CA. Rajkumar S. Adukia
B.Com (Hons.), FCA, ACS, ACWA, LL.B, MBA, IFRS(UK), DIPR, DLL & LW, Dip Criminology
Mob: 098200 61049/093230 61049
E Mail: rajkumarradukia@caaa.in
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• Non profit organizations (NPOs) are organizations that use
surplus revenues to achieve their goals rather than
distributing them as profit or dividends.
• "NON-PROFIT" SECTOR - Sphere of social activity undertaken
by organizations that are not for profit
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• NPOs are also known as:
– Not-for-Profit Organizations
– Non-Governmental Organizations
– Voluntary Organizations
– Civil Society Organizations
– Community Based Organizations
– Charitable Organizations
– Third Sector Organizations
– Social Benefit Organizations
– In Hindi - Seshcha Sevi Sangasthas/ Sanghatanas
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• Charity - giving voluntarily to those in need
• Covers the giving of both money, and of the self through service
• Charitable Organizations (COs) - a type of Non Profit
Organization (NPO)
• Only difference between COs and NPOs is that COs centre also
on social well-being along with non-profit and philanthropic
goals.
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• Voluntarism - dating back to 1,500 BC when it was mentioned in
the Rig Vedas
• Is an altruistic activity and intended to promote goodness or
improve human quality of life
• volunteer efforts keep expenses down for non-profit and
philanthropic organizations empower individuals and groups to
help others
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• 20 Lakh NGOs in India as at March 2014 (Central Bureau of
Investigation’s estimate)
• With population of 1.2 billion - one NGO per every 600 people
• Rs 6654 crore to various NGOs by Union & State Governments
between 2002-09 (received through RTI queries by Asian Centre
for Human Rights)
• more than $2 billion received by about 22,000 NGOs from
abroad ($650 million from US) for the financial year 2010-11
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• Charitable Trusts and Voluntary Organizations are India’s secular
and institutional manifestation
• Voluntary organizations were active in cultural promotion,
education, health, and natural disaster relief as early as the
medieval era
• Towards the end of the 19th century the corporate community
in India also began setting up welfare and development
organizations
• 19th and early 20th century - voluntary organizations received
legal recognition with enacting of various laws
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Five Phases
• The mid to late colonial period (1810s to 1947) - The Era of
Church, National Bourgeoisie, Gandhian Philanthropy, and
Separatist Movements
• The early post-independence period (1947 to the late 1950s) The Era of Religion-Based and Gandhian NPOs
• The period between 1960 and 1970; - Increased Differentiation
• The period between 1980 and 1990 - The Predominance of
NGOs and the Era of Separatist and Fundamentalist Movements
and Organizations
• The more recent past since then
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• Service to a specific group or public at large - not to earn profit
• Source of Income – mainly from:
– Subscriptions from members
– Donations
– Legacies
– Grants-in-aid
– Income from investments
• No distribution of surplus
• Entity Concept - NPOs are separate entities other than the
individuals by whom they are managed
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• structure or management is not the essence of these
organizations. It is their objectives that distinguish them from
the business organizations.
• can be formed as - Any formal organization having a legal
existence of its own with right to enter into contracts and
transactions in its own name
• easier to carry conviction for a NPO in the below mentioned
forms than any other forms:
–
–
–
–
–
Trust, by making a Trust deed
Society, under the Registrar of Societies
Registration as a section-8 Company under the Companies Act, 2013.
Non Trading Corporations
Autonomous Bodies
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Trust
Company
Society
NonTrading
Corpotarion
Autonomous
Bodies
Other Forms
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NPOs formed as Trusts
• Trust is a relationship whereby property is held by one party for
the benefit of another
• The Indian Trusts Act, 1882 - Act to define and amend the law
relating to Private Trusts and Trustees. Thus this Act is not
applicable to public trusts.
• The Public Trusts are governed by their respective state trusts
acts. Eg.
