Memorandum & Bye-Laws for an NGO: What to Include (2026 Guide)
Your NGO's founding document is not just a formality — it determines whether you get RNPO, 80G, and grant eligibility. A weak objects clause, a missing non-profit clause, or a wrong dissolution clause can block your tax exemption for years. Here is exactly what every clause must say.
Founding document by NGO structure
The founding document varies by structure, but the substance — the critical clauses — must be present in all of them:
| Structure | Founding document(s) | Governing law |
|---|---|---|
| Trust | Trust Deed | Indian Trusts Act 1882 + Registration Act 1908 |
| Society | Memorandum of Association (MOA) + Rules & Bye-Laws | Societies Registration Act 1860 (or state equivalent) |
| Section 8 Company | Memorandum of Association (MOA) + Articles of Association (AOA) | Companies Act 2013 |
The same RNPO requirements apply to all three. The Income Tax Department evaluates the objects clause and non-profit provisions regardless of which structure you choose. The format differs; the substance requirements do not.
The objects clause — the most critical clause in your document
The objects clause defines what your NGO will do, who it serves, and what outcomes it will pursue. It is the single most scrutinised clause in every RNPO application. The IT Department's Commissioner reviews it to determine if your NGO's activities constitute a "charitable purpose" under Section 332 of the Income Tax Act, 2025.
What counts as a "charitable purpose" under IT Act 2025?
Section 332 defines charitable purpose to include:
- Relief of the poor
- Education
- Yoga
- Medical relief
- Preservation of the environment (including watersheds, forests, wildlife)
- Preservation of monuments or places or objects of artistic or historic interest
- Advancement of any other object of general public utility
The last category — general public utility — is the widest but also the most scrutinised. Activities that involve trade, commerce, or business (even if for charitable purposes) face additional restrictions under this category. Where possible, draft your objects under the first six categories.
Weak vs strong objects clause — examples
| Weak (will cause problems) | Strong (RNPO-ready) |
|---|---|
| "To do social welfare activities" | "To provide free primary education to children from BPL (below poverty line) families in rural Rajasthan through formal schooling and after-school tutoring programmes" |
| "To help poor people" | "To provide livelihood support, skill training, and microfinance facilitation to women from economically weaker sections in urban slum communities of Delhi NCR" |
| "To promote health" | "To provide free medical consultation, diagnostic services, and health awareness programmes to communities in tribal areas of Jharkhand with limited access to healthcare" |
| "To protect the environment" | "To undertake afforestation, watershed management, and environmental education programmes in degraded forest land areas of Maharashtra, with the objective of restoring biodiversity and supporting adjacent rural communities" |
Notice the pattern: a strong objects clause specifies what you will do, who will benefit, where you will work, and why it is charitable. Generic language about "social welfare" is the most common RNPO rejection trigger.
Mandatory clauses for all NGO structures
1. Name clause
Full legal name of the NGO. Check for conflicts with existing trusts, societies, and companies. For Section 8 Companies, names must be approved by the MCA before incorporation.
2. Registered office clause
Full address with pin code. This determines jurisdiction for registration and for RNPO — the Principal Commissioner of Income Tax in whose jurisdiction the registered office falls will handle your RNPO application.
3. Objects clause
As detailed above — specific, public-benefit, charitable purpose language.
4. Non-profit / non-distribution clause
This clause must explicitly state that no part of the income or property of the NGO shall be applied or transferred — directly or indirectly — for the personal benefit of any Trustee, member, director, or the Settlor. Reasonable salaries for actual services rendered are permitted and should not be mentioned in the prohibition.
Sample wording: "No portion of the income or property of the [NGO Name] shall be paid or transferred, directly or indirectly, by way of dividend, bonus, or otherwise as profit to any Trustee. This shall not prevent the payment of reasonable and proper remuneration to any officer, employee, or servant of the [NGO Name] or to any Trustee in return for any services actually rendered to the [NGO Name]."
5. Dissolution / winding-up clause
On dissolution or winding up, remaining assets must transfer to another charitable organisation — not to Trustees, members, directors, or the Settlor's family. This is a hard requirement for RNPO. The receiving organisation should ideally be specified as "a Public Charitable Trust or institution registered under Section 332 of the Income Tax Act, 2025, with similar objects, as decided by the Board."
6. Amendment clause
How the founding document can be amended — quorum required, notice period, approval threshold (e.g., 75% of Trustees / Board). Changes to the objects clause typically require a higher quorum and, for RNPO-registered NGOs, notification to the IT Department.
7. Accounts and audit clause
Specifies that the NGO will maintain proper books of account, get them audited annually by a Chartered Accountant, and file ITR-7 with the Income Tax Department every year. This signals compliance intent to the RNPO authority.
