Laws Governing Charitable Organisations In India: Charities can be formed in multiple ways and may be subject to various acts of legislation. The right of all citizens to form associations or unions is guaranteed by the Constitution of India, Article 19(1)(c). “Charities and charitable institutions, charitable and religious endowments and religious institutions” is a subject of the Concurrent list of the Seventh Schedule to the Constitution of India, where both the Centre and the States are competent to legislate and regulate charitable organisations. Under Schedule VII of the Indian Constitution, the subject ‘Trust and Trustees’ finds mention at Entry No.10 in the Concurrent List and ‘Charities & Charitable Institutions, Charitable and religious endowments and religious institutions’ find place at Entry No.28 of this list.
Laws Governing Charitable Organisations In India
The legal framework for the charity sector in India is quite complex with a number of different acts of legislation governing it in their own way. There are three basic legal forms of charitable entities under Indian law: trusts, societies, and section 25 companies. The legal framework governing the charitable institution will depend on the form of business organization the charitable institution takes. There is no comprehensive central law for legal incorporation of nonprofit organizations which applies to trusts, registered societies and section 25 companies alike.
If the charitable institution is formed as a Public Trust, it will be governed by the Public Trust Act applicable in the relevant State. However, if no Public Trust Act exists in that state, then the applicable legislation will be the Indian Trusts Act 1882. Indian Trusts Act 1882 deals with private family trusts and becomes applicable where there is no State act.
If the charitable institution is formed as a Society, it will be governed by the Societies Registration Act, 1860. The charitable institution can also be formed as a non-profit company under section 25 of the Companies Act, 1956.
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Apart from the above legislations, the Income Tax Act 1961 will be applicable to charitable institutions. And in the case of foreign contributions to these charitable institutions, the Foreign Contribution (Regulation) Act, 2010 will be applicable. Apart from the above, various laws are applicable to Trusts, Societies and Wakfs.
Also, various State Laws are applicable to Charitable Institutions. For example, all public charitable trusts in the state of Maharashtra are governed by the Maharashtra Public Trusts Act, 1950. The same Act, with minor changes, is also operational in the state of Gujarat. Rajasthan, too, has a Trusts Act of 1959, while Madhya Pradesh had an Act of 1951. In certain southern states like Andhra Pradesh, there are endowment Acts, while a number of northern and north-eastern states in India have no trust Act at all. Even the capital of India- New Delhi-has no trust Act.
Moreover, many state and central government agencies have regulatory authority over these not-for-profit entities. For example, all not-for-profit organizations are required to file annual tax returns and audited account statements with various agencies. At the state level, these agencies include the Charity Commissioner (for trusts), the Registrar of Societies (referred to in some states by different titles, including the Registrar of Joint Stock Companies), and the Registrar of Companies (for section 8 companies). At the national or federal level, the regulatory bodies include the income tax department and Ministry of Home Affairs (only for not-for-profit organizations receiving foreign contributions)
Main laws governing the charity sector
- 1) Constitution of India Article 19(1)(c)
- 2) Indian Trusts Act, 1882 (applicable for private trusts)
- 3) Public Trusts Acts of various states in India.
- 4) The Societies Registration Act, 1860
- 5) The Companies Act, 2013
- 6) Income Tax Act, 1961
- 7) Foreign Contribution (Regulation) Act, 2010
Other Laws governing Charity Sector
Societies
- 8) Religious Societies Act, 1880
- 9) Religious Institutions (Prevention of Misuse) Act 1988
- 10) The Rajasthan Societies Registration Act, 1958
- 11) The Karnataka Societies Registration Act, 1960
- 12) The West Bengal Societies Registration Act, 1961
- 13) The Madhya Pradesh Registration Adhiniyam, 1961
- 14) The Tamil Nadu Societies Registration Act, 1975
- 15) Manipur Societies Registration Act, 1989
- 16) The Jammu – Kashmir Societies Registration Act, 1998
- 17) Societies Registration (Uttar Pradesh Amendment) Act, 2000
Trusts
- 18) Charitable and Religious Trusts Act, 1920
- 19)Religious Endowments Act, 1863
- 20) Charitable Endowments Act 1890
- 21) Hindu Religious and Charitable Endowments Act 1951
- 22) Official Trustees Act, 1913
- 23) Civil Procedure Code, 1908
- 24)Registration Act, 1908
- 25)Indian Stamp Act, 1899
Wakfs
- 26) Mussalman Wakf Act, 1923
- 27) Mussalman Wakf Validating Act,1913
- 28) Mussalman Wakf Validating Act, 1930
- 29) Wakf Act, 1995
State Acts
- 30) Andhra Pradesh Charitable and Hindu Religious Institutions and Endowments Act, 1987
- 31) Bihar Hindu Religious Trusts Act, 1950 15
- 32) Maharashtra Public Trusts Act, 1950
- 33) Bombay Public Trusts Rules, 1951
- 34) Karnataka Hindu Religious Institutions and Charitable Endowments Act, 1997
- 35) Karnataka Hindu Religious Institutions and Charitable Endowments Rules, 2002
- 36) Kerala Travancore-Cochin Hindu Religious Institutions Act, 1950
- 37) Orissa Hindu Religious Endowments Act, 1951
- 38) Rajasthan Public Trust Act, 1959
- 39) Tamil Nadu Hindu Religious and Charitable Endowments Act, 1959
- 40) The Madras Hindu Religious And Charitable Endowments Act, 1951
- 41) Uttar Pradesh Charitable Endowments (Extension of Powers) Act, 1950
- 42) Charitable Endowments (U.P. Amendment) Act, 1952
- 43) United Provinces Charitable Endowments Rules, 1943
- 44) Religious Endowments (Uttar Pradesh Amendment) Act, 1951
- 45) Uttar Pradesh Hindu Religious Institutions (Prevention of Dissipation of Properties) (Repeal) Act, 2000
The Madhya Pradesh Public Trusts Act, 1951 has been repealed by the Bombay Public Trusts (Unification and Amendment) Act, 1959-(Bombay Act No. VI of 1960)
Constitutional Provisions with regard to Charitable Organisations
The Indian Constitution provides a distinct legal space to social capital / civil society institutions
- (a) through its Article on the right to form associations or unions – Article 19 (1)(c);
- (b) through Article 43 which talks of States making endeavor to promote cooperatives in rural areas; and
- (c) through explicit mention in entries made in the Seventh Schedule.
The Relevant Entries in the Seventh Schedule to the Constitution are as follows:
The Union list (List I)
- Entry 43 – “Incorporation, regulation and winding up of trading corporations, including banking, insurance and financial corporations but not including co-operative societies”.
- Entry 44 – “Incorporation, regulation and winding up of corporations, whether trading or not, with objects not confined to one State, but not including universities”.
The State list (List II)
- Entry 32 – “Incorporation, regulation and winding up of corporations, other than those specified in List I, and universities; unincorporated trading, literary, scientific, religious and other societies and associations; co-operative societies”.
The Concurrent List (List III)
- Entry 10 – “Trusts and Trustees”
- Entry 28 – “Charities and charitable institutions, charitable and religious endowments and religious institutions”.
Since forming Associations is a Constitutional right under Article 19(1)(c) of the Indian Constitution, it is quite feasible to set up a non-profit/voluntary organisation without any kind of registration or recognition under any of the entries mentioned above. In fact, some of the community based organisations like village committees, small religious groups and many Resident Welfare Associations function in this manner. However, when it comes to claiming exemptions under the Income Tax Act, 1961 and for availing of other benefits from the Government, there is insistence on formal registration.
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Author – Dr. Rajkumar Adukia
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