Social welfare is the primary responsibility of the government and charitable trust do this and lessen the burden on the government. Therefore these organizations are given tax exemptions and benefits.
What are charitable trusts or NGO?
A trust can either be a public or private charitable trust. Private trusts are governed by the Indian trusts act (1882) and are set up for private purposes such as running a private institution or estate. They are not eligible for any tax exemptions.
Public charitable trust has tax exemption though they do not have any particular national law. There are state level laws regarding the entity.
Purpose of forming a trust
- Discharge the charitable or religious sentiment of the author of the trust for the benefit of the public.
- For claiming income tax exemption over the money spent for charitable and religious cause.
- For the welfare of the family member or relatives who are dependent on the settler of the trust.
- For better management of property and assets
- For regulating the money related to provident fund superannuation fund gratuity fund and any fund constituted for the benefit of employees.
Procedure of setting up charitable trust
Trusts are registered using a document called trust deed which contains all the details of the organization along with a non judicial stamp paper duly signed by the trusty members. The entire process will require the assistance of a notary public.
A non-objection certificate is necessary if the property where the registered office is located in the property of a person other than the trustee. If it belongs to the trustee there is no requirement of this certificate.
A trust should have a minimum of two members to govern as trustee and there is no restriction to the maximum number of trustees.
The essential elements or people of a trust are:
- Author: The person who reposes or declares the deed.
- Trustee: The person who accepts the trust
- Beneficiary: The benefit of confidence is accepted by this person
- Trust property: The subject matter
According to the Indian Trusts Act, 1882 the author of the trust should express the following in trust deed:
- Intention for the creation of trust
- Purpose of the trust
- Trust property
Difference between trust and society
Many people tend to get confused between what a trust and society is, so here is the difference between the both. Trust is an entity which is easier to register and run. Donors give money to the trust believing that the trust members make proper use of the money.
Trustees are answerable only to charity commissioner and relevant laws. The exemptions are provided under the 80G and 12a laws. This can be revoked if the trustees do not follow the rules and regulations mentioned in the trust deed.
Society: However society is a democratic entity. They need to keep all the members related and registrars of the society informed about the decisions. The organizations registered as a society have to keep records of the meeting.
Foundation: There is nothing called as foundation it is just a word used by the non government organization along with their names and there is no registration or laws associated with it.
80 G certificate: Exemption through 80 G is obtained through a form called 10 G.
Requirements to obtain 80 G
NGO should not have any income which does not come under exception. If the organization has any income through business the records for the same have to be maintained separately.
- They should maintain receipts and bills of all expenditures.
- Trustees and the governing members should not draw any unaccounted money for their purposes through the funds.
- The organization should be properly registered under the societies registration act 1860 Indian trusts act 1882.
- The organization should not work for the benefit of any particular caste or religion
- The funds should not be spent for any other purpose other than the charitable objectives mentioned in the trust deed.
How to apply for 80G certificate for trust
Here are the following steps one has to follow while registering for the certificate:
- Dully filled 10 G registration form
- Registration certificate and trust deed
- NOC from landlord in case the property does not belong to the trustee
- Copy of PAN card of the organization
- Bills and receipts such as those of house rent or water bill.
- Proof of welfare activities carried out since the inception of the organization
- Account books ITR filed and balance sheets
- List of donors along with their details such as PAN and address
- List of governing body members
- NGO can apply for 80 G certificate after the registration is complete
- To obtain this exemption one has to apply at office of commissioner of income tax.
The process of forming a trust is quite lengthy and there are various consulting services which complete the task. So wishing luck to all the good Samaritans planning to start a trust which would help those in need.
This experience is shared by Anand Rajendran, CEO of Uptra.in, a leading provider of legal services, including company registration. He is the Head of Communications at Uptra Consultancy Services, India’s largest online legal services facilitator.