Applicable Laws for NGOs
Constitution of India Articles 19(1) (c) and 30;
Income Tax Act, 1961;
Public Trusts Acts of various states;
Societies Registration Act, 1860;
Indian Companies Act, 1956, section 25;
Foreign Contribution (Regulation) Act, 1976;
TRUST, SOCIETY, SANGATHAN, SANGH, NON-PROFITABLE COMPANY ALL ARE KNOWN AS NGO Trusts The public charitable trust is a possible form of not-for-profit entity in India. Typically, public charitable trusts can be established for a number of purposes, including the relief of poverty, education, medical relief, provision of facilities for recreation, and any other object of general public utility. Indian public trusts are generally irrevocable. No national law governs public charitable trusts in India, although many states (particularly Maharashtra, Gujarat, Rajasthan, and Madhya Pradesh) have Public Trusts Acts. Societies Societies are membership organizations that may be registered for charitable purposes. Societies are usually managed by a governing council or a managing committee. Societies are governed by the Societies Registration Act 1860, which has been adapted by various states. Unlike trusts, societies may be dissolved. Sec. 25 Non- Profitable Companies.
A section 25 company is a company with limited liability that may be formed for "promoting commerce, art, science, religion, charity or any other useful object," provided that no profits, if any, or other income derived through promoting the company's objects may be distributed in any form to its members. Tax Laws India ’s tax laws affecting NGOs are similar to the tax laws of other Commonwealth nations. These laws may have some impact on U.S. grantmakers, and thus are summarized here. India provides for exemption from corporate income taxes of the income of certain NGOs carrying out specific types of activities, with unrelated business income being subject to tax under certain circumstances. India also subjects certain sales of goods and services to VAT, with a fairly broad range of exempt activities. The rates range from 4 percent to 12 percent, with most goods and services taxed at 8 percent.The income tax law and the corporate tax law provide tax benefits for donors, and these may be relevant to an American corporation doing business in India in deciding whether to engage in direct corporate grant making in India. The existence of a double taxation treaty between India and the United States may also affect gift planning decisions of U.S. corporate grant makers doing business in India. Finally, not-for-profit organizations involved in relief work and in the distribution of relief supplies to the Needy are 100% exempt from Indian customs duty on the import of items such as food, medicine, clothing and blankets. Other exemptions may also be available.
Maharashtra Value Added
The right of all citizens to form associations or unions is guaranteed by the Constitution of India, Article 19(1)(c). There are three pertinent legal forms of not-for-profit entities under Indian law: trusts, societies, and section 25 companies (as well as cooperatives and trade unions, which, as mutual benefit organizations, are not discussed in this note). Many state and central government agencies have regulatory authority over these not-for-profit entities. For example, all not-for-profit organizations are required to file annual tax returns and audited account statements with various agencies. At the state level, these agencies include the Charity Commissioner (for trusts), the Registrar of Societies (referred to in some states by different titles, including the Registrar of Joint Stock Companies), and the Registrar of Companies (for section 25 companies). At the national or federal level, the regulatory bodies include the income tax department and Ministry of Home Affairs (only for not-for-profit organizations receiving foreign contributions). 3 Trusts Public charitable trusts, as distinguished from private trusts, are designed to benefit members of an uncertain and fluctuating class. In determining whether a trust is public or private, the key question is whether the class to be benefited constitutes a substantial segment of the public.
Societies Societies are governed by the Societies Registration Act 1860, which is an all-India Act. Many states, However, have variants on the Act. Societies are similar in character to trusts, although there a few essential differences. While only two Individuals are required to form a trust, a minimum of seven individuals are required to form a society. The applicants must register the society with the state Registrar of Societies having jurisdiction in order to be eligible to apply for tax-exempt status. A registration application includes the society's memorandum of association and rules and regulations. In general, Indian citizens serve as members of the managing committee or governing council of societies, although there is no prohibition in the Societies Registration Act against non-natural legal persons or foreigners serving in this capacity. According to section 20 of the Act, the types of societies that may be registered According to section 20 of the Act, the types of societies that may be registered under the Act include, but are not limited to, the following: Charitable societies; Societies established for the promotion of science, literature, or the fine arts, For education; and Public art museums and galleries, and certain other types of museums. The governance of societies also differs from that of trusts; societies are usually managed by a governing council or managing committee, whereas trusts are governed by their trustees. Individuals or institutions or both may be members of a society. The general body of member’s delegates the management of day-to-day affairs to the managing committee, which is usually elected by the membership. Members of the general body of the society have voting rights and can demand the Submission of accounts and the annual report of the society for inspection. Members of the managing Committee may hold office for such period of time as may be specified under the bylaws of the society. Societies, unlike trusts, must file annually, with the Register of Societies, a list of the names, addresses And occupations of their managing committee members. Furthermore, in a society, all property is held in The name of the society, whereas all of the property of a trust legally vests in the trustees. Unlike trusts, societies may be dissolved. Dissolution must be approved by at least three-fifths of the Society’s members. Upon dissolution, and after settlement of all debts and liabilities, the funds and property of the society may not be distributed among the members of the society. Rather, the remaining funds and property must be given or transferred to some other society, preferably one with similar objects as the dissolved entity.