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Not for profit organization is an organisation that does not earn profit for self consumption. All the money earned by not for profit organization is used in achieving organization’s objectives.

This sector is also known as third sector, in contrast to the public and the private sector. Non for profit sector or not for profit services in India not necessarily means to be charitable organisation it also involves sectors or organisation which operate with zero profit and loss.

The purpose of not profit organisation in India is not to earn profit rather it serves to the society for any social cause to help people other than the need of earning.

Not for profit sector

Section 8 companies are the companies which permit the allowance or promotion of trade, commerce, arts, science, welfare, education, religion, charity or other objects provided the profits if any or other income is use to promote these.
A section 8 Company in India is registered under the Central Government’s Ministry of Corporate Affairs. Trusts and Societies are registered under State Government regulations. A section 8 Company has various advantages when compared to Trust or Society like improved recognition and better legal standing. Section 8 company limited by guarantee also has higher credibility amongst donors, Government departments and other stakeholders. This is a company act which was launched in 2013.
Company limited by guarantee companies act 2013 means a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up;
A section-8 Company needs a minimum of three trustees; there is no upper limit to the number of trustees. The Board of Management is in the form of a Board of directors or managing committee and should preferably be Indian nationals.
A cooperative society is a group of common people with common ideas who join their hands to achieve same or common goals. These types of societies do not aim at earning profit but rather serving people and achieving their common goals. Just like section 8of Companies Act 2013 cooperative societies may also aim at promoting trade, commerce, art, etc according to the their common goals or targets. The business may be formed to exploit the rights or suppressing lay man’s interest but cooperative society aims at connecting to people’s interest, ideas, opinions and work accordingly to achieve their targets. Cooperative societies are same as charitable and religious trust which aims at rendering service with not for profit motive and giving charity.
These societies are mainly found in villages where people with same targets or aims collaborate with each other in order to reach to their desired place.
The co-operative society act has been necessitated to protect the interests of weaker sections of society. The primary objective of this movement is ‘how to protect economically weaker sections of society’. In all forms of organisation, be it is a sole trade, partnership or joint stock company, the primary motive is to increase profits.
The businessman tries to promote his own interest through all possible means including exploitation of consumers. The co-operative society accounting is a democratic set up run by its members for serving the interests of themselves. It is self help through mutual help. The philosophy behind co-operative movement is “All for each and each for all”.
Features of cooperative society:
Open membership: Cooperative society allows open membership which means anyone can be member of this society. It does not specify maximum number of members. However after the formation of society maximum member may be defined.
Voluntary organisation: It is a voluntary organisation where any individual can volunteer in this society with the aim of providing services.
State control: To protect the rights of people this society is registered under state control. While getting registered the society needs to show the number of members, organisation action plan.
Service motive: cooperative societies are made not for the purpose of profit maximising rather it aims at providing services to individual or group of people or any organisation.
Democratic management: It has the democratic management where the boards of members are elected by the representatives of the society. It ensures all the rights are not exploited.
Co-operative societies in India are voluntary associations started with the aim of service to members. Hubert Calvert says, “Co-operation is a form of organisation wherein persons voluntarily associated together as human beings on the basis of equality for the promotion of the economic interest of themselves.”
Charitable and religious trusts are trusts which aim at helping people interest, ideas, thoughts, opinions to incorporate. They also aims at helping the out thrown people, deprived people. The creation of religious charitable trusts is governed by the personal laws of the religion. The administration of these religious trusts can either be left to the trustees as per the dictates of the religious names or it can be regulated to a greater or lesser degree by statute such as the Bombay Public Trusts Act, 1950. There are some types of cooperative societies which work for same social cause such as charitable and religious trusts do.
Charitable and religious trusts in India are trusts which aims to help socially, physically and deprived people from different religious community. These trusts are not for profit organisation but for purpose of helping deprived people.
The creation of religious charitable trusts is governed by the personal laws of the religion. The administration of these religious trusts can either be left to the trustees as per the dictates of the religious names or it can be regulated to a greater or lesser degree by statute such as the Bombay Public Trusts Act, 1950
For creating charitable and religious trust the author must express its acts by words or act. There is no formal language required to express. The author intended to constitute a trust binding in law on himself or the person to whom the property was given.
The author intended to benefit a definite person or persons in a definite way.
