Section 8 Company, Trust or Society: Choosing a Non-Profit Structure
Starting a charitable or social-impact organisation in India usually means choosing between three structures: a public charitable trust, a registered society or a Section 8 company. All three can pursue charitable objects and apply for income-tax exemption, but they differ in governance, flexibility and credibility.
Public charitable trust
How it's formed: By executing a trust deed and registering it. Some states have specific public-trust legislation; elsewhere the deed is registered under general registration law.
Governance: Managed by trustees named in the deed. Membership is closed, and changing trustees depends on the deed.
Suits: Founders who want tight control: family foundations and smaller charities.
Consider: Less familiar to institutional and foreign donors; amending the deed can be cumbersome.
Registered society
How it's formed: By a group of members registering under the Societies Registration Act or the applicable state law, with a memorandum and rules.
Governance: Democratic: a general body of members elects a governing body.
Suits: Membership organisations, associations, educational and cultural bodies.
Consider: Internal disputes between members can be disruptive; regulation varies by state.
Section 8 company
How it's formed: Incorporated under the Companies Act, 2013 with a licence from the central government, for charitable objects. Profits must be applied to those objects, and dividends cannot be paid to members.
Governance: Board of directors and members, with the same governance discipline as other companies.
Suits: Organisations seeking CSR funding, institutional grants or international partnerships.
Consider: Higher compliance (board meetings, audit, annual ROC filings), but also the highest credibility and transparency.
Comparison at a glance
| Trust | Society | Section 8 company | |
|---|---|---|---|
| Governing law | Trust law (state-specific) | Societies law | Companies Act, 2013 |
| Control | Trustees | Elected governing body | Board of directors |
| Compliance load | Low | Moderate | Higher |
| Donor credibility | Moderate | Moderate | High |
| Flexibility to change | Limited | Moderate | High |
After registration
Whichever structure you choose, you'll typically want income-tax registration for exemption and approval that allows donors to claim deductions. If you will receive foreign contributions, separate registration under foreign-contribution law is required. Each comes with ongoing reporting and audit obligations.
How Advest can help
We help founders choose the right structure, draft the deed or constitution, complete registration and tax approvals, and manage ongoing audit and compliance. See our corporate advisory services.
This article is general information, not professional advice. Please consult us about your specific situation.
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