Question

Choose the correct statement(s) regarding Non-Profit Organisations in India.

1. Organisations like Akshaya Patra Foundation and Goonj focus on addressing social issues like hunger and clothing poverty.

2. All NPOs in India must operate under government control to maintain their tax-exempt status.

• A. 1 only
• B. 2 only
• C. Both 1 and 2
• D. Neither 1 nor 2

Answer 1

Answer:

A. 1 only

Understanding Non-Profit Organisations (NPOs) in India

• Non-Profit Organisations (NPOs), often referred to as Non-Governmental Organisations (NGOs), are entities whose primary objective is to serve the public or a specific cause, rather than to generate profit for their owners or members.
• Their surplus funds are reinvested into the organisation's mission, not distributed as dividends.

Statement 1: Organisations like Akshaya Patra Foundation and Goonj focus on addressing social issues like hunger and clothing poverty.

• This statement is correct.
• Akshaya Patra Foundation:
  • It is a non-profit organisation in India that implements the Mid-Day Meal Scheme in government and government-aided schools.
  • Its mission is to eradicate classroom hunger and promote education. It is one of the world's largest school meal programmes.
  • Key focus areas include food security, education, and child welfare.
• Goonj:
  • Founded by Ramon Magsaysay Award winner Anshu Gupta, Goonj is a social enterprise that transforms urban discards into a resource for rural development and disaster relief.
  • It primarily addresses clothing poverty and other basic needs of underprivileged communities, promoting dignity and sustainable development through initiatives like 'Cloth for Work'.
  • Their work highlights the importance of re-purposing resources and community participation.

Statement 2: All NPOs in India must operate under government control to maintain their tax-exempt status.

• This statement is incorrect.
• While NPOs in India are subject to government regulation, they do not operate under direct government control. They maintain their autonomy.
• To maintain tax-exempt status, NPOs must comply with various laws and regulations, primarily the Income Tax Act, 1961, and the specific acts under which they are registered.
• Key Legal Frameworks for NPOs in India:
  • Societies Registration Act, 1860: Used for registering societies, often involved in educational, charitable, or social welfare activities.
  • Indian Trusts Act, 1882: Governs public charitable trusts, typically formed for charitable or religious purposes.
  • Companies Act, 2013 (Section 8): Allows for the incorporation of non-profit companies with charitable objects, prohibiting the distribution of profits as dividends.
  • Income Tax Act, 1961:
    • NPOs can apply for registration under Section 12A/12AA/12AB to avail tax exemptions on their income.
    • Donations to registered NPOs can qualify for tax deductions for donors under Section 80G.
    • Compliance with financial reporting, auditing, and proper utilisation of funds for the stated objectives is crucial for maintaining tax-exempt status.
  • Foreign Contribution (Regulation) Act (FCRA), 2010: Regulates the acceptance and utilisation of foreign contributions by individuals, associations, or companies in India, ensuring transparency and accountability.
• The government's role is to regulate and monitor NPOs to ensure transparency, accountability, and adherence to their stated objectives, not to control their day-to-day operations.