Registration of NGO or Establishment of Organization

ESTABLISHMENT OF
SERVICE ORGANIZATIONS
Dr. Saravana K & Prof. Elango S
2020
DEPT. OF POST-GRADUATE STUDIES IN SOCIAL WORK
BENGALURU CENTRAL UNIVERSITY

…….. Social Welfare and Development Administration
Social Work, BCU 1
UNIT II
Establishment of Service Organizations
Societies Act, 1860
The Societies Registration Act, 1860 was introduced with the
aim of improving the legal conditions of societies registration for
promotion of literature, science or fine arts or for diffusion of
useful knowledge for charitable purposes. The Societies
Registration Act, 1860 has been adopted by most of the State
Governments with/without further amendments.
Society Registration – Purposes
A Society can be formed for the promotion of literature, science
or fine arts or the diffusion of useful knowledge or political
education or for charitable purposes. As per Section 20 of the
Societies Act, 1860, a Society can be registered for the following
purposes:
• Grant of charitable assistance.
• Creation of Military Orphan funds.
• Promotion of Science.
• Promotion of Literature.
• Promotion of Fine Arts.
• Promotion or Instruction or Diffusion of useful Knowledge.
• Diffusion of Political Education.
• Foundation or maintenance of libraries or reading rooms.
• Foundation or maintenance of Public Museum or Galleries.

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In addition to the above purposes specified by the Societies Act,
1860, a Society can also be registered for other purposes based
on the amendment that has been enacted to the Societies Act,
1860 by the concerned State Government.
Society Registration in India
A Society can be formed by a minimum of seven or more persons.
Besides persons from India, foreigners, companies and other
registered societies can subscribe to the Memorandum of a
society. Like Partnership Firms, Societies can also be registered
or unregistered. However, only registered Societies can hold
vested properties and/or have a suit filed by or against the
Society.
Society registration is managed by State Governments. Therefore,
the application for registration of society must be made to the
concerned authority in the State, in which the registered office of
the Society will be situated.
To register a Society, the founding members must first agree on
a name for the Society and prepare the Memorandum and Rules
and Regulations of the Society.
Society Registration – Name Selection
While choosing a name for the society, it is important to
remember that as per Societies Act, 1860, similar or identical
name of an existing registered society is not permitted. Further
the proposed name for the society must also not suggest
patronage of the Government of India or any State Government
or attract the provisions of Emblem and Names Act, 1950.

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Memorandum of a Society
The Memorandum of the Society and the Rules and Regulations
of the Society must then be signed by each of the founding
members, witnessed by an Oath Commissioner, Notary Public,
Gazetted Officer, Advocate, Chartered Accountant or Magistrate
1st Class with their official stamp and complete address. The
following documents must be prepared, signed and submitted for
Society Registration:
• Covering letter requesting registration of the Society,
signed by all founding members.
• Memorandum of Association of the Society in duplicate
along with a certified copy.
• Rules and Regulations of the Society in duplicate along
with a duplicate, duly signed by the founding members.
• Affidavit sworn by the President or Secretary of the Society
stating relationship between the subscribers.
• Address proof for the registered office of the Society and No-
Objection Certificate from the Landlord.
The signed Memorandum and Rules and Regulations must then
be filed with the concerned Registrar of Societies in the State with
the prescribed fee. If the Registrar is satisfied with application for
Society Registration, the Registrar would certify to deem the
Society to be registered.
1[1] THE SOCIETIES REGISTRATION ACT, 1860 (Act XXI of
1860) CONTENTSSECTIONS 1. Societies formed by
memorandum of association and registration. 2. Memorandum of
association. 3. Registration fee. 4. Annual list of managing body

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to be filed. 5. Property of society how vested. 6. Suits by and
against societies. 7. Suits not to abate. 8. Enforcement of
judgment against society. 9. Recovery of penalty accruing under
bye-law. 10. Members liable to be sued as strangers Recovery by
successful defendant of costs adjudged. 11. Members guilty of
offences punishable as strangers. 12. Societies enabled to alter,
extend or abridge their purposes. 13. Provision for dissolution of
societies and adjustment of their affairs Assent required
Government consent. 14. Upon a dissolution no member to
receive profit Clause not to apply to joint-stock companies. 15.
Member defined − Disqualified members. 16. Governing body
defined. 16-A. Supersession of governing body of a society. 17.
Registration of societies formed before Act − Assent required. 18.
Such societies to file memorandum, etc., with Registrar of Joint-
stock Companies. 19. Inspection of documents − Certified copies
20. To what societies Act applies. 21. Registration of Deeni
Madrassah.1[1]Short title given by the Short Titles Act, 1897 (14
of 1897).
2. THE SOCIETIES REGISTRATION ACT, 1860 2[2] (Act XXI of
1860) [21 May 1860] An Act for the Registration of Literary,
Scientific and Charitable SocietiesPreamble.− WHEREAS it is
expedient that provision should be made for improving thelegal
condition of societies established for the promotion of literature,
science, or the finearts, or for the diffusion of useful knowledge,
3[3][the diffusion of political education] or forcharitable purposes;
it is enacted as follows:-1. Societies formed by memorandum of
association and registration.− Any sevenor more persons
associated for any literary, scientific or charitable purpose, or for
any suchpurpose as is described in section 20 of this Act, may by

