One of the main benefits of running a NGO is that you have an opportunity to serve the community via funds and volunteer work. It’s also an opportunity to solve an issue, which is not good for the community.
Trust is the most common way of starting a NPO or NGO, with the objectives of demolish poverty, providing education and offering medical relief. It can also promote arts, science and literature.
As per the Indian Trust Act 1882, under in a trust, owner (trustor) can transfer the property to trustee for the benefit of a beneficiary, along with a edict that -the trustee should hold the property for the beneficiaries of the Trust.
The Trusts are irrevocable i.e. they can’t be amended or terminated without the court’s order.
Trust is registered under the state laws. It is recommended for the small charitable activities. A Trust is a organisation registered with limited members. In general, the Trusts are incorporated by offering property for a charitable purpose. However, cash fund might also be grand by the trust or trustees for charitable purpose while incorporating a trust.
Trust can be –
• Private trust –
1. In this, the beneficiaries include families or individuals. It is subdivided into –
a. whose beneficiaries and their shares both can be determined
b. whose both or either the beneficiaries and their shares cannot be determined
• Public trust.
1. In this, the beneficiaries include the public.
2. It can be further subdivided –
a. Public Charitable Trust
b. Public Religious Trust
As the trust regulated by State Government, different states in India have different Trusts Acts for their regulation. If by any instance, there is an absence of a Trusts Act in any particular state or territory, the general regulations of the Indian Trusts Act 1882 are applied to the trust registered in that region.
Key Highlights of NGO/Trust
• Easy Management
• of registering trust is very low in comparatively to other NGO
• Annual Returns – There is no requirement of annual return filing
• Tax benefits under Income Tax Act
Constitution of the Trust
• Author/Founder/Settlor of the trust
• Managing trustee(s)
• Other trustees
• The quorum of the Board of Trustees shall not exceed a maximum of 21 members.
• A Trust is registered and regulated through Trust Deed. The Trust deed is an official shape of an NGO which includes the support and recognition of law along with the objects, rules and guidelines for the operation of Trust.
• The trust deed shall be executed on stamp paper and the value of the stamp paper will be dependent on the value of the capital invested by the members in the Trust.
• The trust deed has to be signed by both the settler and trustees in the presence of two witnesses.
Contents of Trust Deed –
The Bible of any charitable trust is the trust deed the aiming the objects and mode of management. A trust Deed shall include –
• Number and details of trustees
• Name of the trust
• The registered office of the trust
• Details of the Author of the Trust
• Corpus/Assets of the Trust
• Plenum of the board with their qualification, terms and tenure
• Powers and functions of the Managing Trustee and other Trustees
• Closure and amendment of the trust deed and the applicability of the Act
Benefits of Trust/NGO Registration
• Various Government benefits
• Trust / NGO gets huge tax benefits
• There is no requirement of annual return filing
Registration Process of NGO/Trust
• Choose an Appropriate Name for the Trust
• Formulate Trust Deed
• Submit the Trust Deed with The Registrar
• Obtain the trust Registration Number
Cons of Trust/NGO
• From the point of view of foreign contribution, Trusts are less preferred
• Change of registered office is difficult
Compliances of Trust/NGO
• Accounts Book Keeping – Monthly
• Annual ITR filings
• Shops and Establishment License – in case of employment
• Professional Tax Registration – if applicable
• GST registration – if applicable
Other Certificates Which can be Required in Order to Avail More Benefits
Under Income Tax Act, 1961, it exempts an individual or organization making a donation to a Trust from paying tax (partially or fully) on the donated amount.
Under Income Tax Act, 1961, it is a one-time registration issued by Income Tax Department. This certificate exempts a NGO from paying income tax on the surplus income.
Organizations seeking foreign contributions in order to promote their activities/ work mentioned in their company object have to obtain FCRA registration. According to the regulation, it shall not receive any foreign contribution without the Government’s approval.
Documents Required for NGO / Trust Registration
o From the trustees and settler –
o PAN Card
o Voter’s ID/Aadhar Card/Passport/Driver’s License
o For Proposed Registered office (Residential or commercial)
o Any Utility bills
o Scan copy of Rent agreement with NOC from owner
o Latest Bank Statement/Telephone or Mobile Bill/Electricity or Gas Bill
o Passport-sized photograph of all Directors
“Pursuant to Section 135 of the Companies Act, 2013 and Rule 4(1) and (2) of Companies (CSR Policy) Rules, 2014 states the any charitable institution either Society, Trust or Section 8 Company duly registered under an Act of Parliament or State Legislature with recognition of Income Tax Department or else, need to get listed or registered in Ministry of Corporate Affairs duly filing form called CSR-1 with effect from 1st April, 2021. Further the form is applicable to existing entity as well as new entity formed thereafter the applicable date. The required form to be filed by such entity is already published and put on website for the use of stakeholders. It is 3 page form simply asking for entity form, registration details and address with valid certificate of registration and PAN Card copy of entity in addition to details of Trustee/Chairman/Director details on issued Form. Upon filing of Form, entity will received Unique Code and it establish the legal identity as well as give opportunity to such entity to serve in mega CSR Project of various entity in India to which Section 135 is applicable.
This is precisely record taking of all NGO in India doing charitable activities either under Corporate Social Responsibility or else to track the CSR expenditure and make transparent procedure for organization which want to do CSR activity from registered entity in Ministry of Corporate Affairs.
Therefore it is mandated by Government of India to get such entity registered with Ministry of Corporate Affairs.
Further, it is again redeliberated to such NGO organization to get registered with Darpan Portal for better appearance and transparency.”
Over and above with the amendment introduced by the Finance Act, 2021 with effect from 1st April, 2021 the long-awaited renewal proposal for 12A/80G already registered entity with Income Tax Department has to renew its registration again by 30th June, 2021 is been finally implemented. The amended provision of Governing Act, Income Tax Act, 1961 is now fully enforceable regarding this provision and upon failure to fulfill the renewal requirements the existing registration of 12A/80G stands withdrawn. Department is working on form and its execution mode.