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Difference between trust society and section 8 company

In India, a non-profit organization for a charitable purpose can be registered under the different authorities. It could be registered as a trust, society and section 8 company.
A charitable purpose is defined under Section 2(15) of Income Tax Act “charitable purpose” includes relief of the poor, education, yoga, medical relief, Preservation of environment (including watersheds, forests, and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility” Charitable purpose does not include the purpose that relates exclusively to religious teachings or worship. While selecting the form in which it should be registered a non-profit making entity must evaluate the object and the area of operation, persons involved in its constitution and the sources of income to achieve its object. In order to facilitate the decision making a comparative analysis of a different form of registration available for non-profit making entities i.e. Trust, Society & Section 8 Company in a tabular form: –
S.No Basis of Difference Trust Society Section 8 Company
1
Statute/Legislation
Indian Trust Act, 1882 is applicable.
Society can be a State level society or a National level society in case of state-level society State Acts are applicable, whereas, for the societies operating all over India Societies Registration Act, 1860 is applicable.
Section 8 Companies are governed by Indian Companies Act.
2
Regulating Authority
Deputy Registrar of the relevant area is authorized to regulate and register a Trust.
Society comes under the jurisdiction of State Divisional Magistrate of a particular area in which society premises is located.
Registrar of the Companies of the State in which the Section 8 companies registered office is located will have the authority to register it.
3
Constitution Document
Trust Deed
Memorandum of Association & Rules and Regulations
Memorandum & Article of Association
4
Stamp Duty
Non-Judicial Stamp duty is required as per the State Stamp Act. The stamp duty can depend on the value of the Trust property if any.
No Stamp duty is required.
No Stamp duty is required.
5
Members Required
Minimum two persons are required. These persons could be the artificial person created under the law or a foreigner serving in this capacity.
Minimum seven persons are required for State-level society. Eight members from different states are required to form a national level society, these persons should be the individuals only.
Minimum two persons are required for a private limited company. Seven persons for a public limited company
6
Management
Trust is managed by their Trustee or Board of Trustee.
Societies are governed by Managing Committee or by Governing Council.
Board of Directors is solely responsible for the management.
7
Ownership
Trust properties are owned by the Trustees.
All the properties of the society are held by society itself in its own name.
Company is the absolute owner of the property.
8
Dissolution
Generally, public trust cannot be dissolved.
A society may be dissolved with the approval of 3/5th members of the society.
A Section 8 company may be winded up as prescribed under the Companies Act.
9
Annual Compliance
Annual return filing about the working of the trust is not required
Society is must file the annual return with the registrar of the societies as prescribed in Societies Registration Act.
A Section 8 Company is required to file an annual return and annual accounts with the Registrar of companies.
10
From the point of view of Grant of subsidy by the government
Preferences is less
Preferences is less
Preferred mostly
11
From the point of view of Foreign Contribution Regulation Act, (FCRA) registration
Less preferred
Less preferred
Most preferred
12
Transparency in working
Low
Low
Working is highly transparent as everything is into public domain.
13
Change in the board of directors/ trustees Members
It’s very easy in case of a Trust if the testator is there.
Society functions through the governing council and any change are to be as per the constitution documents, so changes are complex.
Easy
14
Change of Registered office
Difficult
Complex
Easy
15
Cost factor
Low
Medium
High
16
Time Period involved in registration/ formation
10-15 days
30-45 days
60-75 days
Once a particular form of doing non-profitable activities is chosen by the applicant and the same is registered either as a trust, society, and section 8 Company, in addition to the said registration, a non-profit entity engaged in certain activities requires following licenses:
1. To open an office and employ people, the entity must be registered under Shops & Establishment Act, of the concerned state where the office is located.
2. To employee any foreign staff’s, non-profit entity must have FCRA Registration and also obtain a no objection certificate for employing such foreign individual coming to India on a work visa.
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