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subscribing their names to amemorandum of association and
filing the same with the Registrar of Joint-stock Companies4[4] [*
* *] form themselves into a society under this Act.2. Memorandum
of association.− The memorandum of association shall containthe
following things (that is to say)−
the name of the society: the objects of the society: the names,
addresses, and occupations of the governors, council, directors,
committee or other governing body to whom, by the rules of the
society, the management of its affairs is entrusted. A copy of the
rules and regulations of the society, certified to be a correct copy
bynot less than three of the members of the governing body, shall
be filed with thememorandum of association.5[5] [
3. Registration fee.− Upon such memorandum and certified copy
being filed, theRegistrar shall certify under his hand that the
Society is registered under this Act. Thereshall be paid to the
Registrar for every such registration such fee as the
ProvincialGovernment may direct, and all fees so paid shall be
accounted for to the ProvincialGovernment.]
4. Annual list of managing body to be filed.− Once in every year,
on or before thefourteenth day succeeding the day on which,
according to the rules of the society, the2[2] Short title given by
the Short Titles Act, 1897 (14 of 1897). The Act (with the
exception of the first four sections) is based on Literary and
Scientific Institutions Act, 1854. It had been declared to be in
force in all the Provinces and the Capital of the Federation, except
the Scheduled Districts, by s. 3 of the Laws Local Extent Act,
1874 (15 of 1874). It had been declared by Notification under s.
3 (a) of the Scheduled Districts Act, 1874 (14 of 1874), to be in

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force in the Scheduled Districts; namely − Hazara, Peshawar,
Kohat, Bannu, Dera Ismail Khan and Dera Ghazi Khan. [Portions
of the Districts of Hazara, Bannu, Dera Ismail Khan and Dera
Ghazi Khan and the Districts of Peshawar and Kohat now form
the N.W.F.P., see Gazette of India, 1901, Pt. I, p. 867, and ibid.,
1902, Pt. I, p.575].3[3] Added by the Societies Registration
(Amendment) Act, 1927 (XXII of 1927).4[4] The words and figures
“under Act 19 of 1857” repealed by the Repealing Act, 1874 (16
of 1874).5[5] Substituted by the Punjab Finance Act, 1990 (I of
1990).
3. annual general meeting of the society is held, or, if the rules
do not provide for an annualgeneral meeting, in the month of
January, a list shall be filed with the Registrar of Joint-stock
Companies of the names, addresses and occupations of the
governors, council,directors, committee or other governing body
then entrusted with the management of theaffairs of the society.
5. Property of society how vested.− The property, movable and
immovable,belonging to a society registered under this Act, if not
vested in trustees, shall be deemedto be vested, for the time
being, in the governing body of such society, and in
allproceedings, civil and criminal, may be described as the
property of the governing bodyof such society by their proper title.
6. Suits by and against societies.− Every society registered under
this Act may sue orbe sued in the name of the president,
chairman, or principal secretary, or trustees, as shall
bedetermined by the rules and regulations of the society, and, in
default of such determination, inthe name of such person as shall
be appointed by the governing body for the occasion: Provided

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that it shall be competent for any person having a claim or
demand againstthe society, to sue the president or chairman, or
principal secretary or the trustees thereof, ifon application to the
governing body some other officer or person be not nominated to
be thedefendant.
7. Suits not to abate.− No suit or proceeding in any Civil Court
shall abate ordiscontinue by reason of the person by or against
whom such suit or proceedings shallhave been brought or
continued, dying or ceasing to fill the character in the
namewhereof he shall have sued or been sued, but the same suit
or proceedings shall becontinued in the name of or against the
successor of such person.
8. Enforcement of judgment against society.− If a judgment shall
be recoveredagainst the person or officer named on behalf of the
society, such judgment shall not beput in force against the
property, movable or immovable, or against the body of
suchperson or officer, but against the property of the society. The
application for execution shall set forth the judgment, the fact of
the partyagainst whom it shall have been recovered having sued
or having been sued, as the casemay be, on behalf of the society
only, and shall require to have the judgment enforcedagainst the
property of the society.
9. Recovery of penalty accruing under bye-law.− Whenever by any
bye-law dulymade in accordance with the rules and regulations
of the society, or, if the rules do notprovide for the making of bye-
laws, by any bye-law made at a general meeting of themembers
of the society convened for the purpose (for the making of which
the concurrentvotes of three-fifths of the members present at

