NGO, Foundation, or Charitable Trust: the compliance is harder than most founders expect.
Forming a charitable entity in India is straightforward. Getting the tax exemptions and FCRA license to actually receive donations is a 2-3 year process with strict conditions. Here is what that actually looks like.
The four things that matter
Where this structure actually goes wrong.
Trust vs Section 8 Company — the structural choice
A Public Charitable Trust is governed by the Indian Trusts Act 1882 (central) or relevant state trust acts (Maharashtra, Karnataka, etc. have their own). It requires a Trust Deed, minimum 2 trustees, and registration with the jurisdictional Registrar. A Section 8 Company is incorporated under the Companies Act 2013 as a company — with a board of directors, annual filings with MCA (MGT-7 + AOC-4), and statutory audit. Section 8 companies have more credibility with foreign donors, CSR departments, and government schemes — because there is a public MCA record. Trusts are faster and simpler to form; Section 8 companies are more institutionally credible.
Trust = Indian Trusts Act · Section 8 = Companies Act · Section 8 more CSR-credible
12A and 80G — the tax exemption stack
Without 12A registration, a charitable trust or Section 8 company pays income tax on its surplus (income minus expenditure) at the applicable slab or corporate rate. 12A registration grants exemption under s.11-13 of the Income-tax Act — the entity's income applied for charitable objects is not taxed. 80G registration allows donors to claim 50% deduction on their donations (u/s 80G). Both 12A and 80G registrations, post-Finance Act 2020, are valid for 5 years only — renewal is mandatory (Form 10AB). New organisations must apply within 6 months of formation (Form 10A). The CBDT is strict on corpus vs revenue fund distinctions.
12A = entity exemption · 80G = donor deduction · FA 2020: 5-year renewal mandatory
FCRA — foreign contributions
To receive donations from foreign entities (foreign individuals, foreign companies, foreign foundations), a registered charitable organisation must hold an FCRA registration under the Foreign Contribution (Regulation) Act 2010. Prerequisites: the organisation must be at least 3 years old, have spent ₹15L+ on charitable activities in those 3 years, and have a separate FCRA-designated bank account (only at SBI Main Branch, New Delhi — no exceptions). FCRA applications are processed by the Ministry of Home Affairs and take 6-12 months. An organisation can apply for Prior Permission (FCRA-PP) before the 3-year mark for a specific purpose and specific donor.
3 years + ₹15L spent mandatory · SBI New Delhi account only · MHA processes · 6-12 month wait
CSR eligibility — who can receive CSR funds
A company subject to CSR obligations u/s 135 of the Companies Act can donate to: (a) a Section 8 company, registered trust, or registered society that is not just 12A/80G-registered but specifically established for CSR-eligible activities; (b) a fund listed in Schedule VII of the Act (PM CARES, NMCF, etc.); (c) the company's own Foundation (Section 8 subsidiary). Since the Companies (CSR Policy) Amendment Rules 2021: the implementing organisation must also register on the MCA CSR portal (Form CSR-1) to receive CSR funds. Without CSR-1 registration, a trust or Section 8 company cannot receive CSR funds even if 80G-registered.
CSR-1 mandatory from 2021 · Schedule VII activities only · Section 8 preferred for CSR
Brutally honest
Where it wins. Where it hurts.
- ✓A trust can be formed in days and a Section 8 company in weeks — the legal formation is the easy 10%.
- ✓Both structures can reach the full stack: 12A/12AB, 80G, FCRA, and CSR-1 — nothing is structurally off-limits.
- ✓Donor-facing credibility grows with the public record: Section 8 companies have an MCA trail that trusts lack.
- ✗The honest timeline: Year 0 form the entity, Year 0-1 for 12A/80G (CBDT takes 6-12 months), Year 1-3 of documented charitable spending, and only then FCRA at Year 3+ for foreign funds.
- ✗12A and 80G are now 5-year registrations with mandatory renewal — lapsed registrations are a compliance event, not a formality.
- ✗FCRA requires 3 years of existence plus ₹15L spent on charitable activities, an SBI Main Branch (New Delhi) account, and 6-12 months of MHA processing.
- ✗Without CSR-1, even a 12A/80G-registered organisation cannot legally receive CSR funds from companies.
