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Friday, August 30, 2013

How to Register a Society (NGO) in India..? (With 80 G Details)

In India, Non Profit Organizations (NPOs) are often called the Non Government Organizations (NGOs). An NGO could be registered as one of the following three ways:

In India, societies are governed by a central act called Societies Registration Act, 1860. All the states in India have adopted this act (with or without modifications) to create authorities at state level that register non-profit organizations.
  • The main documents in the registration of a society are Memorandum of Association (MOA) and Rules and Regulations (RR). These two documents are written/printed/typed on plain papers.
  • Minimum seven people are required to form a society. There is no upper limit on the number of members.
  • These members have various designations that can be decided among themselves. Common designations are President, Vice-Present, Secretary, Joint-Secretary and Treasurer etc.
  • These members are collectively called the Governing Body. This body directs and controls the functioning of the society.
  • All the members of society are elected for a specific period (which should be mentioned in the MOA). After expiry of this period; the post is filled through elections in which members of the Governing Body take part.
  • Because of the involvement of election process –societies are more democratic than trusts. But at the same time –power struggle and politics may also creep in as drawbacks. In case of societies, through election politics, it is possible to remove the person who had initiated the society in the first place.
  • Unlike trusts, societies function only within a specified geographical area. To make an all India level society, you would need at least eight members (of which five should be from different states of India)
  • The Memorandum of Association must mention:
    • Name of the Society
    • Address of the registered office
    • Names, designations, addresses and occupations of the members of first governing body
    • Objectives of the society
  • No stamp paper is required for MOA and RR
  • Most important part of the MOA that you should pay attention to is objectives. You should be as thorough as possible in writing down objectives so that you can function smoothly without any problems.
  • Related people (i.e. belonging to the same family) cannot be part of the governing body.
  • Members of the Governing Body can not draw any remuneration from the society funds.
  • While executing their duties as members, expenses incurred by the members of the Governing Body can be reimbursed from the society funds.
Important
  • Society income is exempted from tax. For this, after registration, you need to acquire a certificate from the Income Tax Department. This certificate is called 12A
  • Donations to the society are also exempted from tax (i.e. the donor will not have to pay tax on the amount of donation). For this, you need to acquire 80G certificate from Income Tax Department. Getting 80G and advertising that you have this certificate does encourage donors because they get tax benefit on donation.
  • Usually lawyers and practicing CAs can help you in registration of society –but I guess a lawyer is better person if you need help in formulating your MOA and RR. CAs don’t know the nitty-gritty of the legal stuff.
  • If you can write MOA and RR on your own –and sure that you have done a good job –then all you need is help of a notary who will take your papers and prepare them for the presentation before the registrar.
  • After registration, for acquiring 12A and 80G certificates you may need to take services of a practicing CA. They charge hefty fee for these services.

What is the Exemption under 80G

Exemption under section 80G exempt a donor from paying Income Tax. If the public charitable organization (NGO) has 80G certificate then the donors of that organization would not need to pay tax on the amount of money they donate to the organization.

How to apply for 80G Exemption

Exemption under section 80G is applied on a form called 10G. This form can be downloaded from Income Tax department’s website.

Validity of 80G Exemption

Income tax department issues 80G certificate only for a specific period (usually 1-3 years). After expiry, 80G exemption must be reapplied for and renewed.

Conditions for getting 80G exemption.

There are few conditions to be fulfilled under the section 80G:
  • The NGO should not have any income which are not exempted, such as business income. lf, the NGO has business income then it should maintain separate books of accounts and should not divert donations received for the purpose of such business.
  • The bylaws or objectives of the NGOs should not contain any provision for spending the income or assets of the NGO for purposes other than charitable.
  • The NGO is not working for the benefit of particular religious community or caste.
  • The NGO maintains regular accounts of its receipts & expenditures.
  • The NGO is properly registered under the Societies Registration Act 1860 or under any law corresponding to that act or is registered under section 25 of the Companies Act 1956.

Documents required for registration for 80G

  • Dully filled in Form – 10G for registration u/s 80G registration;
  • Registration Certificate and MOA /Trust Deed (two copies – self attested by NGO head);
  • NOC from Landlord (where registered office is situated);
  • Copy of PAN card of NGO;
  • Electricity Bill / House tax Receipt /Water Bill (photocopy);
  • Evidence of welfare activities carried out & Progress Report since inception or last 3 years;
  • Books of Accounts, Balance Sheet & ITR (if any), since inception or last 3years;
  • List of donors along with their address and PAN;
  • List of governing body I board of trustees members with their contact details;
  • Original RC and MOA /Trust Deed for verification;
  • Authority letter in favor of NGO Factory;
  • Any other document I affidavit / undertaking I information asked by the Income Tax department

When can you apply for 80G?

80G can be applied just after registration of the NGO.

Where is 80G to be applied?

8G can be applied to the Commissioner of Income-tax (Exemption) having jurisdiction over the institution.

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