Difference between a Trust, Society and Section 8 Company

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In India NGO’s can be registered in 3 different forms, i.e. Trust, Society or a Section 8 Company. They are commonly referred to as NPO’s (Non-Profit Organisations) also. All of them can be formed for social welfare and development. But they are not the same. They have some differences as follows:

ParticularsTrustSocietySection 8 Company
Meaning It is an agreement between parties, whereby one party holds the ownership of property for the benefit of another party. It is a collection of persons, who come together for initiating any literary, scientific or charitable purpose. It is an enterprise formed with a commercial, social, charitable or any other such objective and intends to apply its profits for promoting such objectives. 
Registration As NGO/ NPO. As NGO/ NPO. As NGO/ NPO, enjoying the privileges of a limited company but without using the words “Limited” or “Private Limited” in its name. 
Governing law The Indian Trusts Act, 1882 for Private Trusts and general law for Public Trusts except states like Gujarat, Maharashtra where they have separate public trust acts. The Societies Registration Act, 1860. The Companies Act, 2013. 
Registering authority Deputy Registrar of the relevant area. Registrar or Deputy Registrar of Societies of the State. Registrar of Companies (ROC) or Regional Director. 
No. of minimum members required at the time of registration Minimum 2 trustees. Minimum 7 members. Minimum 2 directors and shareholders. Same person can be director and shareholder. 
Geographical area of operation Whole of India. State wise, but can operate in whole of India after taking All India Registration and becoming National Level Society. Whole of India. 
Main documents supporting the formation Trust deed. Memorandum of Association and Rules & Regulations. Memorandum of Association and Articles of association. 
Legal title of property Vests in the hands of trustees. Held in the name of the society. Held in the name of the company. 
Cost factor Low. Medium. High. 
Preference in case of Grant of subsidy by the Government Not much preferred. Not much preferred. Mostly preferred. 
Registration under the Income Tax Act, 1961 Yes, allowed. Yes, allowed. Yes, allowed. 
Preference in case of Foreign Contribution Regulation Act (FCRA) registration Not much preferred. Not much preferred. Mostly preferred. 
Transparency in working details Not much. Not much. High, because of online availability. 
Annual compliance requirement There are some annual compliance requirement depending on whether the trust is Private trust or Public Trust .Annual filing of list of names, addresses and occupations of members of the Managing Committee of the society, with the Registrar of Societies. Annual compliance of filing of accounts and filing of annual return of Section 8 company, with the Registrar of Companies (ROC). 

From the above comparison, we get an overview of the important points that need discussion before choosing from the proper type of organisation. Get Free assistance from our advisors to choose the best form of NGO based on the the circumstances.

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Note: This Post was last updated on October 5, 2021

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