Which is better trust or section 8 company?
No organization has considered donating their funds for welfare. This includes schools, colleges, religious organizations, hospitals (NGOs). Before deciding how to start an NGO in India, it is important to understand the two common forms of NGOs such as Trust, and Section 8 Company. Here we have given information about the NGO registration process in India and how Section 8 Company is different from Trust.
Trust registration
The trust is the first and oldest form of a charitable organization. Public trusts and private trusts have been created primarily for the benefit of family members or for known individuals. The Indian Trust Act is not valid for public trust. Public trusts are generally governed by law except in the states like Gujarat, Maharashtra, etc., which have separate public trust acts.
Trust is easy to build and operate. But, as there is no dispute, if a dispute arises, the parties have to go to court. The trust can be amended by the managing trustee or with prior approval from the Income Tax authorities as per recall in the deed.
Requirements for trust registration
- A bill of electricity or water that needs to register the address.
- Proof of identity of at least two members of the trust. Evidence may be:
- Voter ID
- Aadhar Card
- driving license
- Passport
Section 8 Company Registration
These are limited companies authorized under the Companies Act. The government gives these companies a special license under the Section 8 registration company. In a company that is limited by guarantee, there are no rabbits and therefore there are no shareholders. Members of a company that is limited by a guarantee are bound by a guarantee in the articles of the company’s association, which allows them to pay the company’s debt up to a certain amount. There are three main conditions for this.
1) The company should form a charitable trust
2) Income and profits should be used towards these items
3) The company should not pay any bonus to its members
Requirements for Registration
- Name of the company for approval.
- Address proof of office. It can be a water bill, electricity bill, or house tax receipt.
- Identity proofs of all directors who can be: Driving license
- Copy of passport
- Voter id
- Aadhar Card
4) Articles of Association and Memorandum of Association of the Company.
Is the trust or section 8 company a better NGO?
In India, an NGO online registration for a charitable purpose can be registered under these three different authorities which are trusts, societies, and Section 8 companies. The charitable purpose primarily includes relief to the poor, education, yoga, and medical aid, preservation of the environment and monuments, or the inclusion of historical or artistic places or objects.
When choosing the form to be registered to make a non-governmental organization nonprofit, the entity must evaluate its areas of operation and objects, the individuals included in its constitution, and the sources of income to achieve its resolution. To facilitate decision making by Chartered Munshi as an NGO registration consultant, a comparative analysis of all forms of registration available to non-profit entities, namely, Trusts, Societies, and Section 8 Companies, should be done.
Section 8 Company is a non-profit organization, which makes several deductions on taxes and other benefits. The benefit is received under Section 80G of the Income Tax Act, 1961. The stamp duty is also lower for these companies as compared to other companies.
Companies that are registered under section 8 do not require much share capital. They can easily be funded by membership or donations made by them.
Unlike companies with limited liability, which are usually not allowed to transfer ownership or title, but by Section 8 of the Income Tax Act, 1961, transfer of ownership or title to movable and immovable interest with any form of restriction.
Therefore, registering a section 8 company is a better option than trust through this analysis. To, and that trust, NGOs
