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Non Profit organizations are Organized sector or unorganized sector?

Benz Chell (Manager-Finance&Programme) (64 Points)

09 August 2020

Non Profit organizations are Organized sector or unorganized sector? Any definition for organized sector?

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5 Replies

Asha Kanta Sharma (Manager - Finance & Accounts) (10529 Points)
Replied 10 August 2020

Organizer Sectors are those which are governed and controlled by laws and regulations of the nation/state. Unorganised are the opposite of the same.

Benz Chell (Manager-Finance&Programme) (64 Points)
Replied 10 August 2020

There are definitions around that small scale businesses are falls under unorganized sector even though they are governed by law of the nation. It is a question if that only big corporates are called organized? Most NGO follows law of the nation. NGOs falls under organized sector? Any detailed explanation is appreciated...

Asha Kanta Sharma (Manager - Finance & Accounts) (10529 Points)
Replied 10 August 2020

The main point here is not about Small or Large size of business, if the said business is not regulated in anyway neither via states nor by central govt it needs to be recognized as INFORMAL/UNORGANISED SECTOR whether they have 1 RUPEE of Income of 1 BILLION of income it will still be recognized as UNORGANISED.

The International Labour Organisation (ILO) defines the informal sector as that part of economic activity which is characterized by certain features like ease of entry, reliance on indigenous resources, family ownership, small scale operation, labour intensive technology, skills acquired outside the formal school system, unregulated and competitive markets. In the Indian context, a wide range of activities falling within the domain of industry, transport and agriculture, both in the rural and the urban areas, can be included in this sector.

Here in your case Non Profit organizations are completely organized sector. For an organisation to be termed as charity it requires Income tax clearances under 12 A Clause of Income Tax Act. Section 2(15) of the Income Tax Act defines ‘charitable purpose’ to include ‘relief of the poor, education, medical relief and the advancement of any other object of general public utility’. A purpose that relates exclusively to religious teaching or worship is not considered as charitable.

A non profit organisations can be registered in India as a Society, under the Registrar of Societies or as a Trust, by making a Trust deed, or as a Section 8 Company, under the Companies Act, 2013.

Whether a trust, society or Section 8 company, the Income Tax Act, 1961 gives all categories equal treatment, in terms of exempting their income and granting 80G certificates, whereby donors to non-profit organisations may claim a rebate against donations made. Foreign contributions to non-profits are governed by FC(R)A regulations and the Home Ministry.

So NGO Falls into Organized Sector in India.

1 Like

Benz Chell (Manager-Finance&Programme) (64 Points)
Replied 11 August 2020

There is a different opinion in the explanation as I understand that there is no legitimate industry which is not governed by central or state government. Even for a petty shop which requires shop and establishment license. May be the ILO explanation is a vast and wide which narrates the organized and unorganized difference by various factors. As per their explanation simply having a legal requirement may not fall under organized. For example, NGOs does not have their own source to survive...anytime it can fall....

Asha Kanta Sharma (Manager - Finance & Accounts) (10529 Points)
Replied 15 August 2020

We can not classify organizations as Unorganized if they does not have a source for funds and fails. Source of funds many differ for different organizations based on business types/classifications and objectives.

We have to look for legally binding and governing laws of the nation to classify organizations into ORGANISED or UNORGANISED.