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Non Governmental Organization (NGO)

NGOs are organizations that usually work towards the promotion of certain causes or the welfare of a target population. Since they function in the non-profit realm, their objectives and modus operandi are often ambiguous compared to for-profit organizations. In order to achieve their objectives, NGOs need to follow a meticulous approach right from the stage of conceptualization. Besides, there are rules and regulations laid down by the Government of India. 

It can be registered under Indian Acts as:

Charitable Trust: By creating a trust, you create a relationship which allows one party to hold the property of another property for someone's benefit. The easiest way to form an NGO is to start a Trust because only 2 people are required to start an NGO as a Trust: the author and the trustee. This is the reason many NGOs in India are registered as Trusts. To set-up a Trust, drafting a 'Trust Deed' is required.
Societies under the Societies Registration Act: By registering your NGO as a Society you provide it with a legal status of a Society,7 or more people are required to form an NGO as a Society. The purpose they come together for should be a common purpose and can be a scientific purpose, a charitable purpose or a literary purpose.
Companies under section 25 of the Companies Act :If your NGO is into the promotion of commerce, science, art, charity, religion or any such useful object and the profits are further invested into the promotion of these objectives, then you may register your NGO as a Section 25 Company, thus to start an NGO as a Section 25 Company will ensure that it is structurally stronger.

Therefore, NGO formations can a charitable trust or a society registered under the Societies act and those want the tax exemption then can apply with an application form no. 56 as per the Indian Income Tax rules and regulations. NGO's need financial help as these organizations are providing assistance to many poor people and institutions those don't have more financial stability.

To be eligible for tax-exemption under the Income Tax Act, 1961, a not-for-profit entity must be organized for religious or charitable purposes. Charitable purposes include "relief of the poor, education, medical relief and the advancement of any other object of general public utility."

An NPO/NGO can be formed for promotion of any useful object like sports, education, research activities etc. The term No Profit does not mean that the Company cannot generate profit or income, but it essentially means applying the income for further promotion of the object and not for distributing it to the promoters. It means that the Company can earn profits but the promoters cannot be benefited out of those profits.

Key Benefits:

Many privileges and exemptions under Company Law.

Exemption from requirement of Minimum Paid-up capital.

Exemption of Stamp duty for registration.

Non-application of Companies Auditor’s Report Order (CARO) 2003.

Registered partnership firm can be a member in its own capacity.

Tax deductions to the donors of the Company u/s. 80G of the Income Tax Act.

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