Know the Complete Difference between Non- Profit Organization and an NGO

There are organizations which are formed by the individuals for serving the entire society. Such organizations may be Non- Governmental Organizations (NGO) or Non- Profit Organizations (NPO). An NGO is formed to work for social and public welfare. On the other hand, NPO works for any purpose other than making profits and are incorporated under the Companies Act. Since, the purpose, rules and regulations of both the types of organization are different; there is a fine line of difference between NGO and NPO. This article will help you to know the complete difference between Non- Profit Organization and an NGO in India.

Brief difference between Non- Profit Organization and an NGO

What is an NPO?

NPO or Non- Profit Organization is a legal entity formed by a group of persons to promote social, cultural, professional, religious objectives. The members or trustees raise the initial funds of the NPO. Since the organization is a non-profit making entity; all the surplus funds are applied on the promotion of the objectives and the purpose of the organization rather than being used by the members of the organization itself. NPO is registered under Section 8 of the Companies Act and has many benefits such as being exempted from tax, not required to use the term ‘Pvt Ltd’ or ‘Ltd’ at the end of its name and etc.

An NPO may include a charitable organization, membership groups like women’s club or sports club, social organization, public hospitals, public educational institutions and etc.

What is an NGO?

A Non Governmental Organization or an NGO is an association formed by the citizens that perform its functions completely autonomous from the government to perform a wide spectrum of services and humanitarian functions. An NGO is a non-profit making organization that performs its operations at national, regional or international level based on its reach and connectivity. An NGO can be incorporated as a Trust, Society or Section 8 Company. It raises its funds from foundations, government, private people and businesses. It performs to provide aid to people for the social cause for which it is established and to draw the attention of the government towards the grievances of the citizens to resolve it, promote political participation by providing information and advocating public policies.

Many NGOs work and performs to deal with specific issues like supporting women and children’s rights, human rights, health or environmental issues and etc. International Chamber of Commerce (ICC), International Air Transport Association (IATA^[1]), International Organization for Standardization (ISO) are some well know NGO’s functioning and operating worldwide.

The purpose of forming an NGO registration is to promote social welfare and uplift the deprived and impoverished section of society. It performs tasks to motivate the government to initiate and take necessary measures towards the problems and issues faces by the people.

Critical Points for Difference between Non- Profit Organization and an NGO

The difference between Non- Profit Organization and an NGO is: –

• The purpose of forming an NGO is to promote social welfare and uplift the deprived section of the society. Whereas, the purpose of forming an NPO is to promote arts, science, commerce, research, education, cultural, religious, professional objectives and etc.
• The scope of operation of NGO is comparatively larger than the NPO.
• NGO is registered under the Public Trust Act, Societies Registration Act, 1860 or Section 8 Companies Act 2013. Whereas, NPO is registered under Section 8 of the Companies Act, 2013.
• The funds raised by NPO and NGO cannot be used for personal expenses.
• A Non- Profit Organization has a more business organization background as it is quite popular in business and business sector. Whereas, a Non Governmental Organization have a more social background. It is generally formed by the protesters for a social cause, welfare of the particular group of people. Therefore it deals more with social causes such as slavery, prostitution, child labour etc.
• A Non government organization expresses its will to deal with the issues related to the rights of the people or civil society. It is mostly involved in advocacy and information campaign. Whereas, the Non Profit Organization do not share profits between its shareholders, but produces goods or services so as to use the profit for various social initiatives.
• Financial assistance is given to NGO from various schemes of the State and Central government. It is not related with profitability however NGOs do take contribution as per the requirement to meet the both ends. However, Non profit organisation performs work which may not result into profit but still loss should also not be there.

Conclusion

Non-Profit Organization and Non Governmental Organization are two different entities having different objectives, rules and regulation. However, both the entities require association or group of members to incorporate the NGO and NPO in accordance with the bylaws and both the entities are exempted from paying taxes. Though there are many similarities between the two, yet there are differences as well. The complete difference between Non- Profit organization and an NGO is stated above in the Article.

Both the NGO and NPO perform different functions and have different purposes. But both of them aim to serve to the people without aiming for gaining profits. NPO and NGO perform their functions without any autonomously without the interference of the government and are not affiliated with the government. The NPO is quite popular in the business or commercial sector and NGO can be formed under three different ways that is, Trusts, Society or Section 8 Company, and the objective of NGO is to deals with the social causes and promote the social welfare of the people.

Also, Read: Things to Keep in Mind While Planning to Start an NGO