Chapter IV - Voluntary/ Non-profit Sector
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Made publicly available in the spirit of open access by its author, Noshir Dadrawala (CEO, Centre for Advancement of Philanthropy), and collaborators CAP and Forbes Marshall.
The voluntary sector in India is noted for its vibrancy, innovation, and research-based advocacy. It has played an important role in supporting government as a partner in nation-building. Historically, Indian voluntary development organisations played three significant roles:
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In filling gaps in the government's welfare systems, such as delivering basic services like health care, education, water, and sanitation to the most remote locations in the country
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In research-based advocacy, such as analysing the efficacy and reach of various government projects to provide guidance to the government for policy change; and
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In working on a rights-based approach and entitlements. Voluntary groups work for marginalised communities in providing them access to basic services, and their modus operandi is primarily to educate and empower the community about their entitlements and review government plans and policy for their efficacy.
The voluntary sector in India today does not simply fill gaps in the government's service delivery system; it contributes significantly to the country's GDP. The voluntary sector is a major provider of livelihoods to millions, and has grown exponentially over the past two decades.
Different acronyms are used by voluntary organisations, the most common being NGO or Non-Governmental Organisation, signifying that it is an organisation doing what government is supposed to be doing but without being the government. Other acronyms include:
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NPO Non-Profit Organisation (essentially meaning profits or surplus, if any, are not distributed among members)
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CSO Civil Society Organisation (usually policy research and/or advocacy-based organisation)
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SPO- Social Purpose Organisation
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SDO - Service Delivery Organisation
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CBO-Community Based Organisation
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PVO- Private Voluntary Organisation
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INGO-International NGO
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BINGO - Big International NGO
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QANGO- Quasi Autonomous NGO
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GONGO - Government-organised NGO
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MANGO - Market Advocacy NGO
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PANGO - Party NGO (set up by Political Parties as NGOs)
Types of non-profit organisations
In India, there are generally five types of non-profit organisations (though only the first three can be considered as established for 'charitable purpose':
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Public charitable trust
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Charitable society
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Company (licensed as non-profit)
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Co-operative and
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Trade union
The characteristics common to the first three types are:
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They exist independently of the state (i.e. they are autonomous in their management/governance though they may be financially supported by government)
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They are self-governed by a 'board of trustees' or 'managing committee' or 'governing council' which comprises individuals who generally serve in a fiduciary capacity
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They produce benefits for others, generally outside the membership of the organisation
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They are 'non-profit', in as much as they are prohibited from distributing a monetary residual to their own members
The term 'not-for-profit' or 'non-profit' does not mean that profits cannot be generated by the organisation. Rather the term implies that the organisation is 'not profit distributing' in nature.
Trust
A public charitable trust has, for the purpose of its objects, the members of an uncertain and fluctuating body. In ascertaining whether a purpose is public or private, one must see if the class to be benefited, or from which the beneficiaries are to be selected, constitute a substantial body of the public. Hence, trusts which lack the public element, such as trusts for the benefit of workmen or employees of a company, however numerous, have been held not to be 'public charitable'. A trust is defined as an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by him for the benefit of another. A trustee of a public charitable trust must not, in any way, make use of the trust property or of his position as trustee for his own interest or private advantage, nor may he enter engagements in which he has or can have a personal interest which conflicts or possibly may conflict with the interest of those whom he is bound to protect. A trustee may remain a trustee for life unless there is a scheme for election in the trust deed of the trust. Often trustees appoint among themselves a chairperson (who generally presides at board meetings) and or an executive/managing trustee. It is an accepted principle that a trustee of a religious or charitable trust should take proper care of the trust property just as a man of ordinary prudence does, in respect of his personal property.
Society
Unlike trusts, societies have a more democratic set-up. There is usually a scheme for election of members of the governing council/managing committee. The founders of the society can continue to remain members of the governing council/managing committee, subject to their being elected to it from time to time. In rare cases, one or two founder members may be permitted to remain permanent/life members on the governing council/managing committee. The managing committee may also elect among themselves office bearers such as president, vice-president, secretary and treasurer with specific duties. Members of the general body enjoy voting rights and the right to demand the submission of accounts and the annual report of the society. A society can be wound up if the objectives for which it had been established have been fully achieved.
Company (licensed under Section 8)
Although The Indian Companies Act is primarily intended to regulate profit-making entities, a section of the Act (Section 8 of the Indian Companies Act 2013) allows the possibility of obtaining non-profit status for certain companies having as their objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object and intends to apply its profits, if any, or other income in promoting its objects and intends to prohibit the payment of any dividend to its members. A not-for-profit company enjoys several advantages over a public charitable trust or society. The key advantage is 'limited liability'. Incidentally, the Income Tax Act gives equal treatment to trusts, societies and not-for-profit companies as far as various tax exemptions and tax deduction for donors are concerned.
Cooperative
A co-operative may be defined as an institution which aims at the economic and social betterment of its members, and an enterprise, which is based on mutual aid conforming to co-operative principles. All states and union territories have their own laws governing co-operatives, and institutions registered as co-operatives are expected to abide by these laws, which can vary from state to state.
Trade union
Trade unions are governed by the Trade Union Act, which defines a trade union as a temporary or permanent institution formed for regulating the relations between workers and employers, among workers, or among employers. The Act also allows for a federation of two or more unions. In contrast to all other forms of non-profit organisations, trade unions are allowed to use their general fund to remunerate their members and staff, to fund legal procedures, educational activities, and the general welfare of its members. Trade unions are also allowed to have separate funds for promoting civil and political interests of their members.
There is no single body of law for all these classes of non-profits; instead, as specified above, there are specific laws and regulators for each major type. Also, different legal provisions exist at the national and state level.
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