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such meeting shall be necessary), anypecuniary penalty is
imposed for the breach of any rule or bye-law of the society,
suchpenalty, when accrued, may be recovered in any Court
having jurisdiction where thedefendant shall reside, or the
society shall be situate, as the governing body thereof shalldeem
expedient.
10. Members liable to be sued as strangers – Recovery by
successful defendant ofcosts adjudged.− Any member who may
be in arrear of a subscription which, accordingto the rules of the
society he is bound to pay, or who shall possess himself of or
detainany property of the society in a manner or for a time
contrary to such rules, or shall injure or destroy any property of
the society, may be sued for such arrear or for the
damageaccruing from such detention, injury or destruction of
property in the mannerhereinbefore provided. But if the
defendant shall be successful in any suit or other proceeding
broughtagainst him at the instance of the society, and shall be
adjudged to recover his costs, hemay elect to proceed to recover
the same from the officer in whose name the suit shall bebrought,
or from the society, and in the latter case shall have process
against the propertyof the said society in the manner above
described.
11. Members guilty of offences punishable as strangers.− Any
member of the societywho shall steal, purloin or embezzle any
money or other property, or willfully andmaliciously destroy or
injure any property of such society, or shall forge any deed,
bond,security for money, receipt, or other instrument, whereby
the funds of the society may beexposed to loss, shall be subject
to the same prosecution, and, if convicted, shall be liable tobe

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punished in like manner as any person not a member would be
subject and liable to inrespect of the like offence.
12. Societies enabled to alter, extend or abridge their purposes.−
Whenever it shallappear to the governing body of any society
registered under this Act, which has beenestablished for any
particular purpose or purposes, that it is advisable to alter,
extend orabridge such purpose to or for other purposes within
the meaning of this Act, or toamalgamate such society either
wholly or partially with any other society, such governingbody
may submit the proposition to the members of the society in a
written or printedreport and may convene a special meeting for
the consideration thereof according to theregulations of the
society. But no such proposition shall be carried into effect unless
such report shall have beendelivered or sent by post to every
member of the society ten days previous to the specialmeeting
convened by the governing body for the consideration thereof, nor
unless suchproposition shall have been agreed to by the votes of
three-fifths of the members delivered inperson or by proxy, and
confirmed by the votes of three-fifths of the members present at
asecond special meeting convened by the governing body at an
interval of one month after theformer meeting.
13. Provision for dissolution of societies and adjustment of their
affairs − Assentrequired − Government consent.− Any number
not less than three-fifths of the members ofany society may
determine that it shall be dissolved, and thereupon it shall be
dissolvedforthwith, or at the time then agreed upon, and all
necessary steps shall be taken for thedisposal and settlement of
the property of the society, its claims and liabilities, according
tothe rules of the said society applicable thereto, if any, and, if

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not, then as the governing bodyshall find expedient, provided
that, in the event of any dispute arising among the saidgoverning
body or the members of the society, the adjustment of its affairs
shall be referredto the principal Court of original civil jurisdiction
of the district in which the chief building ofthe society is situate;
and the Court shall make such order in the matter as it shall
deemrequisite: Provided that no society shall be dissolved unless
three-fifths of the membersshall have expressed a wish for such
dissolution by their votes delivered in person, or byproxy, at a
general meeting convened for the purpose:
14. Upon a dissolution no member to receive profit − Clause not
to apply to joint-stock companies.− If upon the dissolution of any
society registered under this Act thereshall remain after the
satisfaction of all its debts and liabilities any property
whatsoever,the same shall not be paid to or distributed among
the members of the said society or anyof them, but shall be given
to some other society, to be determined by the votes of notless
than three-fifths of the members present personally or by proxy
at the time ofdissolution, or in default thereof, by such Court as
aforesaid: Provided, however, that this clause shall not apply to
any society which shall havebeen founded or established by the
contributions of shareholders in the nature of a Joint-stock
Company.
15. Member defined − Disqualified members.− For the purposes
of this Act a memberof a society shall be a person who, having
been admitted therein according to the rules andregulations
thereof, shall have paid a subscription or shall have signed the
roll or list ofmembers thereof, and shall not have resigned in
accordance with such rules andregulations; but in all

