CONDUCIVE LEGAL REQUIREMENTS FOR THE VOLUNTARY SECTOR

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CONDUCIVE LEGAL REQUIREMENTS FOR THE VOLUNTARY
SECTOR

• K. SHIVAKUMAR
• Chartered Accountant
• Gandhigram 624 302.
• E-mail - vkshiva_at_sancharnet.in

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Views

• The Bank also recommends that government
  consult fully with the leaders of major NGOs and
  NGO networks in the revising of NGO laws
• - Discussion Draft for World Bank on laws
  relating to NGOs

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VOs Legislation

• No identity and separate legislation
• VOs have to choose one of the following
• Registration under
• Societies Registration Act 1860.
• Indian Trust Act. 1882.
• Cooperative Societies Act.
• Section 25 Companies Act.

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Societies Registration Act 1860

• Each state has its own rules and regulations
• Century outmoded sections continues
• Office Bearers are not eligible for remuneration
  as per certain state rules
• Re-registration is must in certain states
• Takeover provisions

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Indian Trust Act, 1882

• Applicable only for private trust but, can be
  registered as per public charitable trust
• No external control
• It is considered non-democratic but depends on
  trust deed

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Cooperative Societies Act

• Have became political weapon of ruling parties in
  certain states
• Elections are not conducted and bureaucrats are
  ruling in those states

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Section 25 Companies

• Administration has to control more time in
  filling forms
• Rules Regulations applicable as per Companies
  Act
• Medium small NGOs needs proper personnel to
  handle the regulatory requirements

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Foreign Exchange

• Requiring advance approval for foreign grant, as
  
• is done in Egypt, India Bangladesh, is a
• wasteful dilatory and excessively bureaucratic
  
• approach
• - World Bank View point
• New Economic Policy
• FERA buried.
• FEMA has been enacted
• Change of Policy from Regulatory mechanism to
• maintenance mechanism
• VOs still continue under regulatory mechanism

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FCRA Problems

• Genuine groups with documental evidence of
  support letters from donors, summarily rejected
• If there is a change of 50 or more of the
  office bearers, fresh application undemocratic
• Grey Areas
• When FC losses its characteristics.
• Not able to support Gross Root level Orgs.,/CBOs
• FC 8 Application recommendation letter from
  Collector or Govt., officials

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FCRA suggestions

• Needs to have a single legal system FOREX
  dealings
• FCRA may be merged with FEMA one or two chapter
  to be added with FEMA
• Level playing field single maintenance
  mechanism for all

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Income Tax - Problems

• No separate reorganization for VOs, since
  reorganization is for Religious/Charitable trust.
• Grant-in-Aid for activities considered as Income
• Utilization has been increased to 85 from 75
• TDS on investments on Corpus other Funds

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Income Tax - Suggestions

• Section 2(15) should be amended to include
  development/Voluntary Organisation, separately
• Grant-In-Aid should not be included as income
  since it is meant for community or for activities
• Utilization for exemption should be restored to
  75
• TDS not be done in the case of registered trusts

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Obligations for Developmental Organisations

• Activities within framewrok of objectivies/
  vision
• Conduct of meetings
• Audit of accounts
• Reporting/ filing of returns

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Recommendations Overall

• A separate legal structure, designed to support
  VOs, enacted by Parliament applicable for all VOs
• Government can adopt single window concept for
  registration instead of requesting VOs to go to
  different departments
• Grant-In-Aid should completely exempted

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Recommendations Overall

• Single law for all Foreign Exchange dealings
  merging FCRA with FEMA
• The Government may appoint a task force including
  VANI other networks to look into simplification
  of laws and to recommend conducive legal
  requirements

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Conclusion

• Government has power over NGOs through the laws
  they can either help or hinder them through
  laws.- by passing laws they can represent NGOs or
  they can encourage them.
• - World Bank report on NGOs
• Indian VOs need encouragement. the Government
  should implement liberalization policy and
  encourage VOs by giving its deserving dues
• By initially starting a conducive legal
  environment to the sector

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Thank you