Governance clauses — different by structure
For a Society (Bye-Laws)
| Governance clause | What to specify |
|---|---|
| Membership | Categories, eligibility, admission process, membership fees (if any) |
| General Body | Annual General Body meeting — notice period (21 days typical), quorum, voting rights |
| Governing Body / Managing Committee | Composition (number of members), election process, term, powers, quorum |
| Office-bearers | President, Vice-President, Secretary, Treasurer — roles, election, term, removal |
| Finance | Bank account signatories (at least 2 joint), financial year, powers to receive donations and grants |
| Dispute resolution | How internal disputes are resolved — arbitration or reference to Registrar |
For a Section 8 Company (AOA)
| Governance clause | What to specify |
|---|---|
| Board of Directors | Minimum and maximum number, appointment, removal, term, powers |
| Board meetings | Minimum 2 per year; notice period; quorum (minimum 2 or 1/3 of directors, whichever is higher) |
| AGM | Annual General Meeting within 6 months of FY end; notice 21 days; quorum |
| Resolutions | Ordinary vs special resolutions; voting procedures |
| Accounts | Financial year; appointment of auditors; audit obligations |
| Dividend prohibition | Explicit statement that no dividend shall be declared or paid to members |
For a Trust (Trust Deed)
Trusts have more flexibility than Societies or Section 8 Companies. The Trust Deed should specify:
- Trustee meetings — frequency, quorum, decision procedure
- Managing Trustee — role and powers (day-to-day operations)
- Trustee appointment and succession (who appoints replacement Trustees)
- Trustee removal — grounds and procedure
- Powers of Trustees — to open bank accounts, receive donations, hire staff, execute contracts
- Investment powers — how Trust funds can be invested
RNPO-proofing checklist — review before you register
| Checkpoint | Status to confirm |
|---|---|
| Objects clause specifies charitable purpose (IT Act 2025 Section 332) | ✓ Must be specific — not vague |
| Beneficiaries are "public" or "section of public" — not named individuals | ✓ Public charitable test |
| Non-distribution / non-profit clause present and correctly worded | ✓ Must be explicit |
| Dissolution clause transfers assets to another charitable entity | ✓ Not to founders or family |
| No commercial activity clause that could trigger "general public utility" restrictions | ✓ Or carved out correctly |
| Accounts and audit clause included | ✓ ITR-7 filing intent stated |
| Amendment clause with reasonable procedure | ✓ Not easy to remove non-profit clauses |
| No clause allowing personal benefit to founders | ✓ Salaries allowed; profit share not |
| Registered office address matches IT jurisdiction for RNPO | ✓ Correct Principal Commissioner jurisdiction |
Common drafting errors that block RNPO
Error 1 — Objects that include prohibited commercial activities
Objects like "to manufacture and sell eco-friendly products to raise funds for charitable activities" contain commercial activity that triggers scrutiny under the "general public utility" restriction. If business activity is part of your model, it must be clearly incidental to charitable objects and not the primary purpose.
Error 2 — Dissolution clause sending assets to named individuals
We have seen Trust Deeds that say "upon dissolution, assets shall be distributed equally among the Trustees." This is a dealbreaker for RNPO. The dissolution clause must send assets to another charitable institution.
Error 3 — Missing audit clause
Founding documents that make no mention of accounts, audit, or ITR filing are viewed negatively by RNPO authorities. Including an explicit accounts and audit clause is both good practice and a signal of compliance intent.
Error 4 — Governance clauses that concentrate power dangerously
A Trust Deed that says "all decisions are at the sole discretion of the Managing Trustee with no checks" is a red flag for funders even if it passes RNPO scrutiny. Build in basic checks — joint signatories for bank accounts, minimum Trustee quorum for major decisions.
Error 5 — Copying templates without reviewing for RNPO compatibility
Many online templates predate the IT Act 2025 and reference 12A/12AA/12AB. These references should now be updated to Section 332 of the IT Act, 2025. An outdated template can cause confusion in the RNPO application even if the substance is correct.
Get your founding document drafted correctly
We draft RNPO-ready Trust Deeds, Society MOAs and Bye-Laws, and Section 8 MOAs and AOAs — with every clause correctly worded to pass IT Department scrutiny. Book a free consultation.
Frequently asked questions
What is the most important clause in an NGO's founding document?
The objects clause. It defines your charitable purpose and is the basis for RNPO eligibility. A vague or incorrect objects clause is the most common reason RNPO applications are rejected. It must be specific, public-benefit oriented, and fall within the IT Act 2025 Section 332 definition of charitable purpose.
Can we change the objects clause after registration?
Yes but the process varies: Trust needs a registered Deed of Amendment; Society needs a General Body resolution and Registrar approval; Section 8 Company needs a special resolution and MCA approval. Any change after RNPO is granted may require fresh RNPO verification. Get the objects right from the start to avoid this.
What is the non-profit clause and why is it mandatory?
It explicitly prohibits distributing income or property to Trustees, members or directors for personal benefit. Without it, the IT Department cannot confirm charitable institution status and will reject the RNPO application. Reasonable salaries for actual services are permitted — the clause should carve these out explicitly.
Draft it right the first time
A correctly drafted founding document saves months of rejection, amendment, and re-application. First consultation is free — let us review your draft or write it from scratch.
This article is general information and not legal or tax advice. Have a qualified CA or legal professional review your founding documents before registration.