Non-Governmental Organizations (NGOs) play a crucial role in social development and charitable activities in India. However, to function legally and effectively, NGOs must comply with various legal and regulatory requirements. This article provides a comprehensive overview of NGO compliance in India, including legal aspects and steps to ensure compliance.

Legal Framework for NGOs in India

NGOs in India can be registered under different legal structures, each governed by specific laws:

  1. Societies Registration Act, 1860 – Applicable for NGOs registered as societies.
  2. Indian Trusts Act, 1882 – Governs NGOs registered as trusts.
  3. Companies Act, 2013 (Section 8 Company) – Regulates NGOs registered as non-profit companies.

Additionally, NGOs must adhere to various tax, financial, and operational laws, including:

  • Income Tax Act, 1961 – Sections 12A, 80G, and 10(23C) provide tax exemptions for NGOs.
  • Foreign Contribution (Regulation) Act, 2010 (FCRA) – Regulates the receipt of foreign funds.
  • Goods and Services Tax (GST) Act, 2017 – Applicable if NGOs provide taxable services.

Key Compliance Requirements for NGOs

1. Registration and Renewal

  • NGOs must be registered under the relevant legal structure (Society, Trust, or Section 8 Company).
  • Renewal of registration, particularly under FCRA, is required periodically.

2. Tax Compliance

  • Obtain 12A registration for income tax exemption.
  • Secure 80G certification to enable donors to claim tax benefits.
  • File annual income tax returns (ITR) with the Income Tax Department.

3. Financial Reporting and Auditing

  • Maintain proper books of accounts as per the applicable accounting standards.
  • Conduct an annual audit by a certified Chartered Accountant (CA).
  • File financial statements with the relevant regulatory authorities.

4. FCRA Compliance (For NGOs Receiving Foreign Donations)

  • Obtain FCRA registration or prior permission from the Ministry of Home Affairs (MHA).
  • Maintain a designated FCRA bank account for receiving foreign contributions.
  • Submit an annual FCRA return (Form FC-4).

5. Goods and Services Tax (GST) Compliance

  • NGOs engaged in commercial activities must register under GST.
  • File GST returns if applicable.

6. Employment and Labor Law Compliance

  • Adhere to labor laws such as the Employees’ Provident Fund (EPF) and Employees’ State Insurance (ESI), if applicable.
  • Follow the Payment of Gratuity Act, 1972, and the Minimum Wages Act, 1948.

7. Operational and Governance Compliance

  • Conduct regular board meetings and maintain minutes.
  • File Annual Returns and Financial Statements with the Registrar of Societies/Registrar of Companies (ROC) as applicable.
  • Ensure transparency and proper utilization of funds.

Steps to Ensure NGO Compliance in India

Step 1: Choose the Right Legal Structure

Decide whether to register the NGO as a Society, Trust, or Section 8 Company based on the objectives and operational model.

Step 2: Register the NGO

File the required documents with the Registrar of Societies, Sub-Registrar, or Ministry of Corporate Affairs (MCA) for Section 8 companies.

Step 3: Obtain Necessary Approvals

Apply for PAN, TAN, 12A & 80G registrations to avail tax benefits.

Step 4: Set Up Financial and Operational Controls

  • Open a dedicated bank account.
  • Establish an accounting and auditing mechanism.
  • Comply with statutory filings and governance requirements.

Step 5: Ensure Ongoing Compliance

  • File annual tax returns and audit reports.
  • Renew necessary registrations like FCRA.
  • Maintain records and documents for transparency and accountability.

Conclusion

NGOs in India must comply with multiple legal, financial, and operational requirements to function effectively and legally. Ensuring compliance with these regulations not only enhances credibility but also facilitates smooth operations and sustainable growth. NGOs should stay updated with changing legal frameworks and seek professional assistance when necessary to maintain full compliance.