Trust बनाऊँ? Society बनाऊँ? या Section-8 Not-for-Profit Company बनाऊँ?

Summary

In this informative video, Suresh Vadhwa discusses the key considerations for starting a non-profit organization (NGO) in India, focusing on three main structures: Trusts, Societies, and Section 8 Companies. He outlines the requirements, registration processes, and costs associated with each option, emphasizing the importance of a well-drafted trust deed. Vadhwa highlights the similarities in income tax treatment across these structures and advises on selecting the best option based on control, management, and compliance needs. The video serves as a comprehensive guide for aspiring NGO founders seeking clarity on their choices.

Takeaways

• 😀 Understanding the three main options for establishing an NGO in India: Trust, Society, and Section 8 Company.
• 🔍 Trusts are governed under the Indian Trust Act of 1882, requiring at least one settler and one trustee.
• 🏛️ To create a Trust, you must draft a Trust deed and register it with the local sub-registrar, similar to property registration.
• 📜 Societies require a minimum of five members and must be registered with the Registrar of Firms and Societies.
• 💼 Section 8 Companies function like non-profit organizations, requiring licensing from the Ministry of Corporate Affairs.
• 💰 Trusts generally incur the lowest costs to establish compared to Societies and Section 8 Companies.
• 📅 Societies require renewal of registration every five years, whereas Trusts and Section 8 Companies have a more permanent status.
• 📊 All three options are treated similarly by the Income Tax Department regarding tax benefits.
• 📝 The Trust deed is crucial as it outlines the NGO's objectives and operational framework; careful drafting is essential.
• 🔒 Section 8 Companies provide greater control and regulatory oversight, making them a favorable option for those wanting strict governance.

Q & A

What are the three main options for starting an NGO in India?

The three main options are creating a Trust, forming a Society, or registering a Section 8 Company.

What is the legal basis for establishing a Trust in India?

A Trust is formed under the Indian Trust Act of 1882.

What are the minimum requirements to create a Trust?

To create a Trust, you need at least one settlor and one trustee.

How many members are required to form a Society?

A minimum of five members is required to form a Society.

What is the process for registering a Society?

To register a Society, you must submit the members' ID proofs and the society's bylaws to the Registrar of Firms and Societies.

What is a Section 8 Company, and how is it different from other options?

A Section 8 Company operates as a non-profit entity under the Companies Act of 2013, requiring a license to operate and has more regulatory compliance compared to Trusts and Societies.

What are the advantages of registering as a Trust?

Trusts are generally cost-effective, have simpler management, and face fewer regulatory requirements.

Why is it important to draft the objectives clearly in the foundational documents?

Clear objectives are crucial for obtaining tax benefits and ensuring compliance with regulations, as they help the income tax department evaluate the validity of the NGO's purpose.

What are the legal requirements for a Section 8 Company?

You need to obtain a license from the Ministry of Corporate Affairs, comply with corporate regulations, and conduct regular audits.

What should one do if they need help with drafting documents for an NGO?

It is advisable to seek assistance from legal counsel or chartered accountants to ensure that the documents are well-drafted and compliant with regulations.