Formation of any non-profit organization requires not only a good social cause but also an appropriate organizational setup, documentation, financial arrangements, registrations for taxes, and other compliances. Here, the help of a CA becomes handy in making it easier for the founders to set up their NGO in a better way.
Registration of NGO is just one of the aspects of setting up an organization. Based on the structure and purpose of the NGO, it can be registered as a trust, society, or Section 8 company.
The objectives of an NGO are usually charitable, social, educational, environmental, religious, or some other recognized objective. The legal structure must be one that allows for such objectives but at the same time is practical in terms of governance and financial structure.
For instance, section 8 of the Companies Act, 2013 pertains to companies established for charitable objects like education, social welfare, charity, environment, research, etc. Such bodies must use their income towards their objectives and no dividends are to be paid to members.
Hence, the importance of the initial structuring decision can be seen here. You do not want to establish your organization only to realize that your legal and financial structures do not fit your operations.
Having professional assistance will make the process of forming an NGO much more organized from the very beginning. Having a CA will assist founders in comprehending the financial and compliance ramifications of the structure they are choosing.
Structure of trust, society, and Section 8 companies can be used for charity purposes, but they are not the same.
Professional assistance will allow analyzing such aspects as:
The task is not only to fill out the documents. The task is to choose a proper structure for the future activities of the organization.
This is an area where small mistakes can result in huge hassles.
Based on the nature of their structure, documents can consist of constitutional documents, identity proof, declarations, governance documents, among others.
CA assistance is important in coordinating the financial and documentation information needed in the setup of a business entity.
Call AABK & Associates today for expert guidance on NGO formation, tax compliance, accounting, and ongoing statutory requirements.
Once the organisation has been set up under the appropriate legal structure, there arises a need to think about tax registrations and necessary approvals on the part of the founders.
Income Tax Department issues Form 10A for registration of charity or religious trust/institution under Section 12A of the respective Income Tax Act. It also issues Form 10B for any auditing of reports for those organisations which come under its jurisdiction.
That is the reason behind the fact that people who are searching for Registration under Section 12 A should realise the difference between tax registration and legal establishment of an NGO.
A professional CA can assist in knowing what applications are applicable for an NGO in case of taxes rather than having the same check-list for all NGOs.
Tax compliance could be an important function of NGO activities, especially where the NGO receives donations or incomes.
According to the Income Tax Department, the deduction for any eligible donation is provided by the provisions of Section 80G as per the conditions required. The present guidance of Income Tax Department also states some restrictions with respect to cash donations of more than ₹2,000 for Section 80G deductions.
Thus, one cannot presume that simply by establishing an NGO, all donations received will be deductible and incomes tax exempt.
This is yet another area that demands Registration under section 12 A along with tax compliance.
The requirements may differ depending on the type of structure adopted. It is advisable to seek professional assistance to make a comparison of the various structures.
Establishing an NGO is not the end. On the contrary, it is just the beginning.
While a functional NGO may require keeping proper books of accounts, record keeping, filing of taxes, auditing work, and others as required, a NGO that will be receiving any foreign contributions would have FCRA considerations to be addressed. According to the Ministry of Home Affairs, an association cannot receive foreign contributions without being registered with FCRA or getting prior permission as required.
This indicates that founders of an NGO must look beyond the Registration of NGO stage.
There are certain difficulties which make NGO formation needlessly complex:
Professional guidance does not reduce all the obligations for the organization. On the contrary, it helps to build up a better framework for fulfilling the obligations.
However, at AABK & Associates, things may move beyond just filling forms. The expertise of a professional CA will provide a lot of assistance to the founders on the financial and compliance aspect of establishing the NGO from scratch.
From the right structure and financial documentation to the help with taxation, registration, accounting, auditing, and compliance – professional assistance will make the process easier and well-organised.
The benefit of the NGO consultancy service does not lie in the convenience but in the clarity that the founder will gain from it. He or she can concentrate on the social mission while structuring the financial and compliance base for work.
If you plan to create an NGO, then taking professional advice before the process will be a good decision for you.
You can also find AABK & Associates on Google Business Profile for convenient access to our professional CA and compliance services.
Step 1: Define Your NGO’s Purpose & Objectives
Step 2: Select the Right Legal Structure
Step 3: Prepare the Required Documents
Step 4: Complete the Legal Formation Process
Step 5: Apply for Relevant Tax Registrations
Step 6: Set Up Proper Accounting & Records
Step 7: Manage Ongoing Compliance
This simple sequence shows why the process involves more than paperwork. Each stage connects with the next.
Starting a good non-profit organization involves laying down a good foundation. Selecting the correct structure, keeping accurate records, knowing what is needed in terms of taxes, and planning your compliance can go a long way in making NGO work easier.
Whatever it is that you may want to know whether it is Registration under Section 12 A, tax approval, accounting or overall NGO Registration process, help from professional CAs will make things clear for you.
For those who seek structured help as founders, AABK & Associates can be a place to begin to understand all about finances, taxes, accounting and compliance related to setting up a non-profit organization.
Get in touch with AABK & Associates today.
