Non-Profit Entities

The concept of charity is as old as human civilisation. Those who think had more than they needed, used to share that with others who were struggling for it. This also extended to building of temples, ashrams etc. There was no law for such activities. However, during the past few centuries, laws were created to regulate such activities in British India wherefrom we derive today’s laws. In fact, even today there are laws relating to trusts in a few states which go as far back as the 19^th century!

Non-profit entities take the shape of any one of the following:

1. Trustunder The Charitable and Religious Trust Act, 1920, the Religious Endowments Act, 1863, the Charitable Endowments Act, 1890 or any of the other state Acts.
2. Society under the Societies Registration Act, 1860
3. Section 8 Company under the Companies Act, 2013.

These non-profit entities are created for two main purposes:

(a) charitable or  (b) religious

Sometimes both these purposes coincide. The choice among creating a trust, society or a Section 8 company depends on the nature of objective and the intent of the ones initiating the idea. Each has its own merits and demerits.

Foreign Exchange Receipt

If a non-profit entity receives donations, it is required to obtain registration under the Foreign Contribution Regulation Act, 2010 and file regular annual returns thereafter.

Tax Benefits

Income Tax : It is well known that non-profit entities can apply for Income Tax exemptions (Section 10, 12AB) for themselves and deductions for others who donate to such entities (Section 80G).There are no legal restrictions with respect to any specific activity being barred from being included under this umbrella.

GST

There are notifications which deal with charitable activities. Unlike Income Tax, in GST only 4 broad categories of activities are covered:

(a) public health – limited scope

(b) advancement of religion, spirituality or yoga

(c) advancement of educational programmers or skill development – limited scope

(d) preservation of environment including watershed, forests and wildlife