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How to Establish an NGO in Odisha and in India

The Indian government has long been wary of foreign political interference through the operation and funding of non-governmental organizations (NGOs). As a result, the current legislation affords regulatory discretion to the government by prohibiting foreign funding for political organizations and imposes onerous reporting requirements for all NGOs. Recent intelligence reports have sparked fears that these laws are undergoing government reform to further restrict NGO operation in India.

This article will examine the country’s current national policy and regulations for establishing NGOs. Next week, International Business Specialist Adam Pitman takes a closer look at the political and economic factors underpinning the reform.

The System

NGOs in India generally assume three legal forms: society, trust and limited company. These entities are heavily regulated by state and federal government agencies. At the state level, an NGO can be registered as a: society under the Registrar of Societies, a public trust via execution of a trust deed or a limited company under section 8 of the Companies Act 2013. At the federal level, the Income Tax Department and Ministry of Home Affairs (Home Ministry) regulate registration, and require all NGOs to file annual tax returns and audited account statements to their respective agencies.

Societies, trusts and limited companies are treated equally under the Income Tax Act. In order to be eligible for tax exemption, an NGO must be organized for a charitable purpose. Charitable purposes include ‘relief of the poor, education, medical relief, and the advancement of any other object of general public utility.’ Once a charitable purpose has been established, the organization is entitled to income exemptions and may apply for an 80G certificate to enable donors to claim tax rebates against their donations.

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Barriers to Foreign Funding

The Foreign Contribution (Regulation) Act 2011 (FCRA) prohibits foreign funding for organizations of a ‘political nature’ and imposes additional requirements for NGO receipt of foreign funding.

The definition of ‘political nature’ is vague and affords the Central Government much discretion with regard to its application. According to the 2011 Foreign Contribution (Regulation) Rules (FCRR), organizations are ‘political’ if they have ‘political objectives’, comment upon or participate in ‘political activities’, or employ various methods of political protest and civil resistance, among other criteria.

Under the FCRA, all NGOs wishing to accept foreign contributions must:

· Register with the Central Government;

· Agree to accept contributions through designated banks; and

· Maintain separate books of accounts with regard to all receipts and disbursements of funds.

In addition, NGOs must report all foreign contributions to the Central Government within 30 days of receipt and file annual reports with the Home Ministry. The report must include: the amount of the foreign contribution, its source, the manner in which it was received, the purpose for which it was intended, and the manner in which it was used. Foreign contributions include currency, securities, and articles. The definition extends to funds collected by an Indian citizen in a foreign country on behalf of an NGO registered in India. Furthermore, funds received in India, from a foreign source, in Indian currency, are classified as foreign contributions.

Qualifying for Tax Exemption

Under the national Income Tax Act (1961) and the Finance Act (2014) NGOs may qualify for tax-exempt status if the following conditions are satisfied:

· The organization must be a registered NGO according to Indian law;

· The organization must be formed for religious or charitable purposes;

· The organization must spend 85 percent of its income in any financial year on the objects of the organization;

· Income or property of the organization must not be applied for the benefit of the founder, trustee, relatives of the founder or trustee or a person who has contributed in excess of IRS 50,000 to the organization in a financial year;

· The organization’s income must be applied or accumulated in India. However, trust income may be applied outside India to promote international causes in which India has an interest, without being subject to income tax;

· The organization must timely file its annual income return;

· The organization must keep a basic record (name, address and telephone number) of all donors; and

· The funds of the organization must be deposited as specified in Section 11(5) of the Income Tax Act.

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Tax Benefits

NGOs operating in India enjoy similar taxation benefits as in other Commonwealth countries. The general benefits available to NGOs include:

· Income incidental to the charitable purpose is not subject to corporate income tax.

· The sale of certain goods and services are subject to VAT, with most goods and services taxed at 12.5 percent. VAT liability arises only if the total turnover of sales is Indian Rupees (IRS) 500,000 (approximately US$8,000), or IRS 100,000 (approximately US$1,600) if the dealer is an importer.

· Donors are entitled to a 50 percent deduction for donations to NGOs and a further 100 percent deduction for donations to listed charities.

· NGOs involved in relief work and in the distribution of relief supplies to the needy are 100 percent exempt from Indian customs duty on the import of items such as food, medicine, clothing and blankets.

The current legislation has had far-reaching implications for the effectiveness and sustainability of civil society organizations in India. As a result, the debate is rife as to whether this structure reflects the makings of an autocratic rule over Indian civil society or critical democratic measures enlisted to aid growth and protect the country from inadvertently facilitating insurgent militants, terrorism and corruption.

