Trust and NGO Registration Registration
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A Non-Governmental Organisation (NGO) is a broad, non-technical term used for a voluntary organisation working for charitable, social, cultural, educational, religious, or philanthropic purposes without any profit motive.
Salient Features, Documents Required, Registration Process & FAQs
A Non-Governmental Organisation (NGO) is a broad, non-technical term used for a voluntary organisation working for charitable, social, cultural, educational, religious, or philanthropic purposes without any profit motive.
In India, an NGO does not have its own separate law; it must be legally registered under one of three recognised structures — a Trust, a Society, or a Section 8 Company.
Among these, the Trust is the most common structure, particularly for organisations engaged in charitable, religious, or welfare activities, and is created under the Indian Trusts Act, 1882 (for private trusts) or the respective State Public Trusts Act (for public charitable trusts). This note explains the salient features, documents required, and the detailed registration process for a Charitable Trust as the primary vehicle for setting up an NGO in India, along with a comparative snapshot of the other available structures.
A Trust/NGO is formed for charitable, religious, educational, medical, or social welfare purposes and not for earning or distributing profit to its members.
Once registered, a Trust becomes a distinct legal entity capable of holding property, entering into contracts, and suing or being sued in its own name.
A Trust can be formed with a minimum of two persons — the Author/Settlor (who creates the Trust) and at least one or more Trustees (who manage it). There is generally no upper limit on the number of trustees.
The Trust is created through a legal document called the "Trust Deed," which specifies the objects, trust property, and the rights and duties of the trustees.
A public charitable trust, once created and registered, is generally irrevocable except in limited circumstances specified in the Trust Deed or by law.
A Trust continues to exist even after the death, resignation, or removal of a trustee, since new trustees can be appointed as per the Trust Deed.
Unlike a company, a Trust has no shareholders or members with ownership rights; trustees act only as custodians/managers of the trust property for the benefit of the beneficiaries.
A registered charitable Trust can apply for tax exemption on its income under Section 12A/12AB of the Income Tax Act, 1961, and donors can claim deduction under Section 80G, subject to conditions.
An NGO wishing to receive foreign donations must additionally obtain registration under the Foreign Contribution (Regulation) Act, 2010 (FCRA).
Public charitable trusts are subject to supervision by the office of the Charity Commissioner (in states where a Public Trusts Act applies) and must comply with periodic filing and audit requirements.
The objects of a Trust, once set out in the Trust Deed, are difficult to alter and generally require the approval of a civil court or the Charity Commissioner.
The founders decide on the charitable objects to be pursued and select a suitable and unique name for the Trust that does not resemble an already registered entity.
At least one Settlor/Author and a minimum of two Trustees (including the Settlor, if he/she also acts as a trustee) are identified.
A Trust Deed is drafted (preferably with legal assistance), covering the name and address of the Trust, objects/purposes, details of Settlor and Trustees, the trust property, rules for the appointment/removal of trustees, quorum for meetings, utilisation of income, and the procedure for amendment or dissolution, if any.
The Trust Deed is executed on non-judicial stamp paper of the value applicable in the concerned State (typically a percentage of the value of the trust property, or a fixed amount for a nominal corpus). The Trust Deed is then signed by the Settlor in the presence of two witnesses.
The Settlor, along with two witnesses, presents the Trust Deed for registration at the office of the Sub-Registrar/Registrar of Assurances having jurisdiction over the registered office of the Trust, along with a photocopy of the Deed and identity/address proofs. The Settlor's photograph and thumb impression are taken at the time of registration, along with the details of the witnesses.
The registering authority retains a photocopy of the Trust Deed for its records and returns the original certified copy to the Trust after registration, typically within a week to a few weeks depending on the State.
A PAN card is obtained in the name of the Trust from the Income Tax Department, which is essential for opening a bank account and for tax compliance. A bank account is then opened in the name of the Trust using the registered Trust Deed and PAN.
The Trust applies to the Income Tax Department for registration under Section 12AB (for exemption of the Trust's own income) and Section 80G (to enable donors to claim tax deduction on donations made). If the Trust intends to receive foreign donations/grants, it must separately apply for FCRA registration, generally after completing three years of existence. Afterwards, the Trust must maintain proper books of accounts, get them audited (where applicable), and file annual returns.
Expert technical and legal answers regarding Trust and NGO entities
Q. What is the minimum number of people required to form a Trust?
Ans. A minimum of two persons is required — one Author/Settlor who creates the Trust and at least one Trustee to manage it. In practice, most Trusts are formed with one Settlor and two or more Trustees.
Q. Is a Trust the same as a Society or a Section 8 Company?
Ans. No. A Trust, Society, and Section 8 Company are three different legal structures used to run an NGO. A Trust is governed by the Indian Trusts Act, 1882/State Public Trusts Acts and is easier and quicker to form; a Society is governed by the Societies Registration Act, 1860 and needs a minimum of 7 members with a governing body; a Section 8 Company is governed by the Companies Act, 2013 and follows a corporate structure with greater compliance but higher credibility for large-scale fundraising.
Q. Can a Trust be dissolved or its objects changed after registration?
Ans. A public charitable trust is generally irrevocable, and changing its objects or dissolving it usually requires the approval of a civil court or the Charity Commissioner, depending on the terms of the Trust Deed and the applicable State law.
Q. Is registration of a Trust Deed compulsory?
Ans. Registration is compulsory where immovable property is settled upon the Trust. Even where only movable property or a nominal corpus is involved, registration is highly advisable, since it lends legal validity and is necessary for opening a bank account and obtaining tax registrations.
Q. What is the difference between 12A/12AB registration and 80G registration?
Ans. Section 12AB registration exempts the income of the Trust itself from income tax, subject to the funds being applied towards charitable objects. Section 80G registration allows donors who contribute to the Trust to claim a deduction on their own taxable income. Both are separate registrations obtained from the Income Tax Department.
Q. Can a Trust receive donations from foreign sources?
Ans. A Trust can receive foreign donations only after obtaining registration under the Foreign Contribution (Regulation) Act, 2010 (FCRA) from the Ministry of Home Affairs. Operating without FCRA registration while receiving foreign contributions is not permitted.
Q. How much stamp duty is payable on a Trust Deed?
Ans. Stamp duty varies from State to State and is generally calculated as a percentage of the value of the trust property, or as a fixed nominal amount where only a token corpus is settled. It is advisable to check the applicable Stamp Act of the State in which the Trust Deed is being executed.
Q. Can family members be trustees of the same Trust?
Ans. Yes, there is no restriction under law on family members being trustees of the same Trust, and many charitable/family trusts are formed with relatives as trustees, provided the Trust genuinely operates for its stated charitable objects.
Q. Does a Trust need to file annual returns?
Ans. Yes. A Trust must maintain proper books of account, get them audited where its income exceeds the prescribed threshold, and file an annual income tax return. Where a State Public Trusts Act applies, periodic returns/accounts may also need to be filed with the office of the Charity Commissioner.
Q. Can a Trust carry out commercial activities?
Ans. A charitable Trust can carry out incidental business/commercial activities only if they are directly connected to and in furtherance of its charitable objects, and subject to conditions prescribed under the Income Tax Act for retaining tax-exempt status; a Trust cannot be formed with profit distribution as its primary object.
Q. What happens to the Trust's assets if it is dissolved?
Ans. On dissolution, the Trust Deed usually provides that the remaining assets of a charitable Trust must be transferred to another Trust or institution with similar charitable objects, and not distributed among the trustees or settlor, in keeping with the non-profit character of the Trust.
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