SERVICES


In India non profit / public charitable organisations can be registered as trusts, societies, or a private limited non profit company, under section-25 companies.

Non-profit organisations in India...
  1. exist independently of the state;
  2. are self-governed by a board of trustees or ‘managing committee’/ governing council, comprising individuals who generally serve in a fiduciary capacity;
  3. produce benefits for others, generally outside the membership of the organisation; and
  4. are ‘non-profit-making’, in as much as they are prohibited from distributing a monetary residual to their own members.
India has an ancient and rich tradition of philanthropy. There are virtually hundreds of thousands of charitable organizations (registered and unregistered) operating all over India. In Maharashtra alone, there are over four lakh charitable organizations registered with the office of the Charity Commissioner.

"Charity" being a State subject allows different states in India have separate Acts to govern and regulate charitable organizations. For example, all public charitable trusts in the state of Maharashtra are governed by the Bombay Public Trusts Act, 1950. The same Act, with minor changes, is also operational in the state of Gujarat. Rajasthan, too, has a trusts Act of 1959, while Madhya Pradesh has an Act of 1951. In certain southern states like Andhra Pradesh, there are, endowment Acts, while a number of northern and north-eastern states in India have no trust Act at all. Even the capital of India- New Delhihas no trust Act.

The Societies Registration Act, 1860, however, is an All-India Act, with each state adopting certain modifications.

Section 2(15) of the Income Tax Act –
which is applicable uniformly throughout the Republic of India – defines ‘charitable purpose’ to include ‘relief of the poor, education, medical relief and the advancement of any other object of general public utility’. A purpose that relates exclusively to religious teaching or worship is not considered as charitable. Thus, in ascertaining whether a purpose is public or private, one has to see if the class to be benefited, or from which the beneficiaries are to be selected, constitute a substantial body of the public. A public charitable purpose has to benefit a sufficiently large section of the public as distinguished from specified individuals. Organisations which lack the public element – such as trusts for the benefit of workmen or employees of a company, however numerous – have not been held to be charitable. As long as the beneficiaries of the organisation comprise an uncertain and fluctuating body of the public answering a particular description, the fact that the beneficiaries may belong to a certain religious faith, or a sect of persons of a certain religious persuasion, would not affect the organisation’s ‘public’ character.

Whether a trust, society or section-25 company, the Income Tax Act gives all categories equal treatment, in terms of exempting their income and granting 80G certificates, whereby donors to nonprofit organisations may claim a rebate against donations made. Foreign contributions to non-profits are governed by FC(R)A regulations and the Home Ministry. CAF would like to clarify that this material provides only broad guidelines and it is recommended that legal and or financial experts be consulted before taking any important legal or financial decision or arriving at any conclusion.