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Social Enterprises: Trustworthy practices by Kedar Sabne

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  2. 2. Let’s understand the difference ..Comparison between Trust, Society and Section 25 CompanyPublic Trust Society Section 25CompanyStatute/Legislation Public Trusts Act like the Bombay Public of 1860Trusts Act of 1950Societies Registration Act Companies Act of 1956Jurisdiction of the Act Concerned State Concerned State where registeredAuthority Charity Commissioner Registrar of Societies Registrar of CompaniesRegistration As TrustAs Society (and by default Memorandum andalso as Trust in Articles of AssociationMaharashtra and Gujarat)MOA & MOA
  3. 3. Let’s understand the difference ..Stamp DutyTrust deed to be executed on non judicial stamp paper of prescribedvalueNO stamp paper required for Memorandum and rules and regulationsNo stamp paper for Memorandum and AOANumber of persons needed to registerMinimum two with no upper limitMinimum seven with no upper limitMinimum seven with no upper limitBoard of ManagementTrustees Governing Body or /Council / Executive CommitteeBoard of Directors /Managing or Managing CommitteeMode of successionUsually by appointmentUsually by election of the general bodyUsually election by members of general body
  4. 4. Taxation• Common treatment on tax• Section 11 – exemption for charitable and religious purpose ( relief to poor , education, preservation of environment ,monuments , advancement of objectives for general public utility * * if it involves commercial activity then would not fall within the definition of charitable purpose• This also means that charitable Trust can also carry on business , provided the business is incidental to attainment of objectives and separate books are maintained ( Hospital, printing press)• Section 12 – income from property held under trust• Section 13 - income not to be spent for the benefit of certain persons - Author , relatives and people having substantial interest which also means NGOs can pay salaries at par with industry to retain talent and run the organisation to its employees
  5. 5. What is exemptedIncome in form of voluntary contributions towards corpusIncome derived from property and other than corpus voluntary contributionsIncome from business incidentalIncome in form of capital gains from sale of capital asset
  6. 6. Application of incomeEstablishment expenseRepayments of loanRevenue or capital expenditurePayment of taxesDonation to other Trust
  7. 7. Audit requirementsAudit is mandatory in case the income is above the exemption limit
  8. 8. Tax exemption for a research association u/ s 10(21) for eligiblescientific researchExplore this exemption to get corporate funding
  9. 9. As we already know that an NGO can avail income tax exemption by getting itself registeredand complying with certain other formalities, but such registration doesnt provide any benefit tothe persons making donations. The Income Tax Act has certain provisions which offer taxbenefits to the "donors". All NGOs should avail the advantage of these provisions to attractpotential donors. Section 35AC is one of such sections.REGISTRATION UNDER SECTION 35AcThe Central Government approves certain NGOs and notifies them as eligible for project orschemes for the purposes of section 35AC. If an NGO succeeds in getting such an approval forits projects then it stands a very good chance of mobilising funds from the corporate and thebusiness sector. Business houses making contribution to such approved projects are allowed thebenefits of deducting such contribution as expenditure.
  10. 10. 80 G – A sourcing gate wayCONDITIONS TO BE FULFILLED UNDER SECTION 80GFor approval under section 80G the following conditions are to be fulfilled :i) the NGO should not have any income which are not exempted, such asbusiness income. If, the NGO has business income then it should maintainseparate books of accounts and should not divert donations received for thepurpose of such business.ii) the bylaws or objectives of the NGOs should not contain any provision forspending the income or assets of the NGO for purposes other than charitable.iii) the NGO is not working for the benefit of particular religious community orcaste.iv) the NGO maintains regular accounts of its receipts & expenditures.v) the NGO is properly registered under the Societies Registration Act 1860 orunder any law corresponding to that act or is registered under section 25 of theCompanies Act 1956.
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