Meaning of NPO (Non Profit Organisation), Definition of Charitable Purpose

Meaning of NPO (Non Profit Organisation)

Meaning of NPO (Non Profit Organisation), Definition of Charitable Purpose: Meaning of Non Profit Organisation. Check Definition of non profit organisation, Definition of NPO in India. In this article you may find complete details for non profit organizations definition and examples….

Meaning of NPO (Non Profit Organisation)

Non-profit organization is an organization which has an objective of charitable purpose. Trusts, foundations, unincorporated associations and in some jurisdictions specific types of companies, may be established for a charitable purpose or may acquire such purpose after establishment. Charitable organisations are non-profit organizations; however, not all non-profit organizations are charitable organizations. Some charitable organizations may be established by companies as part of tax planning strategies.

The primary function of a charitable organisation is to give benefit to the public by performing worthy causes that helps the public at large. Also all the operations performed by those organizations are legal and their policy goes in tune with the general public policy

Charitable organisations usually have an active way to raise funds through a campaign or conducting programmes. Its functions can range from helping others in times of disaster, giving financial aid, medical services, public works and conducting human right activities. They generally function as a welfare organisation and work for the improvement of the society through their charitable function.

Meaning of NPO (Non Profit Organisation)

Definition of Charitable Purpose

Public charitable trusts, by definition, must be created for the benefit of the public. Societies likewise may be registered for charitable purposes. Section 25 companies are formed for the limited purposes of “promoting commerce, art, science, religion, charity or any other useful object.”

In law, the concept of “charitable purpose” has a meaning which is not quite the same as in normal language.

According to Section 2(15) of the Income Tax Act, 1961, Charitable purposes include “relief of the poor, education, medical relief, and the advancement of any other object of general public utility.” Finance (No.2) Act, 2009 added the “preservation of environment (including watersheds, forests, and wildlife) and preservation of monuments or places or objects of artistic or historic interest” to the list of charitable purposes. Finance Act, 2008 limited the definition of “charitable purpose,” by stating that if the “advancement of any other object of general public utility” involves undertaking any trade, commerce, or business activities, or rendering any related service for a fee or any other condition (irrespective of use, application, or retention of income arising from such activities), it will not be considered a “charitable purpose.” The Finance Act 2010, retrospectively effective from April 1, 2009, provided some relief by exempting the aggregate value of receipts from such activities up to one million rupees. Organizations established for and running programs for relief of poverty, education, and medical relief are not affected by the amendments of 2009 or 2010.

Section 2(15) defines the expression “charitable purpose” in an inclusive manner. The aforesaid definition is not exhaustive and, therefore, purposes similar to the purposes mentioned in the aforesaid definition will also constitute charitable purposes. Further, the words “any other object of general public utility” are of wide import. However, the object should not be of utility for only a few persons.

According to Section 9(1) of the Maharashtra Public Trusts Act, 1950, “charitable purpose includes: 1) relief of poverty or distress 2) education 3) medical relief 3A) provision for facilities for recreation or other leisure time occupation (including assistance for such provision), if the facilities are provided in the interest of social welfare and public benefit 4) the advancement of any other object of general public utility, but does not include a purpose which relates exclusively to religious teaching or worship.”

The definition of charitable purpose is broad enough to cover activities other than direct relief of distress due to poverty or calamities. It includes education, medical relief, and the advancement of any other object of general public utility such as promotion and preservation of the arts

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Author – Dr. Rajkumar Adukia

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