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In India, a non-profit organization for a charitable purpose can be registered as a Trust, Society and Section 8 Company. A charitable purpose is defined under Section 2(15) of Income Tax Act "charitable purpose" includes relief of the poor, education, yoga, medical relief, Preservation of environment (including watersheds, forests, and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility".

Trusts, Societies and Section 8 companies are set up to provide service to the community and not with a profit motive. All of them are formed for social welfare and development, but they are not same. A comparative analysis of the differences among them are described below:

Difference between Trust, Society and Section 8 Company

BASIS OF DIFFERENCE

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 a non-profit 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/Non Profit Organizations

As NGO/Non Profit Organizations

As NGO/ NPO, and enjoying the privileges of a limited company without using the words "Limited" or "Private Limited" in its name

Statute

The Indian Trusts Act, 1882

The Societies Registration Act, 1860. 

The Companies Act, 2013.

Regulating Authority

Deputy Registrar of the relevant area.

Registrar or Deputy Registrar of Societies of the State. 

Registrar of Companies (ROC) or Regional Director. 

Constitution Document

Trust Deed

Memorandum of Association and Rules & Regulations.

Memorandum of Association and Articles of Association. 

Minimum Eligibility Requirement

Minimum 2 trustees

Minimum 7 members. 

Minimum 2 directors and shareholders. Same person can be director and shareholder. 

Stamp Duty

Non-Judicial Stamp duty is required as per the State Stamp Act, vary from state to state.

No Stamp duty is required

No Stamp duty is required

Geographical area of operation 

Whole of India

State wise, but can operate in whole of India after taking All India Registration

Whole of India

Legal Title

Vests in the hands of trustees. 

Held in the name of the society

Held in the name of the society

Board of Management

By Trustee or Board of Trustees

By Managing Committee or by the Governing Council

By the Board of Directors

Amendments

Through a supplementary deed

Through MOA and the Rules & Regulations

As per the directions given under The Companies Act, 2013

Annual Compliance

There are some annual compliance requirement

Annual filing of list of names, addresses and occupations of members of the Managing Committee, with the Registrar of Societies. 

Annual compliance of filing of accounts and filing of annual return, with the Registrar of Companies (ROC). 

Dissolution

Generally, public trust cannot be dissolved.

A society may be dissolved with the approval of 3/5th members of the society.

A Section 8 company may be winded up as prescribed under the Companies Act.

 

Therefore, it must be clear that though Trust, Society and Section 8 Company are non-proprietary organizations there are substantial differences in their methods of formation and operation.

The author can be reached at shubhikhandelwal30@yahoo.com

 

 

Published by

CA Shubhi Khandelwal
(Chartered Accountant)
Category Professional Resource   Report

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