Question

Consider the following statements about non-profit organisations:
i. They are value-based and focus on public or social purposes.
ii. They are required to distribute excess funds to their employees.
iii. Examples include organisations like Akshaya Patra and HelpAge India.
Which of the statements given above is/are correct?

• A. Only i and iii
• B. Only i and ii
• C. Only ii and iii
• D. All of the above

Answer 1

Answer:

A. Only i and iii

Understanding Non-Profit Organisations (NPOs)

• Non-profit organisations, also known as Non-Governmental Organisations (NGOs) or Not-for-Profit Organisations, are entities primarily established to serve a public or social cause, rather than to generate profit for their owners or shareholders.
• They operate with a mission-driven approach, focusing on specific societal needs such as education, healthcare, environmental protection, poverty alleviation, human rights, or cultural preservation.

Key Characteristics and Points:

• Statement i: They are value-based and focus on public or social purposes.
  
  • This statement is correct. NPOs are fundamentally driven by their values and a commitment to address social or public issues. Their primary objective is not financial gain but to achieve their stated mission, which benefits a community or society at large.
  • Their activities are aligned with their core values and often involve advocacy, direct service delivery, community development, or research for public good.
• Statement ii: They are required to distribute excess funds to their employees.
  
  • This statement is incorrect. A defining characteristic of non-profit organisations is the 'non-distribution constraint'. Any excess funds (often referred to as 'surplus' rather than 'profit') generated by an NPO must be reinvested back into the organisation to further its mission and objectives.
  • These funds cannot be distributed as dividends or profits to owners, shareholders, or even as bonuses to employees in the same way a for-profit company would. Employees receive salaries, but surplus funds are dedicated to the cause.
• Statement iii: Examples include organisations like Akshaya Patra and HelpAge India.
  
  • This statement is correct. Both Akshaya Patra and HelpAge India are prominent examples of successful non-profit organisations operating in India.
  • Akshaya Patra Foundation: It is well-known for its mid-day meal program, which aims to counter malnutrition in children and support their right to education by providing nutritious meals in schools.
  • HelpAge India: This organisation is dedicated to serving the needs of disadvantaged elderly people in India, working on issues such as healthcare, livelihood, and elder abuse.

Additional Facts for Competitive Exams:

• In India, non-profit organisations are typically registered as Trusts, Societies (under the Societies Registration Act, 1860), or Section 8 Companies (under the Companies Act, 2013).
• NPOs often rely on funding from donations, grants (from government or other foundations), sponsorships, and sometimes earned income from activities related to their mission.
• They are generally exempt from certain taxes (like income tax) on their surplus income, provided they use the funds for their charitable or public purposes, as per the Income Tax Act, 1961 (e.g., Section 12A and 80G registrations).
• Transparency and accountability are crucial for NPOs, as they handle public and donor funds.