Non-Profit Organisation vs Charitable Trust

In a society, several organisations are set up by groups of individuals for public welfare. These organisations are Non-Profit Organisations (NPOs) and Non-Governmental Organisations (NGOs). The government has no role in these organisations, but the GOI provides financial benefits to help them grow. 

The profits of these organisations are not divided among members or shareholders, besides it used in the operations of the organisation to make it sustainable. Both the NPOs and Charitable Trusts have their different functions, benefits and processes of operation. Many people use these terms interchangeably but they are different, so in this article, we share the points of differences between between the two.

What are Non-Profit Organisations?

The NPOs are public or private organisations that cannot draw a part of profit or dividends for personal use. The profits must used for the organisation only, and the NGOs are a part of a Non-Profit Organisation. They serve their objective of public good including healthcare, providing shelter, counselling and many more. The NPOs are formed by normal people and not governmental organisations. They draw the attention of the government to the concerns of the citizens. 

In the list of NPOs, trusts, cooperative advocacy, charity and environmental and religious groups are included. The earnings of non-profit organisations are exempted from tax. So, all the profit is used in operating expenses and to achieve the goal instead of being distributed among employees and members.

Benefits of NPOs in India

The following are the benefits of a Non-Profit Organisation:

• No requirements for minimum share capital and they can start from any amount.
• After registering as an NPO under the Companies Act 2013, tax benefits will be provided.
• You can acquire, buy or register assets and stakes in the name of the NPO. This will help you to protect your liability in case of closure, bankruptcy, debt, etc.
• The NPO can transfer the ownership or can claim the interest earned if it registers under the Income Tax Act, of 1961.
• Under the Income Tax Act, Section 8 companies are exempt from stamp duty which will again save more tax.

What are Charitable Trusts/NGOs?

The NGO stands for Non-Governmental Organisation. They work for a public good or have an object to serve society on a large level. They have motives such as providing education, healthcare benefits, food, old age homes, adoption homes, etc. Also, they protect the environment for sustainable development, aware people of human rights, sanitation and hygiene, women empowerment, etc.

The NGOs are separate from the government but depend on government funding or grants. However, some NGOs operate as non-profit organizations and have a non-profit status. To work according to the law, the NGO must register itself and it can be done in 3 ways:

1. Register as a Trust under the Trust Act, of 1882.
2. As Society under Societies Registration Act, 1860.
3. Section 8 Company under Companies Act, 2013.

Benefits of NGOs

The following are the benefits of NGOs:

1. Help the government by providing recommendations in policy-making through their research and experience.
2. Check if the government is responding to the citizens’ concerns or not.
3. Empowering women and reducing the issue of gender inequality. In the past, many initiatives took place to create a better place for women in society such as stopping the tradition of Sati, dowry, women's education, and many more.
4. Tax benefits from the stamp duty, profits and dividends.

Difference Between NPOs and NGOs

Conclusion

To conclude, the NPOs and NGOs are contributing to the social growth of the country and their role is important in the overall development of the country. Especially, their goals and initiatives are helping underprivileged communities living in developing countries. The government help NGOs and NPOs through various grants and for that organisations require a license. Reach out to Registrationwala, if you want to register as a Section 8 Company, we assist you from application to finally obtaining a certification.

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.