Legal issues pertaining to not for profit organizations in India

Not-for-profit organisations in India:

• exist independently of the state
• are self-governed by a board of trustees or 'managing committee'/ governing council, comprising of individuals who generally serve in a fiduciary capacity
• produce benefits for others, generally outside the membership of the organisation
• are 'non-profit-making' and are prohibited from distributing a monetary residual to their own members

What constitutes a charitable purpose?

Section 2(15) of the Income Tax Act - which is applicable uniformly throughout the Republic of India - defines 'charitable purpose' to include 'relief of the poor, education, medical relief and the advancement of any other object of general public utility'.

A public charitable purpose has to benefit a sufficiently large section of the public as distinguished from specified individuals. Organisations that lack the public element, such as trusts for the benefit of workmen or employees of a company, are not been held to be charitable.