In any case, the actions of the Indian government should not be viewed as a condemnation of foreign NGOs. NGOs seeking to register should not be deterred by the administrative burden and endeavor to forge closer relationships with state government agencies through diligent adherence to administrative procedures.

For Formation and Registration  of  New NGOs in Odisha and Other parts of India  Please Contact: pkgngo@gmail.com or Mob: 09040101080, 9937185565

Lokpal: Staff of foreign-funded NGOs may have to declare assets

In a move to introduce transparency norms for all NGOs that receive foreign funds, the government has proposed an amendment to the Lokpal law that will require NGO executives too to declare their assets at par with government officials.

The government has proposed to empower the Lokpal to frame “appropriate regulations” for furnishing assets and liabilities by employees of NGOs that receive foreign funding or associations that receive government funding. The Lokpal will also determine how these details would be made public.

The Lokpal law already treats employees of NGOs which receive foreign funding in excess of Rs. 10 lakh as public servants.

This provision is part of the bill to amend the Lokpal and Lokyuktas Act introduced in the Lok Sabha on Thursday.

The bill also seeks to include Leader of Congress party in Lok Sabha in the selection committee for the Lokpal chairperson and members, give the eminent jurist — nominated to this selection panel a three year term and loosen the grip of the CBI Director over the Director of Prosecution who is a government appointee.

The amendment has not only proposed to dilute provisions relating to declaration of assets and liabilities of government officials but also expanded this transparency norm to cover NGO executives as well.

Under the existing provisions, only government officials were required to declare all their assets — movable and immovable — and the government was required to make them public.

The new provisions have diluted this requirement, ostensibly to bring Lokpal law in line with the existing service rules.

Cong moves privilege motion against Naidu

The Congress on Thursday moved a privilege motion against M Venkaiah Naidu, alleging he had “misled” Lok Sabha on the issue of celebrating former PM Atal Bihari Vajpayee’s birthday on Christmas as ‘Good Governance Day’.

In his notice for the motion to Lok Sabha Speaker Sumitra Mahajan on Wednesday, Congress MP KC Venugopa said the HRD ministry, contrary to the government’s claim, had issued three circulars to CBSE and Navodaya schools and universities to celebrate the ‘Good Governance Day’ on December 25.

The ministry later clarified that participation was voluntary. The Congress asked the government to come clean on the issue.

Source: http://www.hindustantimes.com/india-news/lokpal-staff-of-foreign-funded-ngos-may-have-to-declare-assets/article1-1298081.aspx

'NGOs played key role in rehabilitation'

NGOs had set up 11,625 temporary shelters and donated fibreglass boats, drinking water, sanitation, essential commodities and utensils to fishermen

Business Standard

December 26, 2014 Last Updated at 00:24 IST

In Nagapattinam district in Tamil Nadu, people view non-governmental organisations (NGOs) with respect, citing their "commendable" role in rehabilitation after the 2004 tsunami.

J Radhakrishnan, former collector of Thanajavur and the person who spearheaded the rescue operations in Nagapattinam district, said more than 419 NGOs came forward to work in the affected areas. Relief material was distributed through an NGO coordination centre in the district, he added.

The NGO coordination and resource centre (NCRC) was aimed at coordinating the efforts of these entities with those of government departments. It was planned when rehabilitation work reached a mature stage, NGOs would hand over the work to separate organisations.

While the South Indian Federation of Fishermen Societies and Social Need Education and Human Awareness continue to work to improve the conditions of fishermen, by 2007, NCRC was transformed into Building and Enabling Disaster Resilience of Coastal Communities (BEDROC), an organisation focusing on improving soil and water conditions for farmers, said Basil and Santhosh, who are engaged with BEDROC.

NGOs had set up 11,625 temporary shelters and donated fibreglass boats, drinking water, sanitation, essential commodities and utensils to fishermen. Besides, free medical camps and counselling was conducted for those hit by the tsunami. These entities also played a key role in increasing enrolment in schools, locals say.

Besides helping in rescue operations, NGOs also set up vocational training centres such as HOPE Foundation, set up in collaboration with US-based Manpower. They also helped set up the Centre of HOPE in Nagapattinam, which ran two schools and microfinance programmes in the area. The HOPE foundation claims the initiative is one of the largest in the aftermath of the 2004 tsunami.

The vocational programme has a 15-year sustainability plan, with significant investment in infrastructure such as buildings, computers and equipment. It aims to train 10,000 students during the first 10 years.

