Non-Governmental Organisations (NGOs), also known as non-profit organisations, are formed to promote social welfare, education, charitable causes, environmental protection, and community development.
In India, an NGO can be legally structured as:
- A Trust
- A Society
- A Section 8 Company
Each structure is governed by a different law and serves different operational needs.
Legal Framework Governing Each Structure
- Trust – Governed by the Indian Trusts Act, 1882 (for private trusts; public trusts may be governed by state laws)
- Society – Governed by the Societies Registration Act, 1860
- Section 8 Company – Governed by the Companies Act, 2013
When to Consider Forming a Society?
A Society is often the right choice when democratic governance and flexibility are priorities.
✅ 1. You Want an Elected Governing Body
Societies are managed by a governing council or managing committee, which is elected by members.
This makes it suitable for:
- Associations
- Cultural organisations
- Educational groups
- Clubs
- Professional bodies
If your objective is collective decision-making, a society structure works well.
✅ 2. Members Should Not Be Bound Permanently
In a society:
- Membership is flexible
- Members can resign or be replaced
- Entry and exit are relatively easy
This makes it ideal where membership may change over time.
✅ 3. Easier Winding Up
If ease of dissolution is a concern:
- Societies are comparatively easier to wind up
- Less compliance-heavy than Section 8 Companies
- Less rigid than many Trust structures
This makes societies suitable for smaller or community-based initiatives.
Quick Comparison Snapshot
| Feature | Society | Trust | Section 8 Company |
|---|---|---|---|
| Governing Style | Democratic, elected body | Managed by trustees | Board of Directors |
| Flexibility of Members | High | Low | Moderate |
| Compliance Level | Moderate | Low | High |
| Credibility | Good | Moderate | Very High |
| Ease of Winding Up | Easier | Moderate | Complex |
When to Consider Forming a Trust
A Trust is one of the oldest forms of charitable structures and is suitable in the following situations:
- Family-led management: When multiple family members are involved in running the organisation.
- Lifetime trusteeship: If you want trustees to hold office for life without periodic elections.
- Privacy and flexibility: Trusts generally offer greater confidentiality in operations and flexibility in distributing benefits according to the trust deed.
Trusts are governed by the Indian Trusts Act, 1882 (for private trusts), while public trusts are governed by general law or specific state laws in certain states.
Reasons for Forming a Section 8 Company
A Section 8 Company is suitable when:
- The objective is to carry out a broad range of charitable or social activities.
- You want strong credibility and reliability, as it is incorporated under central government authority.
- You want a corporate legal structure without the requirement of high share capital.
Section 8 Companies are governed by the Companies Act, 2013 and enjoy the benefits of a limited company without adding “Pvt. Ltd.” to their name.
Difference Between Trust, Society, and Section 8 Company
Below is a structured comparison of the three forms:
| Particulars | Trust | Society | Section 8 Company |
|---|---|---|---|
| Meaning | Oldest form of charitable organisation; property is held by one party for the benefit of another | Formed by a group of persons for a common purpose (charitable or otherwise) | Company formed to promote commerce, art, science, sports, education, research, social welfare, religion, charity, environmental protection, etc., where profits are applied toward objectives |
| Governing Legislation | Indian Trusts Act, 1882 (private trusts); public trusts governed by general/state laws | Societies Registration Act, 1860 | Companies Act, 2013 |
| Registered As | NGO/NPO | NGO/NPO | NGO/NPO with company privileges |
| Constitution Document | Trust Deed | MOA + Rules & Regulations | MOA + AOA |
| Registration Authority | Deputy Registrar (State) | Registrar/Deputy Registrar of State | Registrar of Companies (ROC) / Regional Director |
| Minimum Members | Minimum 2 trustees | Minimum 7 members (5 in certain states) | 2 directors and 2 shareholders (can be same persons) |
| Annual Compliance | No mandatory yearly filings | Annual filing of managing committee details | Mandatory annual returns and financial statements with ROC |
| Cost Factor | Low | Medium | High |
| Government Grants | Limited | Limited | Considerable possibility |
| FCRA Preference | Low | Low | Preferred |
| Income Tax Registration | Allowed under Income Tax Act, 1961 | Allowed | Allowed |
| Transparency | Low | Low | High |
| Ownership of Property | Held by trustees | Held in society’s name | Held in company’s name |
| Approx. Registration Time | 15–20 days | 20–25 days | 30–45 days |
| Stamp Duty | Depends on state stamp laws and property value | None | None |
Conclusion
- Choose a Trust for privacy, family management, and lifetime trusteeship.
- Choose a Society for democratic functioning and flexible membership.
- Choose a Section 8 Company for higher credibility, structured governance, and better funding opportunities.
FAQs
1. What is the main difference between a Trust, Society, and Section 8 Company?
A Trust is governed by the Indian Trusts Act (private trusts) or state public trust laws, a Society is registered under the Societies Registration Act, 1860, and a Section 8 Company is incorporated under the Companies Act, 2013 for charitable or non-profit purposes. Section 8 Companies generally have stricter compliance but higher credibility.
2. Which structure is best for an NGO in India?
It depends on your goals.
- Trust – Suitable for family-run or smaller charitable initiatives.
- Society – Ideal for membership-based organizations.
- Section 8 Company – Best for structured governance, transparency, and larger funding opportunities.
3. Which entity has higher legal credibility?
A Section 8 Company usually has higher credibility due to stricter regulatory oversight and compliance requirements under the Companies Act, 2013.
4. Is compliance higher for a Section 8 Company?
Yes. Section 8 Companies must maintain proper books of accounts, conduct board meetings, and file annual returns with the Registrar of Companies (ROC), making compliance more structured compared to Trusts and Societies.
5. Which structure is easier to form?
A Trust is generally the simplest to form, followed by a Society. A Section 8 Company involves incorporation procedures similar to private limited companies and requires approval from the Central Government.
6. Can all three entities apply for 12A and 80G registration?
Yes. Trusts, Societies, and Section 8 Companies can apply for income tax exemptions under Sections 12A and 80G of the Income Tax Act, subject to eligibility conditions.
7. Which structure is better for foreign funding (FCRA)?
All three can apply for FCRA registration, but Section 8 Companies are often preferred due to stronger governance and transparency standards.
8. Which entity is better for long-term sustainability?
A Section 8 Company is generally better for long-term growth due to clear management structure, defined roles, and improved fundraising opportunities.
9. Can profits be distributed among members?
No. In all three structures (Trust, Society, Section 8 Company), profits must be reinvested for charitable or non-profit objectives and cannot be distributed to members.
10. Which structure is more suitable for educational or healthcare institutions?
For larger educational institutions or hospitals seeking grants, CSR funding, and government recognition, a Section 8 Company is often preferred. Smaller institutions may opt for a Trust or Society.
11. Is conversion possible between these entities?
Direct conversion is not straightforward. Usually, a new entity must be registered, and assets/liabilities are transferred following legal procedures.
12. What factors should you consider before choosing?
- Scale of operations
- Funding requirements
- Governance expectations
- Compliance capability
- Long-term expansion plans