– The Maharashtra Public Trusts Act, 1950
– The Rajasthan Public Trusts Act, 1959
– The Tamil Nadu Public Trusts (Regulation of Administration of Agricultural
Lands) Act, 1961
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• Two types of trusts in India: private trusts and public
trusts
Trusts
Private Trusts
Public Trusts
Religious
Trusts
Non Religious
Trusts
Religious
Trusts
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Non Religious
Trusts
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NPOs formed as Trusts
• Applicability of Indian Trusts Act, 1882
Even though it is designed for private trusts, in absence of any
specific law for public trusts, courts have held that the principles
& spirit of the Trusts Act would apply also for public trusts in
India. (Sheikh Abdul Kayum and others v. Mulla Alibhai and
others [ AIR 1963 SC 309]
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NPOs formed as Societies
• Association of persons formed to deliberate & promote a
specific purpose
• The Societies Registration Act, 1860 is the Act for the
registration of Literary, Scientific & Charitable Societies
• Other laws applicable:
– The Religious Societies Act, 1880
– Various State Acts governing Societies
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NPOs formed as Companies
• Section 8 of the Companies Act, 2013 - Companies with
charitable objects, etc
• Companies that can be registered:
– That have their objects the promotion of commerce, art, science, sports,
education, research, social welfare, religion, charity, protection of
environment or any such other object
– Which intend to apply profits or other income in promoting their objects
– which intend to prohibit the payment of any dividend to their members
• Are issued license by the central government allowing them to
be registered as limited companies under this section without
adding the words “Limited” to their name
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NPOs formed as Non-Trading Corporations (NTCs)
• Impart Non Trading activities for the benefit of its member,
without carrying commercial or profit making activities
• Non-trading corporations (NTCs) appear under The Constitution
of India– Schedule VII – List II (State list) - Entry 32.
• Monitored by Registrar, NTC, delegated to Sales Tax Department
• A few acts related to NTCs can be listed as under:
– Maharashtra Non-Trading Corporations Act, 1959
– The West Bengal Non-Trading Corporations Act, 1965
– The Orissa (Non-Trading) Companies Act, 1959
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Other forms for NPOs
• Trade Unions
organization of workers pertaining to a particular trade, industry
or a company and formed to promote and protect their interests
and welfare by collective action
Legislation - Indian Trade Unions Act, 1926
• Political Parties
Legislation - Representation of the People Act, 1951
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NPOs formed as Autonomous Bodies
• Autonomous bodies are established by the Government to
discharge the activities which are related to governmental
functions
• Although given autonomy to discharge their functions Government’s control exists since these are funded by the
Government of India
• mostly registered as societies under the Societies Registration
Acts and in certain cases they have been set up as statutory
institutions under the provisions contained in various Acts
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Other forms for NPOs
• right of all citizens to form associations or unions is guaranteed
by the Constitution of India, Article 19(1)(c)
• Under The Constitution of India - Schedule VII – List III
(Concurrent List) – Entry 10 is the subject ‘Trust and Trustees’
and Schedule VII – List III (Concurrent List) – Entry 28 is ‘Charities
& Charitable Institutions, Charitable and religious endowments
and religious institutions’
• Thus both the Centre and the States are competent to legislate
and regulate NPOs
• No comprehensive central law for legal incorporation of
nonprofit organizations which applies to trusts, registered
societies and section 8 companies alike
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1.
2.
3.
4.
5.
Consultation
Drafting Documents
Stamping & Registration of NPOs
Financial Reporting & Auditing
Taxation
1.
2.
Direct Taxation – Income Tax
Indirect Taxation – Service Tax & VAT
6. Consultants in funding – India & outside India
7. Internal Audit and Risk Control
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8. Arbitration & Conciliation
-
Drafting Arbitration Agreement
Representing either of the party (plainant/defendant) to the dispute in
the arbitral proceedings
Assisting Arbitrator in drafting arbitral award
Assisting to go to Court of Law
Assisting in preparing submissions to arbitrator
Acting as a member of Arbitral Tribunal
Acting as an arbitrator where required
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9. Requirements & filings under Foreign Contribution Regulations
(FCR)
-
10.
11.
12.
13.
Foreign Contribution (Regulation) Act, 2010
Foreign Contribution (Regulation) Rules, 2011
Foreign Contribution (Acceptance or Retention of Gifts or
Presentations)Rules, 2012
Corporate governance for attracting CSR
Credibility Rating
Social Audit
Other Areas
1.
2.
Winding Up/ Liquidation
Business Process Reengineering services for NPOs
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1. Writing articles in NPO related magazines and other
publications
2. Participating as speaker in conferences
3. Communicating with people related to NPO activities
4. Building a NPO information website
5. Writing books on topics covered under NPOs
6. Projecting oneself as an NPO Expert
7. Reaching out to the prospective service receivers
8. Using social media to reach more number of people related to
NPOs
9. Increase expertise in the field of NPOs by undertaking capacity
building initiatives
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