Registering a non-profit in India

General
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There are different ways to register a non-profit organization in India. While accountants, company law experts, and other professionals can offer assistance, understanding the basic routes can be helpful. Here are the possible constitutions and the types of grant-taking certificates you can register for to accept funds within India.

Possible Constitutions

When registering a non-profit in India, you have several options for its legal constitution:

  1. Society

    • Governed by the Societies Registration Act, 1860.
    • Requires a minimum of seven members.
    • More suitable for large groups with multiple activities.

  2. Trust

    • Governed by the Indian Trusts Act, 1882.
    • Requires at least two trustees.
    • Ideal for managing property or funds for charitable purposes.

  3. Section 8 Company

    • Governed by the Companies Act, 2013.
    • Requires at least two directors and two members.
    • Suitable for non-profits that need a corporate structure with limited liability.

Required Certifications

  1. 12A Certificate (Income Tax Act)

    • Enables the non-profit to be exempt from paying income tax on its surplus income.
    • Must be obtained as soon as possible after registration.
    • Valid for 5 years, can be renewed.

  2. 80G Certificate (Income Tax Act)

    • Allows donors to claim deductions on donations made to the non-profit.
    • Can be applied for after receiving the 12A certificate.
    • Valid for 3 years initially and then can be renewed for 5 years each time.

  3. CSR Registration

    • Required for receiving Corporate Social Responsibility (CSR) funds from companies.
    • Must be registered with the Ministry of Corporate Affairs.
    • Can be obtained after the non-profit is operational and has a 3 year track record of activities.

Benefits and Timing

  1. 12A Certificate

    • Benefits: Tax exemption for grants received by the organisation.
    • Timing: Apply immediately after registering the non-profit.

  2. 80G Certificate

    • Benefits: Attracts more donations due to tax benefits for donors, enhances credibility.
    • Timing: Apply after obtaining the 12A certificate.

  3. CSR Registration

    • Benefits: Access to CSR funds from corporates, support for large-scale projects.
    • Timing: Apply once the non-profit has established its activities and can demonstrate its impact for at least 3 years.

This is a to-my-best-understanding post that can help with a starting point. Now that you have context and are considering one of the options, please also check with a company secretary or a legal professional.

1 Like
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Thank you very much for this. Could you say a little more about the pros and cons of registering a Section 8 Company, as opposed to a ā€˜traditionalā€™ society or trust?

Also, with the New Tax Regime, will 80G certification soon become obsolete?

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The constitution you choose should depend on how you are organizing the operation of the non-profit you are creating. For instance, if the non-profit involves a large number of people who will continuously be added as membersā€”and if the work will be both managed by and directed toward these membersā€”a society structure might be the best option. On the other hand, if you were to establish a Section 8 company, the effort required to add shareholders each time or to change the board composition might seem tedious.

The Government has been slowly nudging people to move from the old scheme to the new one. It is possible that the old scheme, at some point, is completely done away with. At that point, some of the nudges that the Government was doing through the old scheme will need to be revisited, including the nudge for people to donate via the 80G section.