What Is an NGO Trust Society? A Complete Guide

The term "NGO Trust Society" is commonly used, but it actually refers to three distinct legal forms for non-profit organisations in India. A Trust is governed by the Indian Trusts Act, 1882 (for private trusts) or various state Public Trusts Acts. It is created through a trust deed and managed by trustees. A Society is registered under the Societies Registration Act, 1860, and is managed by a governing body with members. A Section 8 Company is registered under the Companies Act, 2013, and is regulated by the Ministry of Corporate Affairs (MCA).

The key difference lies in governance and compliance. Trusts are simpler to form but have less formal governance structures. Societies require a minimum of seven members and have a more democratic structure with annual general meetings. Section 8 Companies have the highest compliance requirements, including board meetings, annual filings with the MCA, and audit requirements, but they offer greater credibility and limited liability for members.

For most small to medium NGOs, a Trust or Society is the preferred starting point. Section 8 Companies are often chosen when the organisation plans to receive significant foreign funding or needs a corporate structure for large-scale operations.

Registration procedures differ based on the legal form you choose. For a Trust, you need to prepare a trust deed on non-judicial stamp paper (value depends on the state). The deed must include the trust's name, objectives, trustees' details, and the trust's address. You then submit the deed to the local Sub-Registrar's office for registration. The registration fee is nominal, typically between Rs. 1,000 to Rs. 5,000 depending on the state.

For a Society, you need at least seven members (called the governing body). You prepare a Memorandum of Association and Rules & Regulations. These documents are submitted to the Registrar of Societies in your state. The registration fee is usually between Rs. 500 to Rs. 2,000. The Registrar will issue a certificate of registration after verifying the documents.

Both processes require the following common documents:

• Identity proof (Aadhaar, PAN) of all trustees/members
• Address proof of the registered office
• Passport-size photographs
• Proof of ownership or rental agreement for the office premises

The entire process typically takes 15-30 days for a Trust and 30-60 days for a Society, depending on the state's processing time.

Compliance requirements vary significantly based on the legal form. For a Trust, the primary compliance is maintaining proper accounts and filing annual income tax returns if the trust has income exceeding the basic exemption limit. Trusts must also file Form 10A and Form 12A with the Income Tax Department to claim tax exemptions. There is no requirement to file annual returns with any government authority unless the trust is registered under a specific state act.

For a Society, compliance is more structured. Societies must hold an Annual General Meeting (AGM) within 15 months of the last AGM. They must file an annual list of the governing body members and audited accounts with the Registrar of Societies. Failure to do so can lead to the society being struck off the register.

For a Section 8 Company, compliance is the most rigorous. You must:

• Hold at least one board meeting every quarter
• Hold an AGM within 6 months of the financial year end
• File annual financial statements and annual return with the MCA (Form AOC-4 and MGT-7)
• Maintain a registered office and statutory registers
• Get accounts audited by a qualified chartered accountant

All three forms must comply with the Foreign Contribution (Regulation) Act (FCRA) if they receive foreign funds, which requires separate registration.

Yes, an NGO Trust Society can receive foreign funding, but it must comply with the Foreign Contribution (Regulation) Act (FCRA), 2010. The organisation must first obtain FCRA registration from the Ministry of Home Affairs. The application requires:

• The organisation must have been in existence for at least three years
• It must have spent at least Rs. 10 lakh on its core activities in the last three years
• It must have filed its annual returns for the last three years
• It must have a dedicated FCRA bank account

Once registered, the NGO must file annual FCRA returns (Form FC-4) by December 31st each year. The government has recently tightened FCRA rules, including the requirement that foreign funds must be received only in the designated FCRA bank account and cannot be transferred to other organisations.

It is important to note that political organisations, religious organisations, and organisations of a political nature are prohibited from receiving foreign funds. Also, any organisation that has been convicted of certain offences or has been found to be involved in activities prejudicial to national interest cannot receive foreign funds.

An NGO Trust Society can claim tax exemptions under the Income Tax Act, 1961, provided it obtains the necessary registrations. The two key registrations are:

1. Section 12A registration: This allows the NGO's income to be exempt from tax. The application is made in Form 10A online through the Income Tax portal.
2. Section 80G registration: This allows donors to claim a deduction of 50% or 100% of their donation from their taxable income. The application is made in Form 10G.

To maintain these exemptions, the NGO must:

• File its income tax return annually (Form ITR-7)
• Ensure that its income is applied for charitable purposes (at least 85% of income must be spent)
• Not use funds for the benefit of trustees/members
• Maintain proper books of accounts

Additionally, if the NGO has income from business activities, that income is taxable unless the business is incidental to the charitable objectives. The NGO must also ensure that it does not accumulate income beyond 5 years without specific approval.

It is important to note that these tax benefits are not automatic. The NGO must apply for and obtain the registrations before claiming exemptions. The process can take 3-6 months, so it is advisable to apply early.

If you are planning to start an NGO, first decide which legal form suits your needs based on scale, funding sources, and compliance capacity. Then, consult a qualified professional to draft the necessary documents and guide you through the registration process. For specific tax or FCRA matters, a chartered accountant or lawyer with NGO experience is essential.

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This page provides preliminary information. It is not legal advice. For your matter, consult a qualified professional.