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proceedings under this Act no person shall be entitled to vote or
to becounted as a member whose subscription at the time shall
have been in arrear for a periodexceeding three months.16.
Governing body defined.− The governing body of the society shall
be thegovernors, council, directors, committee, trustees or other
body to whom by the rules andregulations of the society the
management of its affairs is entrusted.
16-A. Supersession of governing body of a society.− (1)
Notwithstanding anythingcontained in the memorandum of
association, rules or regulations of a society registeredunder this
Act, if, after such inquiry as may be necessary, the Provincial
Government isof the opinion that the governing body of the
society − (a) is unable to discharge or persistently fails in
discharging its duties, or (b) is unable to administer its affairs or
meet its financial obligations, or (c) generally acts in a manner
contrary to public interest or the interests of the members of the
society,the Provincial Government may, by notification in the
Official Gazette, declare thegoverning body to be superseded for
such period, not exceeding one year, as may bespecified in the
notification.
6. (a) the office-bearers and other members of the governing body
shall cease to hold office; and
(b) all functions of the governing body shall, during the period of
supersession, be performed by a governing body constituted by
the Provincial Government from among the members of the
society. (3) On the expiry of the period of supersession, the
governing body of thesociety shall be reconstituted in accordance
with its memorandum of association, rulesand regulations.]

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7. Charitable societies, 14[14][* * *] societies established for the
promotion of science,literature, or the fine arts, for instruction,
the diffusion of useful knowledge.

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Trust Act
The origin of 'Trusts' can be traced back to the ancient
times when human motivation to do charity and dedicate
property for charitable and religious purposes found its
manifestation in the form of dharmashalas, annachatras,
sadavarts, educational and medical institutions, construction of
water tanks and wells, bathing ghats,implanting trees etc. with
the emergence of idol worship, endowments for temples and idols
came into existence.In addition to public endowments/wakfs,
private trusts can also be formed for looking after the
welfare,age,illness,disability or any other reason.
DEFINITION OF TRUST
As per section 3 of Indian Trust Act 1882 “A Trust is an obligation
annexed to the ownership of the property, and arising out of a
confidence reposed in and accepted by the owner, or declared and
accepted by him, for the benefit of another, or of another and the
owner” Trivia : This definition has never been amended since its
inception
Need of Trust
Trust are generally, formed or created to fulfill any or more of the
following Objectives:-
• For discharge of the charitable and/or religious sentiments
of the author of settlor of the trust, in a way that ensures
public benefit;

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• For claiming exemption from Income tax U/s 10 or 11, as
the case may be, in respect of incomes applied to charitable
or religious purposes;
• For the welfare of the members of the family and/or other
relatives, who are dependent on the settlor of the trust;
• For the proper management and preservation of a property;
• For regulating the affairs of a provident
fund,superannuation fund or gratuity fund or any other
fund constituted by a person for the welfare of its
employees;
Procedure to register Trust
Trusts are created when the settlor of the property transfers
property or provides benefits for the welfare of beneficiaries or for
the usage of public purposes. Four essential conditions are
necessary to bring into being a valid trust.
• The person who creates a trust (settlor) should make an
unequivocal declaration binding on him.
• He must transfer an identifiable property under irrevocable
arrangement and totally divest himself of the ownership
and the beneficial enjoyment of the income from the
property .
• The objects of the trust must be defined and specified.
• The beneficiaries are specified.
Eligibility to Register Trust
As per Section 7 of the Indian Trusts Act, a trust may be created
by every person competent to contract and by or on behalf a

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minor, with the permission of a principal court of original
jurisdiction. Following are eligible to create a Trust.
• Trust by an Hindu Undivided Family;
• Trust by a Minor;
• Trust by a Woman;
• Association of Persons;
• Company(eg: Debenture-Redemption Fund Trust for
redemption of its debentures);
Meaning of Private Trust
A trust is called a Private Trust when it is constituted for the
benefit of one or more individuals who are, or within a given time
may be, definitely ascertained. Private Trusts are governed by the
Indian Trusts Act 1882. A Private Trust may be created inter vivos
or by will. If a trust in created by will it shall be subject to the
provisions of Indian Succession Act, 1925.
The following are the requisites for creation of a Trust:
• The existence of the author/settlor of the Trust or someone
at whose instance the Trust comes into existence and the
settlor to make an unequivocal declaration which is
binding on him.
• There must be a divesting of the ownership by the author
of the trust in favour of the trustee for the beneficial
enjoyment by the beneficiary.
• A Trust property.
• The objects of the trust must be precise and clearly
specified.

