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 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.
3. Sec. 25 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.
B. 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 grantmaking 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 grantmakers 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.
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).