“Is it possible for a trustee to take salary / compensation / remuneration from the Trust Fund?” This is one of the most common questions asked by people in India who want to setup a public charitable trust. Running a trust is not an easy job and it may require a trustee to invest significant amount of time and energy. And some people feel that they should be get the compensation from the Trust Fund for the work they do fro the Trust. Most lawyers and CAs would straightway tell you that it is not allowed for a trustee to take any benefits (in the name of trustee salary, trustee remuneration or trustee compensation) from the Trust Funds. This however depends on what constitutes a benefit.
The first thing you must understand is that trusts are of two types: private and public charitable trusts.
Indian Trusts Act 1882 covers only private trusts and it specifically excludes public charitable trusts from its ambit. Most people think that the Indian Trusts Act 1882 applies to public charitable trusts as well. But that is wrong. In some states, public charitable trusts are governed by Bombay Public Trusts Act 1950. But in most states of India, there is no Act for governing charitable trusts.
Social work is important for a better society.
Both Bombay Public Trusts Act 1950 and Section 13 of Income Tax Act state that the trustees can draw a “reasonable” compensation from the trust fund for the services they provide to the trust. Please note that being a trustee itself is not considered a service. So, lets try to understand what could be a defined as a service.
SEE ALSO: Can an NRI Become a Trustee?
SEE ALSO: Can a government employee become a Trustee?
Lets assume, in a charitable trust, one of the trustees is a qualified Chartered Accountant –and if he is managing the trust’s accounts. In such a case he is eligible for a reasonable compensation for his CA work because his work is saving the Trust from paying another CA’s fee.
NGO: Frequently Asked Questions
“Reasonable” means that the compensation must not be higher than the prevailing average market rate. I would suggest that such a compensation should actually be a notch below the average (after all you’re supposed to be doing charitable work -so it’s better to put the least possible burden on Trust Funds)
If one or more trustees are taking unreasonable benefits from the Trust Fund –the Income Tax Department may refuse/revoke the allotment of tax exemptions under section 12A and 80G. If that happens all the donations/earnings acquired by the Trust shall become taxable.
For more information, you should contact the Commissioner of Income Tax (Exemptions) who has jurisdiction over your area. I hope this clarified the issue of whether a trust can take salary, compensation or remuneration from the Trust Fund.
Hi Lalit,
Thanks for the article. Our NGO was registered under societies registration act 35 of 2001. Can we hire employees with reasonable compensation for our operations which are no where related to the board duties? and is there any insurance policy for the NGO employees?
You can hire employees.
Sir, ours is a registered charitable public trust.
We are promoting the concrete technology.
We are only two working staff in this trust and others are directors.
We both staff are working for this trust for last 20 years.
We are getting salary, bonus and leave salary.
In our Audited accounts, under one section, it is mentioned that “Gratuity will be applicable as and when staff retires”.
We request you to kindly guide us and help us out.
Thanks a lot.
You should speak with a qualified lawyer in this case.
Sir,
Please clarify, that if we open a trust aimed at spreading computer education among poor children of backward rural areas, can we recruit additional teachers, office clerks and office bearers, drivers for running the trust, on day to day wages basis or monthly salary basis? For doing that is there any compulsory minimum amount to open the fund. Sir please clarify urgently.
Yes, you can keep staff to perform duties in your charitable work and you can pay the staff from the trust fund.
hello, a very good morning.
though lot of information is already provided by you on my concern. but still a little curiosity needs to be settled down. i am a Dr with MD degree n starting a NGO soon for providing health improvement services to underprivileged people in rural and urban slum areas. as i am thinking to provide many services by my own such as full body check up with printed report of 50 pages, health seminars, wellness guidance and one o one consultations. so can i charge for this from NGO fund..?
though market prices are so high for these (like full body check up market price is Rs 8000) but i am planning to charge the actual cost involved like Rs1000 per person. so will it be as per the law..?? or i should simply hire a Dr to carry out this and pay to him.
i want to go with the rules and don’t want to create any trouble for the NGO operation such as termination of tax exemption facility by IT dept.
thanking you.
Dr Satya
Such matters are subjective. There can not be a single answer applied to all cases. Basically, you must not make any profit from NGO funds. Let’s say you go to a village and stay there for a week carrying out these check ups. You take all the expenses of travel, boarding and lodgings from NGO funds and you also keep that Rs. 1000 per check up. To some people that may sound a bit fishy. It’s true that you are a professional and your time is valuable but still work for social causes is always subjected to scrutiny and criticism. Different people will evaluate your work differently. So, I always advice to try and not take any benefit from the NGO funds. And if if you must, then be extremely frugal.
thank u so very much for your guidance specific to my concerns.
i will do accordingly. will not draw a single penny from ngo fund for me.
We have already registered a Trust and run a University. My question to you is “Can a Trustee be entitled to get salary(s) or any other benefits under the Trust when the said University is doing profits?
Trustees can take reasonable salary only if they REALLY WORK PROFESSIONALLY for the trust. Just being a trustee does not entitle them to take salary. Also, dividing profit is strictly prohibited. You began a public charitable trust for the purpose of charity. Now if the trust is making profit, you can not take it for personal use. All the profit is trust’s property and the profits should be used for further charity work.
can a family member of a trustee or an employee do business with a trust?
If such business can be avoided, it should be avoided because such things may raise ethical questions. But if you want to do such business TOTAL transparency MUST be maintained in all transactions.
