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Friday, August 30, 2013

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

A trust can either be a private trust or a public charitable trust. Private trusts are governed by the Indian Trusts Act (1882) and are used for private purposes, such as running a private estate or institution. Privates trusts are not given any tax benefits.

If you want to do some charitable work for public –you can set up a public charitable trust. India does not have a national level law to govern charitable trusts. However, some of the states have enacted Public Charitable Trusts Act (Like Bombay Public Trusts Act, 1950)

  • Trusts are registered using a document called TRUST DEED. This document contains all the information about the trust and is printed/written/typed on plain papers. With these papers you would need to attach Rs. 100 Non-Judicial stamp paper. All the trustees and witnesses will have to give thumb impressions and signatures on these papers. All in all, you will need help of a notary to prepare the papers.
  • You may also need a no-objection certificate from the owner of the property where the registered office of the trust is to be situated
  • Following elements must be mentioned in the trust deed
    • Name and address of the Settlor (Settlor is the person who is setting up trust)
    • Name(s) and address(es) of the other trustees
    • Name of the trust
    • Minimum and maximum number of trustees your trust can have
    • Address of the registered office of the trust
    • Objectives of the trust
    • Rules and Regulations of the trust
  • For registering a trust you need minimum two trustees (i.e. one settler and another person). You can decide maximum number of trustees and it must be mentioned in the trust deed. All the trustees together are called Board of Trustees. This board collectively governs the trust.
  • In case of trusts, all or some of the trustees can be related persons (i.e. belonging to the same family)
  • All the trusts are allowed to work on all India level
  • Trusts are irrevocable –unless it is mentioned in the trust deed. This means that the trust cannot be wound up
  • Trustees are usually life-long members or their tenure is specified in the deed. Electoral process is not involved in the appointment of trustees.
  • Board of Trustees can also have various designations for trustees. Common designations are Chairperson and Managing Trustee
  • Trustees cannot draw any remuneration from the trust fund.
  • Profits cannot be distributed among the trustees.
  • Trust deed can be amended through a supplementary trust deed.
  • Most important part of the trust deed that you should pay attention to is objectives of the trust. You should be as thorough as possible in writing down trust objectives so that you can function smoothly without any problems.
  • At the time of registration, only the Settlor and two witnesses are required to be present in front of the Sub-registrar under whose jurisdiction the registered office address comes. Sub-registrar will check IDs of these people. After that the trust deed will go to the counter where data entry takes place. In the end the Settlor and two witnesses will be photographed. You will need to pay 1100 rupees fee. Of this, Rs. 100 will be the registration fee and Rs. 1000 will be the charges of keeping a copy of the trust deed with the sub-registrar. This will end the process.
  • After one week of submitting the papers, you can go back to the registrar to receive a certified copy of the trust deed.

Other Important Points

  • Trust income is exempted from tax. For this, after registration, you need to acquire a certificate from the Income Tax Department. This certificate is called u/s 12A
  • Donations to the trust 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.
  • Usually Lawyers and practicing CAs can help you in registration of trust –but I guess a lawyer is better person if you need help in formulating your trust deed. CAs don’t know the nitty-gritty of the legal stuff.
  • If you can write your own trust deed –and sure that you have done a good job –then all you need is help of a notary who will take your trust deed and prepare 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?

  • 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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