A Complete Guide to Legal Structure, Registration,

and Taxation of NPOs in India

Introduction

Non-Profit Organizations (NPOs) have a transformative role in Indian society, contributing to education, healthcare, environment, rural development, and more. However, to function legally and sustainably, NPOs must align with India's legal and tax framework. This article offers a full overview of how NPOs are structured, how they register, and what tax compliance they must follow — based on the latest income tax regulations and legal procedures.

Types of Non-Profit Structures in India

Indian law recognizes three types of NPO structures, each governed by different legislation:

(a) Trust

Governed by: Indian Trusts Act, 1882 (for private trusts), or relevant state-specific laws (for public charitable trusts).

Key Documents: Trust Deed (mandatory), detailing objectives, trustees, and operations.

Suitable for: Charitable institutions like schools, orphanages, medical help centers.

(b) Society

Governed by: Societies Registration Act, 1860

Key Documents: Memorandum of Association (MoA), Rules & Regulations.

Requires at least 7 members from different states for national-level registration.

Suitable for: NGOs working in cultural, scientific, and public welfare areas.

(c) Section 8 Company

Governed by: Companies Act, 2013.

Requires a license from the Registrar of Companies (ROC).

High transparency, strict regulation, and increased credibility

Suitable for: NGOs seeking foreign funding, CSR funds, or structured growth.

Registration Process

After choosing the structure, the organization must register itself and obtain tax-related approvals. The major steps include:

(a) PAN Application

After legal registration, every NPO must apply for a Permanent Account Number (PAN) from the Income Tax Department.

(b) 12AB Registration (For Income Tax Exemption)

Mandatory for claiming tax exemption under the Income Tax Act.

Application to be filed online via Form 10A (for fresh registration) or Form 10AB (for re-registration or modification)

Registration valid for 5 years (new regime post-2020 amendment). 

(c) 80G Registration (For Donor Tax Benefit)

Enables donors to claim tax deductions for donations made to the NPO.

Application process is the same as for 12AB — via Form 10A or 10AB.

Registration also valid for 5 years and must be renewed before expiry.

Tax Filing & Audit Requirements

Once registered under 12AB, an NPO must fulfill annual compliance requirements. These include:

(a) Form 10B or Form 10BB – Audit ReportNPOs must get their accounts audited and submit the audit report along with their tax return.

When to use Form 10B:If the gross income exceeds Rs. 5 crore in the previous year.

When to use Form 10BB:If the gross income is more than Rs. 2.5 lakh but less than Rs. 5 crore.

(b) Filing of Income Tax Return – ITR-7All NPOs are required to file ITR-7 irrespective of their income level.Must report all donations, expenditures, assets, and activities.

Key Differences Between Forms: 10A, 10AB, 10B, 10BB

Form | Purpose | Who files it | Trigger Event

---|---|---|---

10A | For fresh application under 12AB & 80G | New NGOs | At the time of starting operations

10AB | For renewal or modification of 12AB & 80G | Existing NGOs | Within 6 months before expiry or when change in objects

10B | Audit Report for income > Rs. 5 crore | Auditor of NPO | Annually, if limit exceeded

10BB | Audit Report for income > Rs. 2.5 lakh and ≤ Rs. 5 crore | Auditor of NPO | Annually

Importance of Complying with Section 12AB and 80G

Failure to register or renew under 12AB or 80G has the following consequences

-NPO becomes fully taxable as a regular entity.

-Donations won’t qualify for tax deductions for the donor.

-Organization loses credibility and transparency in the eyes of stakeholders.

-Can lead to penalties, cancellation of registration, and disqualification for CSR grants.

Conclusion

Establishing and managing an NPO in India is a noble task that requires legal clarity and tax compliance. Understanding the structure (Trust, Society, Section 8), properly registering under Income Tax laws (12AB and 80G), and filing timely reports (10A, 10AB, 10B, 10BB) are not just legal obligations but strategic necessities for growth and impact.

With the introduction of online filing and simplified processes, organizations can now easily maintain compliance. Platforms like NPOSutras.com are built to support this ecosystem by guiding NGOs and NPOs through registrations, renewals, tax compliance, and filings — making the path to impact smoother and legally sound.