All the 3 types of organizations registered in India- Trust, Society and Section 8 Company are NGOs,i.e., Non-Governmental Organizations and are commonly referred to as NPOs (Non-Profit Organizations) also. All of them can be formed for social welfare and development. But they are not the same. They have some differences.
COMPARISON- TRUST, SOCIETY & SECTION 8 COMPANY
|PARTICULARS||TRUST||SOCIETY||SECTION 8 COMPANY|
|Meaning||It is an agreement between parties, whereby one party holds the ownership of property for the benefit of another party.||It is a collection of persons, who come together for initiating any literary, scientific or charitable purpose.||It is an enterprise formed with a commercial, social, charitable or any other such objective and intends to apply its profits for promoting such objectives.|
|Registration||As NGO/ NPO.||As NGO/ NPO.||As NGO/ NPO, enjoying the privileges of a limited company but without using the words “Limited” or “Private Limited” in its name.|
|Governing law||The Indian Trusts Act, 1882 for Private Trusts and general law for Public Trusts except states like Gujarat, Maharashtra where they have separate public trust acts.||The Societies Registration Act, 1860.||The Companies Act, 2013.|
|Registering authority||Deputy Registrar of the relevant area.||Registrar or Deputy Registrar of Societies of the State.||Registrar of Companies (ROC) or Regional Director.|
|No. of minimum members required at the time of registration||Minimum 2 trustees.||Minimum 7 members.||Minimum 2 directors and shareholders. Same person can be director and shareholder.|
|Geographical area of operation||Whole of India.||State wise, but can operate in whole of India after taking All India Registration and becoming National Level Society.||Whole of India.|
|Main documents supporting the formation||Trust deed.||Memorandum of Association and Rules & Regulations.||Memorandum of Association and Articles of association.|
|Legal title of property||Vests in the hands of trustees.||Held in the name of the society.||Held in the name of the company.|
|Preference in case of Grant of subsidy by the Government||Not much preferred.||Not much preferred.||Mostly preferred.|
|Registration under the Income Tax Act, 1961||Yes, allowed.||Yes, allowed.||Yes, allowed.|
|Preference in case of Foreign Contribution Regulation Act (FCRA) registration||Not much preferred.||Not much preferred.||Mostly preferred.|
|Transparency in working details||Not much.||Not much.||High, because of online availability.|
|Annual compliance requirement||There are some annual compliance requirement depending on whether the trust is Private trust or Public Trust .||Annual filing of list of names, addresses and occupations of members of the Managing Committee of the society, with the Registrar of Societies.||Annual compliance of filing of accounts and filing of annual return of Section 8 company, with the Registrar of Companies (ROC).|
From the above comparison, we get an overview of the important points that need discussion before choosing from the proper type of organization. Apart from these, there are some other important matters that need to be taken into consideration for choosing a better option for your business- Trust, Society or Section 8 Company.
- Consider forming a Trust if more than 1 family member is involved in running the business. Society and Section 8 Company may not be better options in this case.
- Consider forming a Trust if you want more privacy in business and flexibility in distribution among beneficiaries.
- Consider forming a Trust if you want trustees to hold office for a lifetime without any elections. Also, due to this reason, there is minimum danger of takeover by persons not approved by the trustees.
- Consider forming a Society if you want an elected body for the management of affairs of the business.
- Consider forming a Society if members need the option to quit if they wish.
- Consider forming a Society if members want easy winding up of the business.
- Consider forming a Section 8 company if you want to undertake a wide range of activities.
- Consider forming a Section 8 company if you want a recognized legal structure of a company without any minimum capital requirement.
- Consider forming a Section 8 company if you want reliability and credibility for your organization, as it is licensed by the Central Government.
Whether it’s a trust, society or a section 8 company, all these organizations can register themselves under the Income Tax Act, 1961 for claiming exemption from their incomes and donations.
So, after the registration as Trust, Society or Section 8 company, option for registration under Section 12A and Section 80G of the Income Tax Act, 1961 is available.
Application for registration of charitable or religious trusts, etc.
An application for registration of a charitable or religious trust or institution shall be made in Form No. 10A and accompanied by the following documents, namely:—
|(a)||where the trust is created, or the institution is established, under an instrument, self-certified copy of the instrument creating the trust or establishing the institution;|
|(b)||where the trust is created, or the institution is established, otherwise than under an instrument, self-certified copy of the document evidencing the creation of the trust, or establishment of the institution;|
|(c)||self-certified copy of the registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be;|
|(d)||self-certified copy of the documents evidencing adoption or modification of the objects, if any;|
|(e)||where the trust or institution has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up;|
|(f)||note on the activities of the trust or institution;|
|(g)||self-certified copy of existing order granting registration under section 12A or section 12AA, as the case may be; and|
|(h)||self-certified copy of the order of rejection of application for grant of registration under section 12A or section 12AA, as the case may be if any.|