.as per sec 12AA of Income Tax Act, 1961
A. Call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and
B. After satisfying himself about the objects of the trust or institution and the genuineness of its activities, he—
- shall pass an order in writing registering the trust or institution;
- shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution,
and a copy of such order shall be sent to the applicant:
Provided that no order for refusing registration shall be passed unless the applicant has been given a reasonable opportunity of being heard.
Application for registration is to be made online through e-filing account in Form 10A with CIT (Exemptions) and it should be accompanied by the prescribed list of documents as mentioned below
1. Certified copy of the instrument under which the trust/institution was created/established, if applicable
2. Certified copy of the document evidencing the creation of the trust or the establishment of the institution, if applicable
3. Certified copy of the registration with RoC/Registrar of Firms & Societies/Registrar of Public Trusts, whichever applicable
4. Certified copy of the documents evidencing adoption or modification of the objects, if any
5. Certified copy of the annual reports of the trust/institution for a maximum three immediately preceding financial years, if applicable
6. Note on activities
7. Certified copy of existing order granting registration under section 12A or section 12AA, if any.
8. Certified copy of an order of rejection of application for grant of registration under section 12A or section 12AA, if any.
REGISTRATION UNDER FCRA( FOREIGN CONTRIBUTION REGULATION ACT):
- NGO’s that receive foreign contributions or donations from foreign sources are required to obtain registration under the Foreign Contribution Regulation Act, 2010.
- This is law is regulated by the Ministry of Home Affairs (MHA). There is a condition that NGO must be in existence for a minimum of 3 years while making the application for FCRA registration.
- Application for FCRA registration is made online through the FCRA portal in Form FC-3. The registration once granted is valid for a period of five years.
- An application for renewal of FCRA registration can be made 6 months prior to the date of expiry, to keep the registration valid. The registered entities are required to make annual & quarterly compliances of FCRA.