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• The beneficiary who may be particular person or persons.
Unless all the above requisites are fulfilled, a trust cannot be said
to have come into existence.
Meaning of Public Trust
A trust is called as Public Trust when it is constituted wholly or
mainly for the benefit of Public at large, in other words
beneficiaries in the Public trust constitute a body which is
incapable of ascertainment. The Public trusts are essentially
charitable or religious trusts and are governed by the general
Law. The provisions of Indian Trusts Act do not apply on Public
Trusts. Like the private trusts, public trusts may be created inter
vivos or by will. The Indian Trusts Act does not apply to public
trusts which can be created by general law. There are three
certainties required to create a charitable trust are as follows
• a declaration of trust which is binding on settlor,
• setting apart definite property and the settlor depriving
himself of the ownership thereof, and
• a statement of the objects for which the property is
thereafter to be held, i.e. the beneficiaries.
It is essential that the transferor of the property viz the settlor or
the author of the trust must be competent to contract. Similarly,
the trustees should also be persons who are competent to
contract. It is also very essential that the trustees should signify
their assent for acting as trustees to make the trust a valid one.
When once a valid trust is created and the property is transferred
to the trust, it cannot be revoked, If the trust deed contains any

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provision for revocation of the trust, provisions of sections 60 to
63 of the Income-tax Act will come into play and the income of
the trust will be taxed in the hands of the settlor as his personal
income. The difference between a public and private trust is
essentially in its beneficiaries, A private trust’s beneficiaries are a
closed group, while a public trust is for the benefit of a larger cross-
section having a public purpose.
However, there may be trusts which are a blend of both and are
known as Public-cum-Private Trusts.
Public-Cum-Private Trusts
There may be certain trusts whose part of the income may be
applied for public purposes and a part may go to a private person
or persons, Such trusts are known as Public cum Private Trusts.
Such trusts, in respect of the portion of the income going to
private person or persons are assessable as private trusts and in
respect of that portion of the income which is applied for public
purposes, they shall be eligible for exemption under section 11
provided these trust are created before the commencement of
Income-tax Act, 1961 i.e. before 1-4-1962. Public-cum-private
created on or after 1-4-1963 shall not be eligible for exemption
u/s 11.
When to Register Trust
As per section 5 of the Indian Trusts Act, a private Trust in
relation to an immovable property must be created by a non-
testamentary instrument in writing, signed by the author of the
trust or the trustee and registered(under Section 17 of Indian

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Registration Act) . Thus,registration of a trust is necessary when
it is declared by a non-testamentary instrument. This registration
would still be required, even if the instrument declaring the trust
is exempt from registration under the Indian Registration Act. In
case of a Private Trustdeclared by a will,registration will not be
necessary, even if it involves an immovable property. Registration
will not be required, of a trust in relation to movable property. In
case of Public Trust, whether in relation to movable property or
an immovable property and whether created under a will or inter
vivos, registration is optional but desirable.
There are two conditions for registration of a trust namely :
1. An application to be made for registration in the prescribed
form (Form 10A) and in the prescribed manner to the
Commissioner of Income tax either before 1st July 1973 or
within one year from the date on which the trust is created
whichever is later
2. Where the total income of the trust or institution without
giving effect to the provisions of section 11 & 12 exceeds
50,000/- in any previous year, the accounts of the trust or
institution for that year has to be audited by a chartered
accountant or any other accountant entitled to be
appointed as an auditor of companies. The report of audit
should be in Form No. 10B prescribed in the Income-tax
Rules, 1962 and said audit report has to be furnished along
with the return of income.
In case of Charitable or religious Trust in relation to an
immovable property, for claiming exemption u/s. 11 of the I.T.

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Act 1961 it is essential that the instrument of trust is duly
registered. Registration is always desirable even if it is not
statutorily required. Following are the advantages of a Registered
trust:
• It becomes an official document with support and law;
• Effectuates Transmutation of possession;
• Easy conveyance of trust-property to the Trustee;
Advantages of a Trust
1. A trust can be formed for Charitable/Religious purposes
which enables the settlor to discharge his sentiments for
public benevolence,amelioration of human
suffering,advancement of knowledge etc., in a regulated
and proper way.
2. From taxation point of view, a charitable or religious trust
enjoys several tax exemptions and benefits
3. Donations to eligible charitable institutions are also
deductible from taxable income of the donor. All the
Industrial Big wigs have formed its own charitable trust, to
channelize their donations for public benevolence through
that trust, which remains under their own control. This
enables them to apply the donations in a regulated manner
according to their own discretion and still avail of the tax
exemptions, both in respect of the donations made and also
the income of the trust.
4. A trust can also be formed for the welfare of family
members and relatives dependent upon the settlor.

