Trust
Setting up an NGO ?Which Form –Society or Trust or Company – is the Best?
An NGO (Non Governmental Organization) is usually formed for the charitable or social work. In India, an NGO can be formed under three types of law –Society Registration Act 1860 or Indian Trust Act 1882 or Companies Act 1856. Out of these three, only Companies Act is a central legislation where as the other two laws are state laws .So , when one decides to form an NGO , first confusion or consideration is the law under which the NGO should be formed or set up .This is important decision because once you register and form an NGO under a particular form, you cannot go back .
Although , there is little difference as far regulation related to the funding source of an NGO is concerned or the income tax benefit on form over other , the biggest difference comes when one consider the controlling aspect of an NGO. From the point of control over the NGO, the TRUST is the best among three forms because of law under Indian Registration Act complete control mechanism inbuilt is in case of formation of trust under Indian Registration Act. After this , society registration Act comes and most difficult among three is is Companies Act.
Comparative chart for NGO Setup Under 3 Forms
| Trust under Indian trust Act | Society under Society Registration Act | Company under Section 8 (25 earlier) of the Companies Act | |
| Ease of setting up Organization | Easiest. Can be formed within a week | Easy , may take 1-2 months | Relatively cumbersome. May take more than 2 months |
| Should Name of NGO be Approved by an Authority? | Not required | Yes, it is given at the time of registration | Strict guideline is applicable .Separate application for name approval required. |
| Cost of Registration | Minimal , may up to Rs 10,000 | Minimal , may up to Rs 10,000 | May be more than others |
| Nos of Subscribers/Trustees | two. | Seven | two |
| Governing structure | Board of trustees | Two tier structure
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Two tier structure
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| Voting Rights or subscriber/trustees | Same for all | Same for all | May be different based on shares. |
| Documentation requirement every year | No documentation required | List of managing committee members | Annual return along with audited balance sheet |
| Stamp Duty | Stamp Duty is as per the State law on registration of trust | No stamp paper required for memorandum of association and rules and regulations. | No stamp paper required for memorandum and articles of association. |
| Meaning of Board | No meeting required | One General Body meeting and one Board meeting | One General Body meeting and Two board meetings in a year |
| Payment to Office Bearer/Trustees/functionaries | Permitted , provided the trust deed provides so | Permitted if general body adopt such practice | Permitted if general body adopt such practice |
| Foreigner as member trustee | Possible | Possible | Possible |
| Is registration with I.T. Authorities required for claiming tax exemption | Required | Required | Required |
Readers may determine from above that the easiest and best way to form an NGO is through a trust under Indian Trust Act . Please rad How to Create a Charitable Trust