The author intended to bind definite property by trust
The not for profit organisation are organisations which are registered under income tax. 80G and 12A registration is something where these organisations can avail income tax exemption. These organisations are not for profit purpose and act as achieving common goal to meet their interest. This act is a beneficial form for the not profit organisation who are not working for profit but for betterment of society in many ways. Under this the registered organisation receives a 12A certificate. If the person gets registered under 80G then he gets 50% deduction in his taxable income. If person is registered in 80G and 12A then he is applicable for government funding only. If an organisation is registered under FCRA then also company can be protected from any negative contribution by foreign companies.
Under this registration, the not for profit organisation must register themselves in order to have advantage of tax exemption. The registered NGO gets 12A certificate but this does not provide benefit to the person who makes donation.
If the NGO is registered in 80G then the individual or the organisation making donations to NGO gets 50% deduction in all his taxable income.
If the NGO gets registered under 80G and 12A then the NGO is only applicable to have government funding.
If NGO is registered under 12A then the NGO does not have to pay any tax for the entire lifetime
80G registration documents:
NGO must not have any income which is not exempted from tax.
The laws of NGO must not contain any rules and regulations which involve further investment or possession of income kept aside of charitable purpose.
NGO must maintain regular accounts of expenditure and receipt
The NGO must be appropriately registered under societies registration act 1960
FCRA registration is the foreign contribution registration act which involves preventing host country from the negative effect of foreign contribution which may be harmful for the host country. This involves foreign hospitality and contribution to NGO’s, public servants etc. This act is applicable for the organisations which are working for the definite cultural, social, economic, educational or religious motive because these are the only field in which huge contribution is required, so that these organisations can be protected from any negative impact of foreign contribution. This also involves charity commission compliance which aims at having tax exemption.
FCRA stands for foreign contribution regulation act. This act regulates the foreign contribution and foreign hospitality given to various NGO, institutes, judges, journalists, public servants etc.
This act ensures and prevent the interventions of foreign funding and contribution to the Indian politics, public servants etc which are negatively affected by foreign contribution. Anyone who violates this act can be imprisoned up to 5 years.
This act is applicable for those Organizations who are working for definite cultural, social, economic, educational or religious programs. But first, they’ve to get permission from the Ministry of Home Affairs. Second, they have to maintain separate account book listing the donation received from foreigners and get it audited by a Chartered Accountant and submit to Home Ministry every year.
FCRA 2010 is act which allows the contribution by foreign but in such a way that it is not for the negative purpose.
FCRA registration documents:
i) Form FC-8 duly filled up in triplicate.
ii) Audited statement of accounts of past three years.
iii) Annual Report specifying activities of past 5 years.
iv) Details of the beneficiaries and detail of the socio-economic factors of the region in which the NGO is working.
v) List and geographical detail of the state, and districts proposed for work.
vi) Certified copy of the Registration Certificate.
vii) Certified copy of the Bye-laws and Memorandum and Article of Association whichever is applicable.
viii) Copy of certificates of exemption or registration issued by the Income Tax Department u/s. 80G and 12A.
ix) Copy of any prior permission granted to the organisation.
x) Copy of resolution of Governing Body of the organisation, authorising the registration under FCRA.
xi) Copy of Power of Attorney or the resolution of Governing Body by which the Chief Functionary is authorised to submit FC-8.
xii) List of present members of the Governing Body of the organisation and the office bearers.
xiii) Copy of any Journal or other publication of the organisation.
xiv) If the association is having any parent or sister or subsidiary organisation, which is registered under the FCRA then the registration number along with Ministry of Home Affairs file number should be mentioned.
xv) If the association has submitted any application earlier then its reference number should be mentioned.
xvi) If the association has received any foreign contribution with or without the prior approval of the Central Government, then the detail should be given.
These organisations can have funds from any foreign companies if organisation has certificate of FCRA under FCRA registration in India 1976.
FCRA registration procedure/process:
It must registers itself with the Central Government.
It must agrees to receive foreign contribution only through one specific bank account.
A charitable trust must get registered under charity commissioner compliance in order to seek benefit of tax exemption. A charitable and religious trust works to help socially, physically, religiously deprived people. These trusts should get registered under charity commissioner compliance so that they must be aware about the new laws formulations and tax exemption. If these trusts do not register themselves under charity commissioner compliance then there income would be liable to pay tax at the rate of 35.1%, hence it is beneficial for these trusts to be registered under this charity commissioner compliance. Government schemes and subsidies are given for charity commission compliance.
