NGOs, legal compliance for NGOs,legal compliance, annual compliance, NGOs in India, Income Tax Act, Companies Act, 2013, Ebizfiling

Important compliance for NGOs in India- All you need to know


Many individuals assume that NGOs are exempt from all taxes because they feel that their sole purpose as an organization is to engage in non-profit activities. But this is only a myth.   When you register a company for you, you need to follow some legal compliance, it same goes for NGOs in India. This blog will guide or give directions about the types of legal compliance for NGOs, annual compliance and their penalties for non-compliance.

What is NGO?

The word “NGO” refers to any organization that seeks charity and philanthropic contributions and uses them for the welfare of society without the intention of making a profit out of it. Such organizations have a clear social, religious, educational, or cultural agenda. NGOs cannot distribute income in the form of dividends because they are not “owned” by anyone. NGOS is registered as  a legal entity in 3 forms, which are:

  • Trust: A trust can be established for a variety of reasons, including poverty or distress assistance, education, medical treatment, and so on. When a person establishes a trust, he should have a clear goal to use trust assets for the welfare of society and support a charity organization that registers a public charitable trust in India. Trust Registration is the process of registering a non-profit organization under the Trusts Act of 1882.
  • Society: Another approach to registering your NGO is through society’s system. Individuals collaborate to pursue scientific purposes, charitable purposes, religious projects and numerous other aims to form a society, as stated in Section 30 of the Society Registration Act of 1.860
  • Section 8 Company: A company has been defined under the Companies Act, 2013, and authorizes the formation of “Section 8 Companies”. The Act defines Section 8 companies as those established for supporting helpful endeavors such as the arts, religion, or charities.

Legal compliance for NGO

The following standards and discussion of pertinent legal annual compliance for NGOs in India are necessary to demonstrate their sincerity and authenticity in line with Indian NGO Law prior to the establishment are listed below:

  • Apply for PAN: After registering an NGO with the legal authorities, the first step is to apply for the NGO’s PAN, because it is mandatory for NGOs to have a PAN card and a separate legal identity.  A Permanent Account Number (PAN), is a special alphanumeric combination that can be used to identify them under the Income Tax Act of 1961.
  • Apply for Tax Deduction Number (TAN): After registering an NGO with the legal authorities, the next step is to apply for the NGO’s tax deduction number. It is a ten-digit alphanumeric number that must be acquired by anybody in charge of withholding or collecting tax at the source.
  • Section 80G: Registering your NGO under Section 80G of the Income Tax Act, gives the advantage of 50% or 100% exemption over the donations to the donors, though registration is not mandatory. On the other day, it gives a huge benefit to NGOs to raise funds.
  • Foreign donations disclosure: The Foreign Contribution (Regulation) Act of 2010 governs foreign donations. Every non-profit organization in India, such as public charity trusts, societies, and Section 8 companies, must get registration before making any foreign contributions. The Central Government requires that they register to keep it on the record for the government.
  • Section 12A: According to the Income Tax Act of 1961, registration under Section 12A entitles you to an exemption on trust income. This registration is optional and registration is only valid for 5 years, and you must renew it after that time.
  • Custom duty: If a non-profit organization is engaged in relief efforts, then they get an exemption from customs duty. Imports of goods including food, medicine, clothes, and blankets are entirely excluded. The other exception that is possible pertains to components and equipment used in research that is destined for research institutes.
  • FCRA Return: This return may be submitted to the Ministry of Home Affairs on a yearly or quarterly basis. Even if no foreign contribution was received, the return must be submitted legally, using Form FC-4, which includes information on the organization’s charity endeavors. The FCRA registration and the CA certificate must be included in the return.
  • Registering for GST: If an NGO offers services such as consulting or research, and the gross income from such activities exceeds the GST’s basic exemption threshold, the NGO must first register for the GST.
  • Professional tax registration: An NGO is required to withhold it from an employee’s pay and deposit it with the government. Since it is a state government matter, the laws governing professional tax vary amongst the various Indian states.
  • Pension Benefit: When registering for an NGO, you can avail the benefits of retirement like provident fund, gratuity, ESIC etc., as with time, NGO grows and the number of employees exceeds the quota set forth.
  • Annual compliance for NGO: Based upon various activities, covered jurisdictional areas, and income size, an NGO is required to file statutory annual compliance under various laws of India. There are a few annual compliances that NGOs are required to do at the end of the financial year. They are listed below:
  • Selecting an auditor: All businesses that operate according to Section 139 of the Companies Act, 2013 must employ an auditor.
  • Record in register: According to Section 8 of the Companies Act, 2013, the firm must maintain a statutory account that details the money it has accrued, the payments it has made, its partners, and other information.
  • Meeting: Organizing annual general meetings and other business-related conferences must be held and information on them must be documented.
  • Directors report: The company’s directors have complete authority to file the annual statement, which includes financial data and corporate social responsibility duties. The board executives are responsible for this decision.
  • Company financial statements: The balance sheet, income statement, cash flow transactions and other financial claims that must be documented for the prior fiscal year.
  • Financial statement filing: Within 30 days after the date of the most recent body meeting, the financial statement must be included in the application form (E-FORM AOC-4).
  • Filing returns: Companies that want to file retrievals within 60 days of the annual general meeting should document the form MGT-7 with the ROC.

Penalties for non-compliance

The Ministry of Corporate Affairs has the authority to apply specific sanctions if any process is violated. The following penalties are to be imposed:

  1. The Central Government has the right to revoke the organization’s permission to operate if it is discovered that they are acting dishonestly or against their stated goals.
  2. The institution’s administration shall be held accountable and subject to a fine that cannot be less than ten lakh rupees and cannot exceed one crore rupees.
  3. Each official, including the organization’s heads, who is in default would be responsible for detention for a period that might total 25 lakh rupees or both.
  4. Every official in default must be at risk for activity under area 447 if it is discovered that the issues of the organization were directed falsely.


The information provided above expands on the numerous legal requirements for NGO registration in India as well as the benefits of doing so. Therefore, depending on the type of NGOs to which you want to target your registration, the documentation requirements may change. If you are launching an NGO in India, you must remain committed to your mission of improving the lives of those who live in crowded conditions as well as the welfare of all disadvantaged groups and societies.

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