♣  NGO (Non-Government Organization):

A non-governmental organization (NGO) is an organization that is not part of a government. They are non-profit making, voluntary and service oriented organizations. Many NGOs now prefer the term Private Voluntary Organization (PVO).

A non-governmental organization (NGO) is a legally constituted organization created by natural or legal persons that operates independently from any government. NGOs which are funded totally or partially by governments, the NGO maintain its non-governmental status by excluding government representatives from membership in the organization.

The World Bank defines NGOs as “Private organizations that pursue activities to relieve suffering, promote the interests of the poor, protect the environment, provide basic social services, or undertake community development.” 

♣  AREA OF WORK:

The NGOs perform various functions for the benefit of society. NGO typically works on various issues like Environment protection, Save the Planet Earth, Disability, Science and Technology, Health, Agriculture, Animal welfare, Art and Culture, Education, Age care, Rural development, Culture and heritage, Women empowerment, Child care, Basic education to all children, Animal welfare, Disaster management and many more.

♣  SOURCES OF FUNDING OF NGO:

A) Internal sources:

1. Membership fees,

2. Subscription,

3. Any short term or long term investment of NGO,

4. Donations by member of the NGO,

5. Rent from property of NGO, (If rented)

B) External sources:

External sources include:

1. Funds from Government,

2. Funds from Foundations/Trusts/Funding Agencies,

3. Funding from Corporations,

4. Public donations,

5. Self financing etc

♣  GOVERNING LAWS FOR NGOs:

NGO registration in India can be done under following acts:

  • Indian Trust Act, 1882 if registered as Trust
  • Societies Registration Act, 1860 if registered as Society
  • Companies Act, 2013 if registered as Section 8 Company (Company not for Profit)

♣  TYPES OF ORGANIZATION:

Non-Government organizations (NGOs) in India generally take three legal forms:

  • Trusts,
  • Societies, and
  • Not-for-profit companies (Section 8 Companies)

♣  REGISTRATION OF SUCH ENTITIES/ORGANISATIONS UNDER VARIOUS ACTS:

⇒  Registration under Income Tax Act: In order to take exemption of Income Tax on any income derived from property held under trust for charitable or religious purpose, such organization/institution/entities require to get itself registered under Section 12AB of Income Tax Act, 1961

Trust or an institution which is already registered under section 12A or under section 12AA, of the Income Tax Act, 1961, require to make an application for registration again within a period of 3 Months from the 1st Day of June, 2020 i.e. till 31st August, 2020 and it shall be valid for a period of 5 years from the date of registration (Amendment by Finance Act, 2020)

⇒  Registration under FCRA: Charitable Trusts, Societies, Section 8 Company which proposes to receive Foreign Contribution or donation from foreign sources is required to obtain registration under Section 11 of Foreign Contribution Regulation Act, 2010. Such a registration under the Foreign Contribution Regulation Act, 2010 is called a FCRA registration.

⇒  Registration of NITI AAYOG: Every NGO need not to mandatorily register with NITI AAYOG. However in order to receive Fund from government under various government schemes, NGO and other voluntary organization required to register with NITI AAYOG. Niti Aayog is now appointed as the nodal agency for the purpose of registration and accreditation of NGOs/voluntary organizations seeking funds from the government.

♣  TAX BENEFITS TO ORGANISATIONS ENGAGED IN CHARITABLE OBJECTS:

To be eligible for tax exemption under the Income Tax Act (1961), a not-for-profit entity must be organized for religious or charitable purposes. “Charitable purpose” includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility as defined under Income tax Act, 1961

Exemption from Tax: Any income derived from property held under trust for charitable or religious purpose shall not be included in the total income of the person who is in receipt of such income subject to compliance of such conditions/restrictions as mentioned u/s 11 and 12 of IT Act, 1961.

Any voluntary contributions received by a trust or by an institution established wholly for charitable or religious purposes shall be deemed to be income derived from property held under trust and shall not be included in the total income of the previous year.

Conditions to take Tax benefit:

A Trust or an institution is not eligible to take tax benefit, unless such trust or an institution has made an application for registration electronically.

Application for registration is to be made at least one month prior to the commencement of the previous year relevant to the assessment year from which said registration is sought.

Trust or an institution must file its timely Income Tax Return.

The Books of Accounts should be properly maintained, including all receipts and expenditures.

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