These are the compliance where the NPO must register themselves in order to have tax exemption. The charitable and religious trusts who are involved in working for the socially, physically, religiously out thrown people to make them self reliant without having motive of earning profits. Therefore charity commission register themselves in order to avail tax exemption. If these trusts do not register themselves under this then they are liable to tax at the rate of 35.1%.
A public charitable or religious institution can be formed either as a Trust or as a Society or as a Company registered u/s 25 of the Companies Act.
It generally takes the form of a trust when it is formed primarily by one or more persons.
At least seven persons are required for the formation of the company. Institutions engaged in promotion of art, culture, commerce etc. are often registered as non-profit companies.
Charity commission forms are enumerated as under :
Charitable Trust settled by a settler by a Trust Deed or under a Will.
Charitable or religious institution / association can be formed as a society.
Charitable institution can be formed by registering as a company u/s. 8 of the Companies Act, 2013, as non profit company
Who can make these trusts:
As per section 7 of the Indian Trusts Act, a trust can be formed –
1. By every person competent to contract, and
2. By or on behalf of a minor, with the permission of a principal civil court of original jurisdiction.
But subject in each case to the law for the time being in force as to the circumstances and extent in and to which the Author of the Trust may dispose of the Trust property.
A person competent to contract is defined in section 11 of the Indian Contract Act as a person who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject. Thus, generally speaking, any person competent to contract and competent to deal with property can form a trust.
Besides individuals, a body of individuals or an artificial person such as an association of persons, an institution, a limited company, a Hindu undivided family through it’s Karta, can also form a trust. Nowadays small charity commissions are being excluded from charity commission register. Charity commission who has its most of assets in England and Wales are supposed to register.
It may, however, be noted that the Indian Trusts Act does not apply to public trusts which can be formed by any person under general law. Under the Hindu Law, any Hindu can create a Hindu endowment and under the Muslim law, any Muslim can create a Public Walf. Public Trusts are essentially of charitable or religious nature, and can be constituted by any person.
Charity commission application form must be filled by charity commissions to get registered. For more details contact us.
Government schemes and subsidies involve various schemes and subsidies or expenditure that government bears on people behalf. This is like charity commissioner compliance where they act as charitable trust that provides subsidies to people who are in need of it without having any profit motive. This is an initiative taken by government to help people by rendering the services through schemes and subsidies. There are various schemes and subsidies made in order to promote or encourage people to operate or execute their ideas, plans etc more effectively.
Various numbers of government schemes and subsidies in India are being provided to numerous people for example MINIMUM SUBSCRIPTION TO FARMERS, LPG SUBSIDIES, WATER SUBSIDIES etc. These are the most beneficial for the people who have no source of livelihood.
Subsidies are kind of rebate given to people or some proportion of expenditure bearded by government in order to support people.
Despite of this there are disadvantage also which says that providing subsidies to poor people won’t help much because they don’t have water connection so what is the use of water subsidy to them.
There are various subsidies for farmers, poor people, small business entities etc for the means of helping them in any of the way which seems to be beneficial to them.
Following are some subsidy schemes:
Scheme for pig development
Scheme for utilization of fallen animal
Scheme for developing agricultural marketing infrastructure
Capital investment subsidies for rural go downs
Capital investment subsidies for cold storage and onion go downs
Capital investment scheme for commercial production units of organic input
Government schemes in India for self employment:
PRADHAN MANTRI ROZGAR YOJANA ___ The PMRY has been designed to provide employment to more than a million people by setting up of 7 lakhs micro enterprises by the educated unemployed youth. It relates to the setting up of the self-employment ventures through industry, service and business routes. The scheme also seeks to associate reputed non-governmental organisations in implementation PMRY scheme especially in the selection, training of entrepreneurs and preparation of project profiles.
PRIME MINISTER EMPLOYMENT GENERATION PROGRAMME___ i) To generate employment opportunities in rural as well as urban areas of the country through setting up of new self-employment ventures / projects / micro enterprises.
1. ii) To bring together widely dispersed traditional artisans /rural and urban unemployed youth and give them self-employment opportunities to the extent possible, at their place.
Government scheme for small businesses/loans:
The Credit guarantee fund scheme for micro and small enterprises
Small industries development bank of India
Credit link capital subsidy scheme for technology up gradation
National small industries corporation limited
National banks for agricultural and rural development