Founders building genuinely charitable, educational, or health institutions who can fund the first 2-3 years themselves, and organisations that will pursue CSR or foreign funding and need the credibility stack.
Anyone treating an NGO as a tax-saving vehicle for family wealth — the s.13(1)(c) private-benefit rules and 5-year renewals make that game short and expensive. Also not for for-profit founders — a charitable entity cannot distribute profits to founders, ever.
What we actually do
Five tracks, start to finish.
- 01Trust Deed / Section 8 incorporationOne-time
Drafting + Registrar filing or MCA SPICe+.
- 0212A / 80G applicationOne-time + 5-yr renewal
Form 10A filing + CBDT response management.
- 03Annual complianceAnnual
ITR-7 (trust/NGO return) + audit + ROC (Section 8).
- 04FCRA applicationOne-time
Form FC-3A + MHA processing + SBI New Delhi account.
- 05CSR-1 registration + utilisation certificatesOngoing
MCA portal + donor-required compliance documentation.
Common questions
Statute-cited answers.
Can a charitable trust receive CSR funding from a company?+
Yes — but only if: (a) the trust is registered under 12A/80G, (b) the trust's objectives align with Schedule VII of the Companies Act (education, health, rural development, environment, etc.), and (c) the trust has registered on the MCA CSR portal via Form CSR-1 (mandatory since April 2021). A trust that is 12A/80G-registered but has not filed CSR-1 cannot legally receive CSR funds from a company. The implementing agency also cannot be newly formed — the CSR Rules require at least 3 years of existence (or the company's own CSR Foundation can be used without the 3-year wait). Get CSR-1 registered immediately after your 12A/80G is granted.
We got a grant offer from a US foundation. Can we accept it?+
Not without FCRA registration or Prior Permission. Under FCRA 2010, accepting foreign contributions without registration is a criminal offence — penalty up to 5 years imprisonment. If your organisation is less than 3 years old or has not yet spent ₹15L on charitable activities, you must apply for FCRA Prior Permission (for this specific grant from this specific foreign donor) before accepting any funds. The grant must be for a specific activity, and the MHA approval must be in place before the funds arrive in your FCRA-designated SBI account. Timeline for prior permission: 3-6 months. Do not accept the funds before clearance.
Can founders or directors of an NGO be paid a salary?+
Yes — but with conditions. Under s.13(1)(c) of the Income-tax Act, a trust/institution loses its 12A exemption if it applies any part of its income for the private benefit of the trustees/founders. However, paying a reasonable salary to a working trustee or director for services actually rendered (not a sinecure) is permissible — it is treated as application of income for charitable purposes if the role is genuine and the salary is not disproportionate. CBDT scrutinises salaries that are out of proportion to market rates or the organisation's income. A written employment agreement, board resolution approving the salary, and market comparisons documented on record are essential.
What is the difference between 12A and 12AB?+
12AB is the current registration category introduced by Finance Act 2020, replacing the old 12A/12AA. All existing 12A/12AA registrations had to be re-validated under 12AB by March 31, 2022 (subsequently extended). New organisations applying after April 1, 2021 directly apply for 12AB via Form 10A. The substantive tax benefit is identical — income applied for charitable objects is exempt. The difference is administrative: 12AB is the active registration; old 12A is no longer issued. If your trust holds an old 12A/12AA certificate and did not re-validate, it is technically unregistered for income tax exemption purposes — apply for 12AB immediately.
Should we form a Trust or a Section 8 Company?+
For most grassroots organisations and new NGOs: start with a Trust. Faster (days not weeks), cheaper (no MCA fee), simpler to manage. For organisations expecting: CSR funding from large corporates (Section 8 is preferred, has MCA credibility), international institutional donors (Section 8 has better KYC acceptance), or government grants (both work, but Section 8 is easier to verify). If you want to eventually scale and institutionalise — Section 8 Company. If you want to be operational quickly with minimal compliance friction in Year 1 — Trust. Both can get 12A/80G/FCRA; both can receive CSR funds after CSR-1 registration. The legal structure choice is less important than getting the 12A/80G filing right.
Set up your NGO or Charitable Foundation — we handle the structure, 12A/80G, and FCRA.
Entity formation, the 12A/12AB + 80G applications, FCRA planning, and CSR-1 registration — sequenced so no exemption window is missed.