Setting up an NGO ?Which Form –Society or Trust or Company – is the Best?

An NGO (Non Governmental Organization) is usually formed for the charitable or social work. In India, an NGO can be formed under three types of law –Society Registration Act 1860 or Indian Trust Act 1882 or Companies Act 1856. Out of these three, only Companies Act is a central legislation where as the other two laws are state laws .So , when one decides to form an NGO , first confusion or consideration is  the law under which the NGO should be formed or set up .This is important decision because once you register and form an NGO under a particular form, you cannot go back . 

Although , there is little difference as far regulation related to  the funding source  of an NGO is concerned or the income tax benefit on form over other , the biggest difference comes when one consider the controlling aspect of an NGO. From the point of control over the NGO, the  TRUST is the best among three forms because of law under Indian Registration Act  complete control mechanism inbuilt is in case of formation of trust under Indian Registration Act. After this , society registration Act comes and most difficult among three is is Companies Act.

Comparative chart for NGO Setup Under 3 Forms


  Trust under Indian trust Act Society under Society Registration Act Company under Section 8 (25 earlier)  of the Companies Act
Ease of setting up Organization Easiest. Can be formed within a week Easy , may take 1-2 months Relatively cumbersome. May take more than 2 months
Should Name of NGO be Approved by an Authority? Not required Yes, it is given at the time of registration Strict guideline is applicable .Separate application for name approval required.
Cost of Registration Minimal , may up to Rs 10,000 Minimal , may up to Rs 10,000 May be more than others
Nos of Subscribers/Trustees two. Seven two
Governing structure Board of trustees Two tier structure

  1. General Body
  2. Board of Directors
Two tier structure

  1. General Body
  2. Board of Directors
Voting Rights or subscriber/trustees Same for all Same for all May be different based on shares.
Documentation requirement every year No documentation required List of managing committee members Annual return along with audited balance sheet
Stamp Duty Stamp Duty is as per the State law on registration of trust No stamp paper required for memorandum of association and rules and regulations. No stamp paper required for memorandum and articles of association.
Meaning of Board No meeting required One General Body meeting and one Board meeting One General Body meeting and Two board meetings in a year
Payment to Office Bearer/Trustees/functionaries Permitted , provided the trust deed provides so Permitted if general body adopt such practice Permitted if general body adopt such practice
Foreigner as member trustee Possible Possible Possible
Is registration with I.T. Authorities required for claiming tax exemption Required Required Required


Readers may determine from above that the easiest and best way to form an NGO is through a trust under Indian Trust Act . Please rad How to Create a Charitable Trust