When individuals come together for charitable, religious, educational, or social purposes, they often choose to form a legal entity to structure their work. In India, the three most common forms of such nonprofit organizations are Trusts, Societies, and Section 8 Companies. While all three aim to promote social welfare without profit motives, they differ significantly in terms of structure, registration, regulation, and governance.
Understanding the difference between a Trust, a Society, and a Section 8 Company is essential for choosing the right legal structure based on goals, activities, governance expectations, and compliance requirements.
What is a Trust?
A Trust is a legal arrangement or structure where the owner, viz., the “settlor”, transfers property to another party, the “trustee”, for the benefit of a third party, the “beneficiary. In India, charitable and religious trusts are basically governed by the Indian Trusts Act, 1882, in some states or state-specific laws.
Key Features:
- Generally used for religious or charitable purposes.
- It does not require multiple members; even a single trustee may suffice.
- Operates under a trust deed.
- Less regulated compared to other forms.
What is a Society?
A Society is a group of people associated together for a defined purpose, such as art, education, culture, religion, or public welfare. It is registered under the Societies Registration Act, 1860.
Key Features:
- Requires at least 7 members.
- Governed by a memorandum of association and rules & regulations.
- More democratic in governance with elections and a managing committee.
- Requires periodic renewal in some states.
What is a Section 8 Company?
A Section 8 Company is a non-profit company which is registered under the Companies Act, 2013, formed to promote commerce, art, science, sports, education, research, social welfare, etc., and intends to apply its profits for the promotion of its objectives.
Key Features:
- Has the highest legal recognition and structure among the three.
- Regulated by the Ministry of Corporate Affairs (MCA).
- Requires a Central Government license under Section 8 of the Companies Act.
- Needs a more formal and transparent structure.
Comparison Table: Trust vs Society vs Section 8 Company
| Feature | Trust | Society | Section 8 Company |
| Governing Law | Indian Trusts Act, 1882 or state laws | Societies Registration Act, 1860 | Companies Act, 2013 |
| Registration Authority | Sub-Registrar of Registration | Registrar of Societies | Registrar of Companies (RoC), MCA |
| Minimum Members Required | 2 trustees (in most cases) | 7 members (can be individuals or entities) | 2 Directors + 2 Shareholders (can be the same) |
| Legal Status | Not a separate legal entity | Limited legal status | Separate legal entity |
| Documents Needed | Trust deed | Memorandum & Rules & Regulations | MoA, AoA, License under Section 8 |
| Management Body | Trustees | Governing Body or Managing Committee | Board of Directors |
| Name Approval | Not mandatory | Not mandatory | Mandatory from MCA |
| Geographical Scope | Can be restricted to a region | Can operate at the state or national level | National or international level |
| Compliance Requirements | Minimal | Moderate (AGM, filing changes) | High (Annual returns, audits, board meetings) |
| Cost of Registration | Low | Moderate | Comparatively higher |
| Amendment of Documents | Difficult | Possible with Registrar’s approval | Requires Central Government/MCA approval |
| Audit Requirement | Not mandatory unless a charitable trust with income | Depends on state laws | Mandatory annually |
| Control and Ownership | Usually family-run or individual-centric | Democratic (voting members) | Professional, corporate structure |
| Foreign Funding Eligibility (FCRA) | Yes, with FCRA registration | Yes, with FCRA registration | Yes, with FCRA registration |
| Suitable For | Religious/charitable institutions | Educational, cultural, welfare groups | Large-scale NGOs, donor-funded entities |
Which One Should You Choose?
Choosing the appropriate or suitable form depends on the purpose, scale, control, and funding strategy:
Choose a Trust if:
- You have a smaller group or an individual-led charitable mission.
- You want simplicity and fewer compliances.
- Your activities are localised and focus on religious or community giving.
Choose a Society if:
- You have a collective or group effort.
- You prefer democratic governance with regular member involvement.
- You operate in education, culture, or public welfare sectors.
Choose a Section 8 Company if:
- You seek a structured and transparent governance model.
- You are planning to raise institutional or international funding.
- You want to operate at national or international levels.
- You are comfortable with higher compliance and reporting requirements.
Conclusion
All three -Trust, Society and Section 8 Company—serve noble purposes and are instrumental in building social capital. However, their legal framework, governance structure and compliance requirements differ significantly.
If you’re planning to register a nonprofit, evaluate your long-term goals, funding needs, and desired flexibility in management. A Trust might work well for the smaller, less formal charitable efforts, while a Society suits community-based initiatives. For more formal operations with a high level of accountability, a Section 8 Company is the best fit.
Each structure has its own merits and limitations. Section 8 Companies are ideal for organisations aiming to grow at scale, collaborate with governments or international donors, and maintain corporate-style transparency. Societies, on the other hand, are easier to manage or settle for group efforts and grassroots initiatives. Meanwhile, Trusts remain a favoured option for family-run or region-specific philanthropy due to their simpler registration and maintenance.
Before making a decision, it’s wise to consult with a legal expert or NGO consultant to ensure your organisation complies with applicable laws and achieves its objectives effectively.
FAQs
1. Can a Trust be converted into a Section 8 Company or Society?
No direct conversion is allowed; however, a new Section 8 Company or Society can be formed, and the assets/liabilities of the trust can be transferred, subject to legal compliance.
2. Which entity is eligible for 80G and 12A exemptions under the Income Tax Act?
All three (Trust, Society, and Section 8 Company) are eligible, provided they are registered under the respective provisions of the Income Tax Act.
3. Is it mandatory for a Section 8 Company to get audited?
Yes, a Section 8 Company must have its accounts audited annually, regardless of its income.
4. Which form is best for receiving foreign donations (FCRA)?
All three entities—Trust, Society, and Section 8 Company—can receive foreign contributions, but they must first register under the Foreign Contribution (Regulation) Act (FCRA), 2010. However, under Section 8, Companies are generally preferred by foreign donors due to their transparent and accountable form of structure.
5. Can a Society operate in more than one state?
Yes, a Society can operate across states, but to do so, it should have members from those states and be registered as a national-level society. This helps in expanding its activities and recognition across India.
