Registration of Organization.
allurisivajiraju
(Querist) 14 January 2010
This query is : Resolved
Respected seniors,
Some of the old students are willing to start an organization to help the poor students economically, health of the poor old age persons and to help the poor girls economically at the time of their marriage. To fulfill the above objects of society all of the old students will contribute voluntary yearly subscription. All old students are become members of the said organization.
In the above circumstances what are the precautions to be taken at the time of registration of the said society and what is the procedure to obtain income tax exemption to the contributing members personally to the amount as well as society.
Thanking You Sir in advance.
A V Vishal
(Expert) 14 January 2010
I. Trusts
A public charitable trust is usually floated when there is property involved, especially in terms of land and building.
Legislation : Different states in India have different Trusts Acts in force, which govern the trusts in the state; in the absence of a Trusts Act in any particular state or territory the general principles of the Indian Trusts Act 1882 are applied.
Main Instrument : The main instrument of any public charitable trust is the trust deed, wherein the aims and objects and mode of management (of the trust) should be enshrined. In every trust deed, the minimum and maximum number of trustees has to be specified. The trust deed should clearly spell out the aims and objects of the trust, how the trust should be managed, how other trustees may be appointed or removed, etc. The trust deed should be signed by both the settlor/s and trustee/s in the presence of two witnesses. The trust deed should be executed on non-judicial stamp paper, the value of which would depend on the valuation of the trust property.
Trustees : A trust needs a minimum of two trustees; there is no upper limit to the number of trustees. The Board of Management comprises the trustees.
Application for Registration :
The application for registration should be made to the official having jurisdiction over the region in which the trust is sought to be registered.
After providing details (in the form) regarding designation by which the public trust shall be known, names of trustees, mode of succession, etc., the applicant has to affix a court fee stamp of Rs.2/- to the form and pay a very nominal registration fee which may range from Rs.3/- to Rs.25/-, depending on the value of the trust property.
The application form should be signed by the applicant before the regional officer or superintendent of the regional office of the charity commissioner or a notary. The application form should be submitted, together with a copy of the trust deed.
Two other documents which should be submitted at the time of making an application for registration are affidavit and consent letter.
II. Society
According to section 20 of the Societies Registration Act, 1860, the following societies can be registered under the Act: charitable societies, military orphan funds or societies established at the several presidencies of India, societies established for the promotion of science, literature, or the fine arts, for instruction, the diffusion of useful knowledge, the diffusion of political education, the foundation or maintenance of libraries or reading rooms for general use among the members or open to the public, or public museums and galleries of paintings and other works of art, collection of natural history, mechanical and philosophical inventions, instruments or designs.
Legislation : Societies are registered under the Societies Registration Act, 1860, which is a federal act. In certain states, which have a charity commissioner, the society must not only be registered under the Societies Registration Act, but also, additionally, under the Bombay Public Trusts Act.
Main Instrument : The main instrument of any society is the memorandum of association and rules and regulations (no stamp paper required), wherein the aims and objects and mode of management (of the society) should be enshrined.
Trustees : A Society needs a minimum of seven managing committee members; there is no upper limit to the number managing committee members. The Board of Management is in the form of a governing body or council or a managing or executive committee
Application for Registration :
Registration can be done either at the state level (i.e., in the office of the Registrar of Societies) or at the district level (in the office of the District Magistrate or the local office of the Registrar of Societies).(2)
The procedure varies from state to state. However generally the application should be submitted together with: (a) memorandum of association and rules and regulations; (b) consent letters of all the members of the managing committee; (c) authority letter duly signed by all the members of the managing committee; (d) an affidavit sworn by the president or secretary of the society on non-judicial stamp paper of Rs.20-/, together with a court fee stamp; and (e) a declaration by the members of the managing committee that the funds of the society will be used only for the purpose of furthering the aims and objects of the society.
All the aforesaid documents which are required for the application for registration should be submitted in duplicate, together with the required registration fee. Unlike the trust deed, the memorandum of association and rules and regulations need not be executed on stamp paper.
Section 2(15) of the Income Tax Act “ which is applicable uniformly throughout the Republic of India“ defines charitable purpose to include relief of the poor, education, medical relief and the advancement of any other object of general public utility. A purpose that relates exclusively to religious teaching or worship is not considered as charitable. Thus, in ascertaining whether a purpose is public or private, one has to see if the class to be benefited, or from which the beneficiaries are to be selected, constitute a substantial body of the public. A public charitable purpose has to benefit a sufficiently large section of the public as distinguished from specified individuals. Organisations which lack the public element such as trusts for the benefit of workmen or employees of a company, however numerous have not been held to be charitable. As long as the beneficiaries of the organisation comprise an uncertain and fluctuating body of the public answering a particular description, the fact that the beneficiaries may belong to a certain religious faith, or a sect of persons of a certain religious persuasion, would not affect the Organisation public character.
The trust should get itself registered [Form No. 10A for Application] with the Commissioner of Income-tax within one year from the date on which the trust is created.
The Commissioner may, in his discretion, admit an application for the registration of any trust or institution after the expiry of the aforesaid period. Where an application for registration is made after the aforesaid period, the provisions of sections 11 and 12 will apply from the date of the creation of the trust, if the Commissioner is satisfied that the person in receipt of income was prevented from making the application with the aforesaid period for sufficient reason. If, however, the Commissioner is not so satisfied, provisions of sections 11 and 12 will be applicable from the previous year in which application is made.
Section 12AA has been inserted with effect from the assessment year 1997-98 to provide for a procedure to be followed for grant of registration to a trust or institution. According to this, the Chief Commissioner or Commissioner shall call for documents and information and hold enquiries regarding the genuineness of the trust or institution. After he is satisfied about the charitable or religious nature of the objects and genuiness of the activities of the trust or institution, he will pass an order granting registration and if he is not so satisfied, he will pass an order refusing registration, subject to the condition that an opportunity of being heard shall be provided to the applicant before an order of refusal to grant registration is passed by the Chief Commissioner or Commissioner and the reasons for refusal of registration shall be mentioned in such order.
The order granting or refusing registration has to be passed within six months from the end of the month in which the application for registration is received by the Chief Commissioner or Commissioner and a copy of such order shall be sent to the applicant. The grant of registration shall be one of the conditions for grant of income-tax exemption.
The accounts of the trust should be audited (Form No. 10B) for such accounting year in which its income exceeds Rs. 50,000.
From the assessment year 1983-84 onwards, the funds of the trust should be invested or deposited in any one or more of the modes or forms mentioned in section 11(5).
Raj Kumar Makkad
(Expert) 14 January 2010
In my opinion, you should draft bye-laws of the society in depth taking the help of some experienced lawyer or some other dealing person. If your deed is well drafted fulfilling your entire requirements then no specific precautions as you asked are necessary to be adhered to.
So far as applying for income tax exemption is concerned, it is not provided immediately on registration of the society in such matters. You have to run your society as told according to its bye-laws and only after 3 years you can apply for such exemption.
A V Vishal
(Expert) 14 January 2010
Sorry Mr Makkad, kindly refer the Income Tax Act, it is clear that the trust/society should get itself registered [Form No. 10A for Application] with the Commissioner of Income-tax within one year from the date on which the trust/society is created. Once the trust/society is created then it can claim exemption of its income from tax and also register for 80G by filing an application in Form.10G
Guest
(Expert) 20 January 2010
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