While many NGOs work hard for different social causes, there are legal and financial benefits of NGOs and NPOs as business entities. These benefits are often used as important business structuring tools.
There are three different types of NGOs on a legal basis:
1. Trust
2. Society
3. Section 8 Company
Section 8 Companies, trusts and societies are exempted from income tax if they are registered under 12AA (tax exemption) of the Income Tax Act. NPOs or non profit organisations also fall under the ambit of section 8 companies. NGOs wanting to receive funds from abroad are required to register under the Foreign Contribution Regulation Act (FCRA) with the Ministry of Home Affairs.
There are some common financial and regulatory benefits of NGOs. They have a separate legal entity, and have limited liability towards stakeholders.
Besides getting exemption from income tax, they are also exempt from government audits and get certain legal protect