While the Society for Community Organisation and People's Education, Tiruchi, conducted training programmes for carpentry, CARE India enabled the construction of 20 model individual 'Ecosan' toilets.

The M S Swaminathan Research Foundation established a knowledge resource centre in Akkaraipettai village in Nagapattinam.

The Tata Relief Committee is engaged in providing information to fishermen and farmers on microenterprises, the availability of fish and fish-processing.

SOS Children's Villages, an NGO, provided emergency relief to families affected by the tsunami. SOS Social Centre offers a comprehensive package of services for families.

Volunteers from social welfare organisations in Punjab, Chhattisgarh and Gujarat set up community kitchens for the displaced. Several other entities, such as the Rotary and Lions clubs and Seva Bharathi, helped organise mass cremations after the tsunami.

Source: http://www.business-standard.com/article/current-affairs/ngos-played-key-role-in-rehabilitation-114122600029_1.html

How 'Desh' Deshpande is helping Indian NGOs scale up

by Samar Srivastava

Tech billionaire Gururaj 'Desh' Deshpande is helping NGOs scale up and sustain philanthropy initiatives on their own steam. His formula for self-reliance is relevance followed by innovation

In 1996, when venture capitalist and entrepreneur Gururaj Deshpande started his first innovation centre at the Massachusetts Institute of Technology in Boston, he was clear about two things. First, his philanthropic activities would not involve merely funding grants. Second, he would approach his giving in much the same way as he approached his life as an entrepreneur. “An idea does not have an impact unless it is directed at some burning problem in the world,” the 64-year-old tech billionaire tells Forbes India during a phone conversation from Boston.

Deshpande applies this core tenet to every project he works on, including Akshaya Patra, a non-profit organisation that is very close to his heart. He is the chairman of the US chapter of the NGO, which provides free lunch to more than a million schoolchildren across India. The scale of its operation at Hubli, Karnataka, is impressive.

At 6.30 am, the town’s largest industrial kitchen was busy preparing mid-day meals for 1.75 lakh schoolchildren in 800 government schools across the districts of Hubli and Dharwad. The building, spread over a three-acre campus, is fitted out with industrial-sized tumblers to prepare rice and sambar. It’s also equipped with its own heating plant to provide fuel needed for cooking. That’s 14,000 kilos of rice, 12,000 litres of sambar and 5,500 litres of milk every day. By 7.30 am, trucks are loaded with food.

Feeding 1.75 lakh children costs about Rs 15 lakh a day, and while the government helps with rice supplies from the Food Corporation of India, the programme relies on donors to fund the bulk of its operations.

Partnering with initiatives like Akshaya Patra has made Deshpande—or Desh as he is popularly called—something of a messiah in his hometown, Hubli. A decade ago, the billionaire and his brother-in-law, Infosys co-founder NR Narayana Murthy, donated $1 million (then Rs 5 crore) to set up the kitchen. It remains, to date, the largest of all the 18 kitchens across India in Akshaya Patra’s network.

But Deshpande does not contribute any of the funds needed for the day-to-day running of the kitchen. An entrepreneur to the core, he is clear that most organisations must be able to support themselves. He does not want to be seen as a mere grant maker. “I chair its fundraising committee in the US, but don’t contribute to daily expenses,” he says.

This philosophy sets the tone for how the Deshpande Foundation, which he founded with his wife Jaishree in 1996, approaches its philanthropic activities. It may have started out by supporting initiatives in the US but, in 2007, the entrepreneur decided to expand its reach to his birthplace, Hubli. One of its primary goals is to support entrepreneurship at the bottom of the pyramid.

Spend time in the town, and it becomes apparent that the foundation has a refreshingly different take on what philanthropic organisations need to do to succeed. There’s active support for ideas that can make a difference to society. And, most crucially, it helps innovators and other organisations scale up these ideas.

It’s a learning that has come out of Deshpande’s experience of over three decades as an entrepreneur. This enables him to examine his philanthropic activities with the same lens through which he looks at entrepreneurship. “As an entrepreneur, you need to identify a problem and scale up. The same holds true for this (philanthropy) space, except that people are not very good at scaling up. That is where we step in,” he says.

When the foundation started operations in Hubli, locals slotted it as a donor.

“People would come to us and tell us that they didn’t have electricity or that the roads were not good. And I would say to them, ‘Well, I don’t even live here. This is not something that I can solve’,” says Deshpande.

Source: http://forbesindia.com/article/philanthropy-awards-2014/how-desh-deshpande-is-helping-indian-ngos-scale-up/39277/1

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