NGO

What Is The Difference Between NGO And Trust?

calendar29 May, 2023
timeReading Time: 5 Minutes
What Is The Difference Between NGO And Trust?

We have been gifted with this beautiful world where we can live, but due to busy schedules, we often forget that we owe some responsibilities towards nature. In order to take care of this world and nature, the NGOs and Trust came into the picture. There is no specific reason why these entities are created. At the same time, the only common thing is that they are registered for a social cause. Every NGO and Trust can be incorporated for different social reasons, such as poverty, nature welfare, education, etc.

Both NGO and Trust work for the welfare of people and are engaged in charitable work. Therefore, there might be some difficulty in understanding the difference between the two and some people might also think that NGO and Trust are same. In contrast, both are different entity work for different purposes, and their registration and incorporation process is also different.

Generally, NGOs do the work of promoting governmental issues and creating awareness among such issues that are not in government’s control. Moreover, NGOs can take financial assistance from the government. Whereas trust can be a public or private entity, and they do not have any connection with the government and their issues. They work on their own set of rules and regulations. It cannot receive any financial assistance from the government. In this blog, we will understand the difference between NGO and Trust and their registration process.

What Is The Meaning Of NGO And Trust?

Let’s discuss the meaning of NGO and Trust:

Meaning of NGO

NGOs are Non-governmental Organizations that are created only for the purpose of social welfare. Therefore, they cannot earn profits or distribute dividends. These organisations are governed by Section 8 of the Companies Act 2013, which clearly states that these companies cannot declare dividends and invest profits back in the company for promotion or welfare.

There are different NGOs created for different purposes, such as education, health, poverty, unemployment, etc. Their main aim is to make this world a better place to live in for everyone, irrespective of the condition of the person.

Furthermore, the NGOs receive huge tax benefits and exemptions as they do not make a profit and are known to be members of civil society.

Laws governing the Registration of NGOs

  • Indian Trust Act of 1882[1] A trust can be registered under this act.
  • Societies Registration Act, 1860 – Societies in India can be registered under this act.
  • Companies Act, 2013 – Section 8 companies can be registered under this act. Such as Nidhi Companies.

Registration of NGOs Based On Their Functions

  • Trust Registration: Since trusts are irreversible and cannot be altered or dissolved without the beneficiary’s approval, NGOs with a small membership or permanent institutions like orphanages and nursing homes choose this kind of organisation. Trusts are not governed by a Central Act, but there are certain states governing the trust, and as a result, the same happens with NGOs.
  • Registration of Societies – Societies are member-based organisations that are controlled by a committee selected by the members in accordance with self-created regulations. Associations are registered under the Societies Registration Act of 1860.
  • Company Registration Under Section 8 – Limited liability firms are businesses that are created to achieve social objectives and the common good. Moreover, every NGO will be registered as per the provisions of the Companies Act.

Companies Act 2013 allows the creation of an NGO under section. It allows NGOs to be either governed by the government or individuals. Incorporating NGOs is important for a well-functioning society as they help people in need and fulfil their objectives. The main objective of these NGOs is to bring the common people and government on the same and let the common voice people heard, and make the government take cognisance of the same.

So far, we have witnessed the role of NGOs in helping people and fighting for their rights. They have successfully contributed to society and worked for their welfare.

Meaning of Trust

This is also a form of charitable organisation, and such organisations have been created since the old days. Here the ownership of one party is retained by another. This means that a property owned by someone is held by someone else on behalf of the owner of the property.

Instances in which a trust can be formed:

  • If two or more members of the family are engaged in running a business.
  • If you would prefer that the trustee must remain in office permanently without being put up for election.
  • Privacy is also crucial, in addition to benefit distribution flexibility.

Registration of Trust Deed

The amount the trust property is worth and will determine how much it is worth on the non-judicial stamp paper used to execute the trust deed. A request must be made to the competent sub-registrar with authority over the desired registration area in order to trust registration.

The trust deed must be recorded in order for an immovable property owned by a charity or religious trust to be excluded from taxation under Section 11 of the Income Tax Act.

A Trust Deed cannot be recorded unless the Settlor or Trustees, two witnesses, and their images and Identity Proofs are physically present at the Registrar’s Office. After two witnesses have attested to it, the settlor or trustees should sign the trust deed with their consent.

Inclusions in a Trust Deed

  • Trustee’s Name
  • Name of Author or Settlor of the trust.
  • Name of the beneficiary, if any.
  • Purpose of the trust, whether public or charitable.
  • Name of the Trust.
  • Place of residence of trustees, principal & other offices.
  • Details of Trust assets.
  • The main and secondary objects of the trust.
  • Appointment, removal, replacement of trustees, their powers, rights, duties, etc.
  • The procedure of establishment of the trust.
  • The Rights and responsibilities of the beneficiary of the trust.

Difference between NGO and Trust

Following are the differences between NGO and Trust:

  • The trust is governed by the Indian Trust Act of 1982, whereas an NGO is governed by the Companies Act of 2013.
  • An NGO takes around 15 days to one month for registration. In contrast, the trust takes around two days to one week for registration.
  • The authority responsible for the registration of an NGO is the Registrar of the Company. At the same time, the Charity Commissioner/ Sub-registration of Registration is responsible for the registration of a trust.
  • According to the trust act, you are not allowed to transfer the Trusteeship of a charitable trust to an NGO. On the other hand, it is allowed to transfer the Directorship to an NGO.
  • The trustees of a charitable trust are not allowed to take any funds except as stated in the statute governing the body. But, in NGOs, the funds can be given to the members after getting approval from the general body of the NGO.
  • In order to get a name for the trust, no approval is required, but the name of the NGO can be taken only after submitting an application to the Registrar of Companies.

Conclusion

Everyone will now understand the difference between NGO and Trust, and it will be easy for you to take a decision as to whether you wish to register an NGO or a trust that can fulfil your requirement. For more related details, you can contact Corpbiz, our team of legal experts will provide detailed guidance and help you register an NGO or trust.

Read Our Article: Guide On NGO Registration: Types And Benefits

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