Policies and Acts

National policy on Voluntary Sector 2007

Scope of the Policy

In the Policy, voluntary organizations (VOs) mean to include organizations engaged in public service, based on ethical, cultural, social, economic, political, religious, spiritual, philanthropic or scientific & technological considerations. VOs include formal as well as informal groups, such as:

• Community-based organizations (CBOs)
• Non-governmental development organizations (NGDOs)
• Charitable organizations
• Support organizations
• Networks or federations of such organisations
• As well as professional membership associations.

To be covered under the Policy, VOs should broadly have the following characteristics:

• They are private, i.e., separate from Government
• They do not return profits generated to their owners or directors
• They are self-governing, i.e., not controlled by Government
• They are registered organizations or informal groups, with defined aims and objectives.

Objectives of the Policy

The specific objectives of the policy are listed below:

• To create an enabling environment for VOs that stimulates their enterprise and effectiveness, and safeguards their autonomy;
• To enable VOs to legitimately mobilize necessary financial resources from India and abroad;
• To identify systems by which the Government may work together with VOs, on the basis of the principles of mutual trust and respect, and with shared responsibility; and,
• To encourage VOs to adopt transparent and accountable systems of governance and management.

Establishing an Enabling Environment for the Voluntary Sector

• The independence of VOs allows them to explore alternative paradigms of development to challenge social, economic and political forces that may work against public interest and to find new ways to combat poverty, deprivation and other social problems. It is therefore crucial that all laws, policies, rules and regulations relating to VOs categorically safeguard their autonomy, while simultaneously ensuring their accountability .
• Voluntary organizations may be registered as societies, as charitable trusts, or as non-profit companies under Central or State laws. Some States have adopted the Societies Registration Act (1860), with amendments, while others have independent laws. Similarly, laws relating to charitable trusts vary across States. Over time, many of these laws and their corresponding rules have become complex and restrictive, thus leading to delays, harassment and corruption. As the nodal agency for interface between the Government and the Voluntary Sector, the Planning Commission will encourage State Governments to review prevailing laws & rules and simplify, liberalise and rationalise them as far as possible. In order to facilitate registration of non-profit companies, the Government will examine measures to simplify procedures under section 25 of the Companies Act (1956), including those for license, registration, and remuneration to member-employees.
• The Government will also examine the feasibility of enacting a simple and liberal central law that will serve as an alternative all- India statute for registering VOs, particularly those that wish to operate in different parts of the country and even abroad. Such a law would co-exist with prevailing central and state laws, allowing a VO the option of registering under one or more laws, depending on the nature and sphere of its activities.
• There has been much public debate on the voluntary sector, particularly its governance, accountability, and transparency. It is widely believed that the voluntary sector must address these issues through suitable self-regulation. The Government will encourage the evolution of, and subsequently accord recognition to, an independent, national level, self-regulatory agency for the voluntary sector.
• At the same time, there is need to bolster public confidence in the voluntary sector by opening it up to greater public scrutiny. The Government will encourage Central and State level agencies to introduce norms for filing basic documents in respect of VOs, which have been receiving funding by Government agencies and placing them in the public domain (with easy access through the internet) in order to inculcate a spirit of public oversight.
• Public donation is an important source of funds for the voluntary sector and one that can and must increase substantially. Tax incentives play a positive role in this process. Stocks and s hares have become a significant form of wealth in the country today. In order to encourage transfer of shares and stock options to VOs, the Government will consider suitable tax rebates for this form of donation. The Government will also simplify and streamline the system for granting income tax exemption status to charitable projects under the Income Tax Act. At the same time, the Government will consider tightening administrative and penal procedures to ensure that these incentives are not misused by paper charities for private financial gain.
• International funding of voluntary organizations plays a small, but significant part in supporting such organizations and their work in the country. An organization seeking foreign funding must be registered under the Foreign Contribution (Regulation) Act. This law prescribes stringent screening norms that often restrict the ability of VOs to avail foreign funds. When approved, there are problems like funds must be held in a single bank account, thus presenting enormous difficulties to VOs working at different locations. The Government will review the FCRA and simplify its provisions that apply to VOs, from time to time, in consultation with the joint consultative group to be set up by the concerned Ministry.
• The Central Government has framed guidelines for bilateral agencies to give direct assistance to voluntary organizations for projects of social and economic importance. It controls access to such funds and their utilisation, both through the FCRA and through regulation by the Department of Economic Affairs. This system needs to be simplified in consultation with the joint consultative group to be set up by the concerned Ministry.
• The Government will encourage all relevant Central and State Government agencies to introduce pre-service and in-service training modules on constructive relations with the voluntary sector. Such agencies should introduce time bound procedures for dealing with the VOs. These would cover registration, income tax clearances, financial assistance, etc. There would be formal systems for registering complaints and for redressing grievances of VOs.

For More Information: National policy on Voluntary Sector 2007 (55.1KB)

Policy Updates

Advisory to associations registered / granted prior permission under FCRA, 2010 to incur expenditure above Rs 20,000 by cheques / drafts

The Home Ministry has asked NGOs to incur all expenditure above Rs 20000 by cheque or drafts. "As per the Income Tax Act, any expenditure incurred by certain category of NGOs in respect of which payment is made for a sum exceeding Rs 20000 otherwise than by an account payee cheque drawn on a bank or by an account payee bank draft, shall not be allowed as a deduction under the Income Tax Act," the Circular says.

It adds that the issue of fixing an upper limit for incurring expenditure by associations registered/granted permission under Foreign Contribution Regulation Act (FCRA), 2010 by cash from designated bank accounts has been "under consideration" of the government for some time. "The Government, after considering the issue, advises all FCRA associations that items of expenditure/payments amounting to Rs 20000 should be done by cheque or demand drafts," the Ministry says.

It has been further specified that the records and accounts of associations indulging in cash payments of Rs 20000 or more from the designated bank accounts "are likely to require more intensive scrutiny by government" and the circular has been issued with approval of the competent authority.

Source : Ministry of Home Affairs circular

Related Resources

• NITI AayogPlanning Commission
• Foreign Contribution Regulation Act, 2010, Ministry of Home Affairs