Many legal entities can be formed in India to conduct charitable and not-for-profit activities. Two of the most popular methods are Trusts and Societies, both of which promote public welfare, education and health, cultural activities, and social development. However, Trusts have different requirements to establish and operate than Societies. It is important for anyone interested in establishing a charity to understand these differences between Trusts and Societies.
This blog will describe what Trusts and Societies are, how they are created, and the practical and legal differences between them to help readers decide which option is best for their needs.
Introduction
India has a long tradition of philanthropy, and many social initiatives begin at the grassroots level. Whether someone wants to run an NGO, establish a school, assist the underprivileged, or promote cultural activities, choosing the right organizational form is the first decision. Most people find themselves choosing between a Trust or a Society. While both are recognized under Indian law and can register for tax exemptions, they are not the same in how they are established, governed, and monitored.
A Trust is generally more stable and suitable for long-term charitable or religious activities, while a Society is more democratic and flexible, often used for larger community-based programs.
What is a Trust?
A Trust is created when the owner of property transfers it to another person or group (trustees) to use for the benefit of others. In India, public charitable trusts are usually registered under the Indian Trusts Act, 1882, although some states have their own Trusts Acts.
Purpose and Use
Trusts are usually created for educational, medical, religious, cultural, or humanitarian goals. Because they are property-based structures, they ensure long-term continuity and are less prone to internal conflicts.
Governance
A Trust is managed by a group of trustees, and decisions are taken according to the trust deed. The internal structure is relatively rigid, as trustees cannot freely change clauses without court intervention in many cases.
Registration
A Trust is registered with the local registrar of trusts by submitting a trust deed along with the identity documents of the settlor and trustees.
Key Characteristics
- Permanent and stable structure
- Trustees hold property for charitable purposes
- Very few annual compliance requirements
- Less democratic and more controlled by trustees
What is a Society?
A Society is an association of individuals who come together for literary, scientific, charitable, or community-related purposes. Societies in India are governed by the Societies Registration Act, 1860, along with respective state amendments.
Purpose and Use
Societies are often formed for community services, cultural activities, research institutions, public libraries, NGOs, and advocacy groups. They are more suitable when the organization needs broad membership and public participation.
Governance
A Society is managed by a Governing Body, which is elected by its members. Elections are usually held annually or periodically, making the structure more democratic and participatory.
Registration
A minimum of seven members is required to form a Society in most states. Registration is done through the Registrar of Societies, along with the by-laws and Memorandum of Association.
Key Characteristics
- Democratic decision making
- Broader participation and membership
- Annual meetings and elections are required
- More compliance-heavy than trusts
Legal Differences Between Trust and Society
-
Governing Laws
A Trust is governed mainly by the Indian Trusts Act, 1882, although public charitable trusts also follow state-specific rules. A Society, on the other hand, is governed by the Societies Registration Act, 1860 and corresponding state legislation.
-
Formation Requirements
A Trust can be formed by a single settlor and two trustees. There is no minimum requirement for a large membership base. A Society must have at least seven members and, in some cases, more, depending on the nature of operations.
-
Legal Control and Flexibility
Trusts tend to have rigid structures because the trust deed acts as the central governing document. Modifying it is difficult. Societies are more flexible, with amendments allowed through member resolutions.
-
Compliance and Reporting
Trusts have minimal compliance requirements. Annual filings vary by state. Societies must conduct annual general meetings, elections, and file annual reports and audited accounts.
-
Ownership of Property
Trust property is held by trustees for the purpose of the trust. Society property is held in the society’s name, and decisions regarding it are taken collectively by the governing body.
Practical Differences Between Trust and Society
Beyond legal distinctions, certain everyday operational differences influence which structure is more suitable.
Stability vs. Participation
A Trust provides stability because trustees generally serve for life or long terms, and decision-making is centralized. A Society offers more democracy and participation, making it ideal for community-driven work, but more prone to internal changes.
Decision-Making
Trusts have quick decision-making since there are fewer trustees, and responsibilities are clearly defined. Societies require discussions, voting, and documented minutes, which can slow processes.
Public Perception
Trusts are seen as more traditional and suitable for long-lasting social work. Societies often appeal to younger or modern organizations focusing on social development projects.
Government and Donor Preference
Donor agencies sometimes prefer Societies because their governance is transparent and representative. Government departments often work comfortably with both but expect stricter compliance from societies.
Ease of Expansion
Societies expand easily due to membership-based structures. Trusts can grow too, but adding trustees or expanding objectives may require major amendments.
Which Should You Choose?
The choice between a Trust and a Society depends on the nature of the proposed work.
A Trust is ideal when the founders want long-term stability with limited membership and when property or assets need to be protected. This is suitable for schools, hospitals, temples, and long-standing charitable institutions.
A Society is a better fit for organizations requiring active participation, public involvement, and democratic functioning. This includes NGOs engaged in advocacy, research, community development, training, and awareness programs.
In both cases, tax benefits under Section 12AB and 80G of the Income Tax Act can be obtained after proper registration.
Conclusion
Trusts and Societies both play significant parts in India’s large social welfare system. They serve the same purpose to help people; however, there are differences between how Trusts are structured or regulated, compared to Societies. The type of structure to choose will depend on the founder’s goals, their preferred way of managing, and the long-term vision for the organisation. A Trust provides stability and less complicated management, while a Society gives more options, with emphasis on democratic control. By being aware of the differences between Trust and Society, individuals or groups will know how to choose the one that fits best with their particular mission and allows for continued success in the years to come.
Related Services