Hello Sir/Madam,
Myself Hishitha from Bangalore, India. I am planning to start up my own Wildlife NGO and willing to continue my career as a full time worker and dedicate rest of my life in the same NGO. for I am no more will be working in other companies/job. I will be conducting training’s for the orphan Children by providing Power point Presentations, videos, and putting up some awareness posters and slogans and meeting up the corporate clients all over India and other countries clients to generate funds to the organization. In particularly, also I will be flying to other countries to raise funds for the NGO and to get wildlife training which in turn benefits the NGO to implement new ideas and concepts.
My question to you is simple, for all the above work which I will be delicately involving my full time and energy to run the NGO, will I be getting some reasonable amount/remuneration for all my service provided to the NGO.
Requesting you to kindly clarify my doubts.
Thanking you in anticipation,
Hishitha J
I have already written the answer in the article. It is always better for trustees not to take any benefit from the trust funds. But if you really need it you can draw reasonable remuneration. However, this “reasonable” will always be under scrutiny of the donors and the Income Tax department. Anyone can argue that you are taking more than you should be! So, I always suggest that all the trustees should have their own source of income and they should not totally rely on income from social work in their own NGO.
Dear Sir,
I am a salaried employee in a financial company. I want to start an NGO. Can I hold a post of Settler (Trust) and President, Secretary, Treasurer (Society) or member as well. Or will I have to quite my job for holding a post in my NGO?
Hi Govind, you can become part of a trust / society and hold any position while working in a private company. Holding posts in NGOs do not bring you any income, so one has to earn his livelihood by taking paid employment.
Truly Lalit ji, you are providing very helpful information to us. First of all thank u sir. I have five years of experience in Human Resource field, and I have recently left my job to open an NGO in my city for doing social work. My question is, Can I make partnership with UN or UNESCO? or how can I run United Nations Development Programme for my NGO? And how can I provide employment to others under my NGO and what will be the procedure?
Hello Chirag, your questions are too specific and require separate research. My articles are limited to the process or registration of a trust or society NGO. I would suggest that you contact UNDP directly for getting answers to these questions. All the best!
Dear Lalit Ji
After 1st time registration of a Trust, is it necessary to renew the Trust every year?
No, once registered the trust registration is not renewed. But the 80g and 12a exemption certificates from Income Tax department may need to be renewed time to time. The income tax department tells you if and when the renewal of these certificates is required.
I have only one question Lalith ji. Every article I read on forming a trust say’s a property is required, and bunch of guys who want to register a trust do not own any property. could you please elaborate on this. I am unable to find any information about it.
You can register a trust in a rented property. You would just need a get a no objection certificate (NOC) from your landlord.
Can founder of trust take remuneration if he works full time of society? If his wife also working in the same society how much salary that they can claim?
There is nothing like “how much” you can claim. It is not advisable to sustain yourself on your NGO’s income. It’s better to develop other sources of income so that NGO’s money can be used exclusively for social work. But if you really think that you are devoting too much time to NGO work that it hampers your income generation -then you can take some reasonable amount. Again I would say, there is nothing like “how much”.
I saw today that In one of the societies, the founders are the memebrs of the governing body as Secretary and Treasurer of the society. They also hold the positions as Director and Manager and are drawing salaries / remuneration. How is that possible? Can the Secretary, who is the member of the Governing Body draw salary and his wife who is also the Treasurer and draw salary a s a manager?.
Well, as long as they can prove that they are not misusing society funds -they can draw a reasonable remuneration for their service.
Dear Lalit ji no doubt it is very useful knowledge for startup NGO. I’m also want to start a NGO for environmental conservation. Is there any way or rules in ngo MOA or RR that founder of NGO is always a part of governing body of NGO.
In case of society, such surety is not possible. The founder may be voted out of the NGO governing body.
I’ve a 10 years old NGO. I’m doing social work since 15 years, but without using NGO/grant. Even I’ve no any documents/bank account of the NGO. Truly speaking I’ve no any knowledge on how and what documents have to maintain for record. Now i want to start to work officially with NGO.
Could you please guide me?
Regards
Uma Shukla
In my articles, you can find all the details of how to register your NGO as a trust or a society. You also find a good CA who can tell you how to keep records. You will anyway need a CA for your NGO’s annual audits.
If a Trustee teaches in her institution with all the required qualifications.. Is she allowed to get salary as other Teacher of the same qualification teaching in the same institute or any other institute as per the average Market/salary norms ??
Sir,
In which section of BPT or any court order or authorized document available about it
Please guide/ provide more details.
Thanks
Ravindra
M. 9689364880
No such document is available in any court, as far as I know. The only mention is in the “Section 13 of Income Tax Act”.
is it compulsory to register the trust? can i open public charitable trust? will i get rent if i accommodate the trust to my home and ultimately saving the rent for the trust office. will i get benefit of taking funds from all over world if i open a website for it? i am website developer. so will i get compensation for developing website of trust and web hosting and domain registration charges of the trust website? i am from ahmedabad, gujarat. please provide your valuable feedback to me. Thanks & Regards, Divyesh
Thers is no prohibition to remunerate interested person but such remuneration should be commensurate with services rendered by him-(DIT (Exemptions)v.Manav Bharathi child institute-ITOv. Human Resource Development & Mgt.trust (ASBM Trust)[2011] 47 SOT 85 (Cuttack)
can a trust pay a rent to trustte as a compensation for the usage of property belong to trustee
no. it’s not allowed.