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Besides,there is an ample scope of tax planning through
private /family trusts.
5. The Institution of a trust enables the settlor to preserve his
property from division and transfer to outsiders.
Provisions and procedures of Income tax exemptions for Non-
Profit Organizations.
When shares of individual beneficiaries are determinate:
• The shares of all beneficiaries are liable to be assessed,
either by the trustee(s) as a representative assessee or
sometimes directly in the hands of the beneficiary entitled
to income. The assessment is made at the rate that is
applicable to total income of each beneficiary.
• If the income of the trust consists of profits and gains of
business, income tax is charged in the hands of trustee(s)
on the whole of the income & at maximum marginal rate.
This provision is not applicable, incase of a trust which has
been declared by anyone exclusively for the benefit of a
relative dependent on him and if this trust is the only trust
so declared by him.
When individual shares of beneficiaries are indeterminate
[U/s164]:
a. As a representative assesses, the Trustee(s) is/are liable to
tax.
b. If the income consists of profits and gains of business, then
the entire income of the trust is charged at maximum
marginal rate of tax, except in cases of the a trust that has

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been declared by a person exclusively for the benefit of a
relative dependent on him and if this trust is the only trust
so declared by him.
However, the maximum marginal rate of tax is not applicable
in the following cases, and the income will be chargeable to
tax as if it were income of an association of persons (AOP) :-
a. Where none of the beneficiaries has any other income
chargeable to tax under the Income Tax Act and none of
the beneficiaries is a beneficiary under any other trust or
b. Where the relevant income or part of relevant income is
receivable under a trust declared by any person by will and
such trust is the only trust so declared by him or
c. Where the trust is a non-testamentary trust created before
March 1, 1970 for the exclusive benefit of relatives of the
settlor mainly dependent on him for their supporter
maintenance or, where settlor is a Hindu undivided family,
for the exclusive benefit of its members so dependent upon
it or
d. Where the trust is created on behalf of a provident fund,
superannuation fund, gratuity fund, pension fund or any
other fund created bona fide by a person carrying on a
business or profession exclusively for the benefit of persons
employed in such business or profession.
In cases of (a), (b) and (c) the relevant income is taxable in the
hands of trustees as if it were the total income of an association
of persons, while income falling under (d) supra is exempt from
tax.

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Public trusts
Section 11 to 13 of the Income-tax Act, 1961 deals with taxation
of Charitable Trust/Institution, in addition to following as follows
• Section 11 provides the manner in which income is exempt
from income-tax.
• Section 12 provides the income of trust or institutions from
contributions.
• Section 12A provides the conditions as to registration of
trusts, etc.
• Section 12AA provides the procedure for registration.
• Section 13 provides section 11 not to apply in certain cases.
This is applicable in following circumstances:
• When the trust is created after March 31, 1962, then any
part of income of the trust ensures, directly or indirectly,
for the benefit of specific categories of persons like, the
author of the trust, trustee or the manager of the trust,
substantial contributor to the trust and also any relative of
such author, trustee, etc.
• Any part of the income/property of the trust is used during
the relevant year, directly or indirectly, for the benefit of
given categories of persons.
• If the trust funds are invested in contravention of
investment pattern of such funds.
Other Conditions of taxability of income of charitable & religious
trusts are as follows

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• Filing of return of the income [U/s 139(4A)] by trustees of
a charitable or religious trusts if total income of the trust
exceeds the minimum amount that is chargeable to
income-tax without giving an effect to provisions of Section
11 and 12.
• Liability of the trustees as 'representative assessees' [U/s
161] wherein they are liable to tax for their representative
capacity in respect of the income of trust.
U/s 80(G), deductions (or special exemptions) in respect of
donations to certain funds, or charitable institutions, etc is
granted. For being eligible under this section, the charitable
trusts or institutions require to obtain a valid certificate by given
an application to them in Form 10G The basic condition for
claiming exemption of income by the trust/institution is
that “Income should be derived from the property held under
a trust and the said income should be applied to charitable
or religious purpose in India”.
PRIVILEGES TO THE DONORS U/S 80G
As we already know that an NGO can avail income tax exemption
by getting itself registered and complying with certain other
formalities, but such registration does not provide any benefit to
the persons making donations. The Income Tax Act has certain
provisions which offer tax benefits to the "donors". All NGO's
should avail the advantage of these provisions to attract potential
donors. Section 80G is one of such sections.

