NON PROFIT ORGANISATIONS
Organizations which have charity as their main motto and which work for the welfare of the society at large, without the motive of profit are known as Non Profit organizations (NPO). In India people have a tendency to call them as NGO (Non Government Organizations), which terminology is not correct in the strict sense, because every non government organization may not be a non profit organization.
Trusts, societies and section 25 companies are the most common forms of NPOs in India. NPOs are entitled for various benefits under the Income Tax Act. Even without registering as an NPO, people can engage in charitable activities, but they register as NPOs to gain the IT benefits. Tax benefits are available to the organization as well as to those who donate to the organization. For this special permission need to be obtain from the Income Tax authorities after the registration of NPO. To obtain tax benefits, it is a condition precedent that the benefits of the NPO shall not be restricted to any particular cast, class or creed but open to all.
Trusts are registered under the Registration Act, Societies under the respective Societies Registration Acts of various states and Section 25 companies under the Companies Act, 1956.For each of these registrations, a deed need to be drafted explaining the main objectives and mode of working of the organization.
There is an increasing trend among the general public to establish NPOs and indulge in profit generating activities, at the same time deriving IT benefits. However, sooner or later the long arms of law will reach them.