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Distinction between NGO and NPO: A Key Analysis

Deepti Shikha

| Updated: Mar 14, 2020 | Category: NGO

NGO and NPO

There are various organisations and institutions which have a sole mission to make the world a better place. Some organisations are set up by a group of individuals for serving the society, which can be a Non-Governmental Organisations or NGO and Non-Profit Organisations or NPO. Non-Governmental Organization (NGO) and Non-Profit Organisation (NPO) both functions to benefit the society and welfare of humans or improve the world. These institutions or organisations are not affiliated with the Government. NGO and NPO are quite similar to each other on the basis of their goals and initiatives that is the reason it gets difficult to analyse the difference between both of them.

An NGO or non-governmental organisation works for the public, social welfare and animal’s interest. This organisation is not affiliated with any government.

NPO is a non-profit organisation that works for the purpose other than the making of profits, but such organisations are incorporated under the Companies Act, 2013.

The rules, regulations and purpose of establishing an NGO and NPO are different. In this article, we shall cover the basic difference between an NGO and NPO.

What is an NGO?

  • An NGO is an abbreviation for Non-Government Organisation.
  • It is an organisation which operates independently from any Government even though it may receive funding from the Government.
  • NGO is a non-profit making entity that operates at regional, national or international level depending on its connectivity and reach.
  • It can be incorporated as a trust, company or a society.
  • These institutions raise their funds from government, businesses, or any foundations or from the general public.
  • In India there are nearly 3.4 million non-governmental organisations (NGOs) that work in diverse fields ranging from disaster relief to advocacy for marginalized and disadvantaged communities.
  • Many NGO works for particular issues like supporting human rights, women’s right, children’s right, environmental or health issues.
  • Some of the NGO’s operating worldwide are International Committee of the Red Cross, Rotary International, International Air Transport Association (IATA), International Organization for Standardization (ISO), International Chamber of Commerce (ICC).
  • NGOs perform various duties like:
Duties of NGO

What is an NPO?

  • NPO is an abbreviation for Non-Profit Organisation.
  • A group of persons or individuals can form an NPO to promote cultural, religious, social or professional objectives.
  • The initial funds are raised by the trustees or members of the NPO.
  • As this organisation is a non-profit making entity, it applies all its surplus funds on the promotion of the objectives of the organisation rather than distributing it among the members of the organization.
  • NPO registration is done under Section 8 of the Companies Act, 2013.
  • These organisations enjoys several privileges like tax exemption and they are not required to use tem ‘Ltd’ or ‘Pvt Ltd’ in the end of its name.
  • An NPO includes a charitable organisation or membership groups like a sports club, women’s club, any social or recreational organisation, some public educational institutions, public hospitals,  etc.
  • NPO fulfils the purposes like Religious, charitable, scientific, public safety, literary, educational, fostering national or international amateur sporting, Preventing cruelty to children and animals but on a much smaller scale compared to an NGO.

What is the Difference between an NGO and NPO?

The difference between NGO and NPO is explained in detail in the table given below:

Topics NGO   NPO
Formation An NGO is formed by ordinary citizens that operate autonomously of government. An NPO is an organisation which is formed to provide goods and services to people and also operates on the principle that no member will receive share profits or losses by the entity.
Registration   Registration of NGOs can be done under various acts and laws in different states: mainly under the Trust Act, Society Registration Act or Non-Profit Private Limited Company. The Registration of NPO is done as per Section 8 of the Companies Act, 2013.
Area of Operation NGO’s operate worldwide.It’s area of operation is very large.   NPO’s area of operation is limited.
Purpose   NGO’s works for the benefit of society and the economy of the country. It also brings awareness amongst the people regarding various issues like environment, health etc. The basic purpose of an NPO establishing a company as a is to promote non-profit objectives such as trade, commerce, arts, charity, education, religion, environment protection, social welfare, sports, research.
Raising of Funds   NGO’s rely on donations, various other methods, processes, programmes, projects and activities for raising of funds.   An NPO uses its extra funds for the purpose of the organisation, rather than dividing it between its shareholders and the owners of the organisation NPO’s can raise funds through external commercial borrowings, foreign funds or the funds can be contributed by the members or directors.
Concept   NGO in India is much broader concept as it also covers an NPO.   NPO is a form of NGO.

What is the Advantage of Registering as an NGO and NPO in India?

The following are the benefits of registering as an NGO and NPO in India:

  • NGO and NPO are exempted from paying Income tax and other Government tax like entertainment tax and service tax in some of the services.
  • It has a separate legal entity in the eyes of government as like other private and public business forms.
  • A registered NGO and NPO will get financial support from the government and other private agencies as well who wants to contribute funds for the welfare of the society. If a company is registered under Trust act, 1882, then the Government will also provide land for its operations.
  • Employees or volunteers can contribute towards the organisation as they will be working for good cause from all their heart instead of focusing on the salary factor.
  • Once you start operating an NGO, then your efforts for the welfare and change for the society will invite all National and International NGOs to collaborate with your organisation’s motive. In some cases, the international companies also invest in NGOs who works to help poor or for the society change.

Conclusion

NGO and NPO are both similar as well as different. However, they are working towards the greater good of society. In either way, the work they do is critical towards the society and without both types of organisations, many of the causes and efforts we support today would not exist. The only thing to keep in mind while registering an NGO or NPO is the motive of starting the organization. The primary difference lies in small details such as NPOs are exempted from tax, while NGO’s do not allow government representatives to become members of the organization.

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Deepti Shikha

Deepti is a Law graduate with an avid interest in reading and very proficient in summarizing legal cases. She has enough experience in handling legal affairs of the company. In the initial days of her career, she has worked as a legal researcher and has 3+ years of experience.

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