Social Work, BCU 24
Registration Under Section 80G
If an NGO gets itself registered under section 80G then the person
or the organisation making a donation to the NGO will get a
deduction of 50% from his/its taxable income. The NGO has to
apply in Form No. 10G As per Annexure-29 to the Commissioner
of Income Tax for such registration. Normally this approval is
granted for 2-3 years.
Note: The Finance Act, 2009, has deleted the five year restriction
under proviso to sub section (5) clause (vi). In other words,
registration certificates issued after 1st October, 2009 can be
considered as one time registration unless any specific restriction
is provided in the certification itself.
Documents to be filled with form 10G
The application form should be sent in triplicate to the
Commissioner of Income Tax alongwith the following documents
:
i. copy of income tax registration certificate.
ii. detail of activities since its inception or last three years
whichever is less
iii. copies of audited accounts of the institution/NGO since its
inception or last 3 years whichever is less.
Conditions to be fulfilled under Section 80G
For approval under section 80G the following conditions are to be
fulfilled :

Social Work, BCU 25
• The NGO should not have any income which are not
exempted, such as business income. If, the NGO has
business income then it should maintain separate books of
accounts and should not divert donations received for the
purpose of such business.
• The byelaws or objectives of the NGOs should not contain
any provision for spending the income or assets of the NGO
for purposes other than charitable.
• The NGO is not working for the benefit of particular
religious community or caste.
• The NGO maintains regular accounts of its receipts &
expenditures.
• The NGO is properly registered under the Societies
Registration Act 1860 or under any law corresponding to
that act or is registered under section 25 of the Companies
Act 1956.
EXTENT OF BENEFIT
There is ceiling limit upto which the benefit is allowable to the
donor. If the amount of deduction to a charitable organisation or
trust is more than 10% of the Gross Total Income computed
under the Act (as reduced by income on which income-tax is not
payable under any provision of this Act and by any amount in
respect of which the assessee is entitled to a deduction under any
other provision of this Chapter), then the amount in excess of
10% of Gross Total Income shall not qualify for deduction under
section 80G. In other words, while computing the total income of
an assessee and for arriving at the deductible amount under
section 80G, first the aggregate of the sums donated has to be

Social Work, BCU 26
found out. Then 50 per cent of such donations has to be found
out and it should be limited to 10 per cent of the gross total
income. If such amount is more than 10 per cent of the gross
total income, the excess will has to be ignored.
Cash payment upto Rs.10000/-
The other important change made by the Finance Act, 2012 is
that any donation under section 80G has to be made otherwise
than in cash, if the amount exceeds Rs. 10,000/-. In other words,
donation in excess of Rs. 10,000/- under section 80G should be
made through account payee bank transfers.
Illustration Of Benefits Under Section 80g
The persons or organisation who donate under section 80G gets
a deduction of 50% from their taxable income. Here at times a
confusion creeps in, that the tax advantage under section 80G is
50%, but actually it is not so. 50% of the donation made is
allowed to be deducted from the taxable income and consequently
tax is calculated. The ultimate benefit will depend on the tax rates
applicable to the assessee. Let us take an illustration. Mr. X an
individual and M/s. Y Pvt. Ltd., a Company both give donation of
Rs. 1,00,000/- to a NGO called ABC Sanga Seva. The total income
for the year 2003-2004 of both Mr. X and Ms. Y Pvt. Ltd. is Rs.
2,00,000/-. Now assuming that the rates are 30% for the
individuals and 40% for the Companies without any minimum
exemption limit. The tax benefit would be as shown in the table :

Social Work, BCU 27
Particulars Mr. X
MS. Y Pvt.
Ltd.
i) Total Income for the year 2003-
2004
2,00,000.00 2,00,000.00
ii) Tax payable before Donation 60,000.00 80,000.00
iii) Donation made to charitable
organisations
1,00,000.00 1,00,000.00
iv) Qualifying amount for
deduction (50% of donation
made)
50,000.00 50,000.00
v) Amount of deduction u/s 80G
(Gross Qualifying Amount
subject to a maximum limit 10%
of the Gross Total Income)
20,000.00 20,000.00
iv) Taxable Income after
deduction
1,80,000.00 1,80,000.00
v) Tax payable after Donation 54,000.00 72,000.00
vi) Tax Benefit U/S 80G (ii)-(v) 6,000.00 8,000.00
Note : The tax rates and mode of computation is not actual
DO'S & DON'TS
• The Objectives of the trust should fall within the definition
of a charitable activity;
• Tax Registration Certificate from the income-tax
commissioner should be obtained;
• The Income of the trust should be applied only for the
objectives of the trust;
• In case the trust is not able to apply the income as
specified, accumulate the balance or invest such balance

Social Work, BCU 28
only in specified securities in accordance with Income-Tax
Act;
• Maintain Books of accounts and get it audited from a
chartered accountant;
• File income-tax return of the trust regularly within the
specified time limit;
• Anonymous donation in excess of Rs 1 lakh or 5% of total
receipts, whichever is higher, should not be accepted;
• Contributions from any foreign source should be accepted
only after the government approves them and if they are in
compliance with the provisions of the Foreign Contribution
Regulation Act;
• The trust should not undertake commercial activity. In
case any commercial activity is undertaken in furtherance
of the trust's charitable purpose, separate books of
accounts should be maintained for it;
However, under the proposed Direct Tax Code charitable trust
would be called a NGO and it is proposed to tax income of non-
profit organizations at 15% on the surplus income.
CURRENT SCENARIO
• Trusts today play a significant role in most financial and
legal systems and are recognized under the Hague
Convention. In a move to revitalize archaic laws, the
government in a market boosting initiative recently
announced a proposal to amend the Indian Trust Act, 1882
(“Act”) to permit all trusts to invest in shares and bonds of
listed companies.

