Legal Compliance for

Voluntary Organizations
in India
By Noshir H. Dadrawala

Centre For Advancement of Philanthropy

Sectors Of Civil Society

First Sector: Government
Second Sector: Market / business
Third Sector: Voluntary organizations
Gov

Corp
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VO

Indian Law Books /Statutes

Recognize Only
Charitable Purpose
&
Religious Purpose.
NGOs, PVOs, CSOs, CBOs etc., not defined
or recognized in Indian statute books.

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Trust Definition
Section 3 of The Indian Trusts Act,
1882:
an obligation annexed to the
ownership of property, and arising out
of a confidence reposed in and
accepted by the owner, or declared and
accepted by him for the benefit of
another.
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Charitable Purpose
(Section 9(1) of Bombay Public Trusts Act, 1950)

1. Relief of poverty or distress

2. Education
3. Medical relief
3A. Provision for facilities for recreation or other
leisure-time occupation (including assistance for
such provision), if the facilities are provided in
the interest of social welfare and public benefit,
4. The advancement of any other object of general
public utility, but does not include a
purpose which relates exclusively to religious
teaching or
worship.

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Section 20 of the Societies

Registration Act, 1860
The following societies can be registered under the
Act:
Charitable societies, military orphan funds or
societies established at the several presidencies of
India, societies established for the promotion of
science, literature, or the fine arts, for instruction,
the diffusion of useful knowledge, the diffusion of
political education, the foundation or maintenance of
libraries or reading rooms for general use among the
members or open to the public, or public museums
and galleries of paintings and other works of art,
collections of natural history, mechanical and
philosophical inventions, instruments or designs.
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Section 25 Company
Section 25 company can be set up for
promoting Commerce, Arts, Science,
Religion, Charity or any other useful purpose
Provided profit/income is used exclusively
for promoting the objects of the company
and no dividends are paid to members.

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Section 8
(Companies Act 2013)
The Central Government may issue a License to:
A Limited or Private Limited Company having as its
objects:
The promotion of commerce, art, science, sports,
education, research, social welfare, religion, charity,
protection of environment or any such other object
and
intends to apply its profits, if any, or other income in
promoting its objects and
intends to prohibit the payment of any dividend to its
members.

Public v/s Private

A public charitable trust has for its
objects, the members of an uncertain
and fluctuating body.
A trust for the benefit of workmen or
employees of a company, however
numerous, would not be considered
Public Charitable.

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Public v/s Private

A sectarian/communal trust can be a
public charitable trust.
Management (largely by family
members) does not determine the
public nature of trust.

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Trust, Society Or Company

Trusts offer simplicity and ease in
registration procedures
Just three trustees are required to
register a trust
In certain states or New Delhi where
there is no charity commissioner the
trust deed can be registered with the
sub-registrars office.
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Trust, Society Or Company

Trusts offer autonomy in management
and administration.
Trusteeship for life and new trustees
may be selectively appointed over a
period of time.
In a society or section 25 company
there are requirements for a general
body of members, periodic elections
and AGMs.
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Donations

Individuals
Companies
Trusts/Foundations
Government
Foreign Agencies
Charity Cash Box
Internet

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Types Of Donations

Corpus
General
Ear-marked
Matching
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Income Tax Act 1961

NO TAX for charitable institutions provided
Obtain PAN
Registered u/s 12A(a) of the Income Tax Act;
The institution continues to operate for charitable
purposes only according to its objects;
It spends at least 85% of its income on the objects of
the institution;
It invests its funds according to the norms
prescribed u/s 11(5) of the Act;
The trustees and their relatives do not derive any
personal benefit.
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Managing Surplus Income

In case a trust is unable to spend 85%
of its income in the previous F.Y. due to
late receipt of interest or grant, the
same may be spent in the immediately
following 12 months. The income tax
department should be informed in this
regard.

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Income Tax Returns

Audit Report in Form 10B, along with
Return of Income in Form ITR - 7,
should be filed every year.

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Section 80G(5D)
No deduction allowed under this section
in respect of donation of any sum
exceeding Rs. 10,000/- in cash.

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Donors PAN
Every donor contributing more than Rs.
50,000 to the organization is required to
provide Permanent Account Number
(PAN) to the organization;

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Application For 80G

Application for 80G certificate should be
in Form No. 10G, together with other
documents (e.g., registration
certificate, trust deed, annual report,
accounts etc.)

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Renewal For 80G?

Finance (No.2) Act, 2009 has omitted
the validity clause (vi) of Section 80G(5)
w.e.f 1-10-2009.
Effect: All 80G certificates granted after
or expiring after 1-10-2009 will be Valid
for all time, unless specifically
withdrawn.
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Foreign Contribution (Regulation) Act, 2010

Foreign contribution means the donation,
delivery or transfer, made by any foreign
source of any:
a) Article
b) Currency, whether Indian or foreign
c) Foreign security.

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What Is Foreign Source?

Foreign source includes:
the government of any foreign
country or territory or its agency;
an international agency;
a foreign company; and
citizen of a foreign country
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Conditions For Foreigners As Trustees

i) the foreigner is married to an Indian citizen;
ii) the foreigner has been living and working in
India for at least five years;
iii) the foreigner has made available his/her
specialized knowledge, especially in the
medical and health related fields on a
voluntary basis in India, in the past;

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Application for FCRA

Application for Registration in
Form FC-3
Application for Prior Permission in
Form FC-4
Both, Registration and Prior
Permission shall be granted or
rejected within a period of 90 days from
the date of receipt of application.
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Important Requirements Under FCRA

Maintain Separate bank account exclusively
for receiving foreign contributions.
NGOs may maintain multiple bank accounts
provided only 1 bank account is maintained
for receiving all foreign contribution.
Separate books of account for foreign
contributions should be maintained.
Return to be filed every year by 31st
December (even if it is NIL Return)
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Changing FCRA Bank Account?

For change of the bank account, an
application in prescribed form mentioning
the details of the old bank account and the
proposed new bank account along with
justification for change may be submitted to
MHA along with copy of resolution of the
trustees or executive committee for such
change.
The new account should be made operational
only after seeking MHAs approval.
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Deregistration Under FCRA

Registration may be cancelled if there
is no reasonable activity for 2 years.
Once registration certificate is
cancelled, such NGO shall not be
eligible for registration or prior
permission for the next 3 years from
the date of cancellation.
The term reasonable activity has not
been defined.
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MHA Contact Details

The Secretary
Ministry of Home Affairs
FCRA Wing / Foreigners Division,
NDCC-II Building,
Jai Singh Road,
OFF Parliament Street,
New Delhi 110001
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For Further Assistance Contact

Tel: (022) 22846534
E mail: info@capindia.in
Web: www.capindia.in
This presentation cannot be re-produced, transmitted in any form or by any means,
electronically or mechanically, on any information storage or retrieval system, without
prior permission of Centre for Advancement of Philanthropy.
Tax, FCRA and other laws in India keep changing from time to time and therefore
Centre for Advancement of Philanthropy does not take responsibly for content of this
presentation which may be rendered invalid if rules change.
Content or suggestions in this presentation could be generic and participants are
requested to seek advice for queries that may be specific to their organisation.