NGO/ NPO: Non-Governmental Organization or Not for Profit Organisation is an organisation which is incorporated for the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object; such organisation intends to apply its profits or other income in promoting its objects.

 

In India NGO can be registered as any of the three forms of entity:

 

1. Section 8 Company As per Company Act, 2013
2. Trust under The Indian trusts Act, 1882
3.    Society under Societies Registration Act, 1860

 

Section 8 Company:

In India, a Section 8 Company is a type of nonprofit organization registered under Section 8 of the Companies Act, 2013 (previously Section 25 of the Companies Act, 1956). These companies are established for promoting various charitable, educational, scientific, religious, or other similar purposes, and they intend to apply their profits, if any, towards promoting these objectives.

Trust under the Indian trusts Act, 1882

A trust is a legal arrangement governed by the Indian Trusts Act, 1882. It's a mechanism used to manage assets or property for specific purposes, often for charitable or philanthropic objectives. To establish a trust as an NGO, individuals or entities interested in philanthropic or charitable activities can create a trust structure by drafting a trust deed that clearly defines the objectives and functioning of the trust.

Society under Societies Registration Act, 1860

An Indian legislation enacted to facilitate the registration of societies for various charitable, literary, scientific, and other purposes beneficial to society It is formed by a group of individuals (seven or more) who come together with a common goal or objective. They draft a memorandum of association and rules and regulations for the society.

Summary of differences of these entities are given below:

Aspect	Section 8 Company	Trust under Trust Act 1882	Society under Societies Registration Act 1860
Formation	Incorporated as a company under Companies Act	Created by a trust deed	Formed by a group of individuals with common objectives
Objective	Charitable, scientific, educational purposes	Charitable, religious, educational purposes	Charitable, literary, scientific, or similar objectives
Legal Status	Separate legal entity from its members	Trust does not have a separate legal identity	Becomes a separate legal entity upon registration
Governance	Managed by a board of directors	Governed by trustees appointed in the trust deed	Managed by a governing body or council elected or appointed
Minimum Member	Minimum 2 directors and shareholders. Directors and Shareholders can be the same person.	At least two trustees are required to register a public charitable trust	Minimum Seven members are required for formation of state level society
Liability	Members have limited liability	Trustees or beneficiaries have no personal liability	Members have limited liability
Compliance	Annual compliances under Companies Act	Fewer statutory obligations	Compliance requirements as per Societies Registration Act
Registration Authority	Registrar of Companies (RoC)	No formal registration required under the Trust Act	Registrar of Societies
Minimum Capital Requirement	No minimum capital requirement	No specific requirement	No minimum capital requirement
Utilization of Profits	Profits applied towards objectives, not distributed	Income utilized for trust purposes	Surplus utilized for society's objectives, not distributed
Tax Exemptions	Eligible for tax exemptions under Income Tax Act	Eligible for tax exemptions as per tax laws	Eligible for tax exemptions under certain conditions

Each of these entities serves nonprofit purposes but differs in terms of their formation, legal structure, governance, compliance, and the way they operate and fulfil their objectives. The choice among them depends on various factors aligned with the organization's vision, operational scale, structure, and compliance preferences.