Social Work, BCU 29
• The government has exempted non-residents and private
discretionary trusts from mandatory filing of income tax
returns electronically. Accordingly, it has been decided that
it will not be mandatory for agents of non-residents if his
or its total income exceeds Rs 10 lakh to electronically
furnish the return of income of non-residents for
assessment year 2012-13. The existing e-filing software
does not accept the return of a private discretionary trust
in the status of an 'individual', it said, adding, e-filing of tax
return in such case is not compulsory.
Foreign Contribution Act (FCRA) - 2015
Foreign Contribution Regulation Act is a consolidating act whose
scope is to regulate the acceptance and utilization of foreign
contribution or foreign hospitality by certain individuals or
associations or companies and to prohibit acceptance and
utilization of foreign contribution or foreign hospitality for any
activities detrimental to the national interest and for matters
connected therewith or incidental thereto.
Salient features:
• The central government has the power to prohibit any persons
or organizations from accepting foreign contribution or
hospitality if it is determined that such acceptance would likely
“affect prejudicially” (i) the sovereignty and integrity of India, (ii)
public interest, (iii) freedom or fairness of election to any
legislature, (iv) friendly relations with any foreign State, or (v)
harmony between religious, racial, social, linguistic or regional
groups, castes or communities.

Social Work, BCU 30
• The focus of the Act is to ensure that the foreign contribution
and foreign hospitality is not utilized to affect or influence
electoral politics, public servants, judges and other people
working the important areas of national life like journalists,
printers and publishers of newspapers, etc. The Act also seeks to
regulate flow of foreign funds to voluntary organizations with the
objective of preventing any possible diversion of such funds
towards activities detrimental to the national interest and to
ensure that individuals and organizations may function in a
manner consistent with the values of the sovereign democratic
republic.
• Foreign funds received as fees for service, costs incurred for
goods or services in the ordinary course of business, and trade or
commerce are excluded from the definition of foreign
contribution.
• The Central Bureau of Investigation or any other Government
investigating agency that conducts any investigation under the
Act shall furnish reports to the Central Government, on a
quarterly basis, indicating the status of each case that was
entrusted to it, including information regarding the case number,
date of registration, date of filing charge sheet, court before which
it has been filed, progress of trial, date of judgment and the
conclusion of each case.
• In case the foreign contribution is proposed to be transferred to
a person who has not been granted a certificate of registration or
prior permission by the Central Government, the person
concerned may apply for permission to the Central Government
to transfer a part of the foreign contribution, not exceeding ten
per cent, of the total value of the foreign contribution received.

Social Work, BCU 31
The application shall be countersigned by the District Magistrate
having jurisdiction in the place where the transferred funds are
sought to be utilised. The District Magistrate concerned shall take
an appropriate decision in the matter within sixty days of the
receipt of such request from the person. The donor shall not
transfer any foreign contribution until the Central Government
has approved the transfer.
New provisions
Seeking to promote transparency in dealings with foreign-funded
NGOs, the Modi government on Monday notified the amended
Foreign Contribution (Regulation) Rules, 2015, that require all
FCRA services and transactions to be made online
All applications for registration, grant of prior permission and
renewal of registration under FCRA, 2010, will now be accepted
online, with fee for various FCRA services to be deposited through
a payment gateway.
On its part, the FCRA division of the home ministry will issue
digitally signed registration certificates, prior permission
sanctions etc to applicants through emails.
As per the amended FCRA rules, all NGOs registered or granted
prior permission under FCRA are now required to upload details
of foreign contributions received and utilized by them every three
months on their website or the FCRA website, fcraonline.nic.in.
TOI had reported this proposed reform on July 27, 2015. The
original FCRR draft had kept this periodicity at seven days, which
was objected to by many NGOs.

Social Work, BCU 32
The new FCRA rules ensure that the human interface with
foreign-funded NGOs is minimized, with all queries and replies to
applicants to be made through emails.
All FCRA designated bank accounts and utilization accounts will
now have to be brought on the online platform of public finance
management service (PFMS) of controller general of accounts,
ministry of finance

Registration of NGO or Establishment of Organization

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