Internal audit, tax and advisory from New Delhi.

What gets tested

The agreement and authorisation letters; identity, training and authorisation of the agency’s staff; call and visit records against the cases allotted; receipts and the time taken to deposit collections; for repossession, the notices, inventories and storage of seized assets; and complaints received.

What the lender receives

A report of exceptions case by case, with the evidence behind each, so the lender can act on specific findings rather than a general opinion.

How each is formed

A public charitable trust is created by a trust deed, which in Delhi is registered with the Sub-Registrar. A society is registered under the Societies Registration Act, 1860, with at least seven founding members. A Section 8 company is incorporated under the Companies Act, 2013, with a licence that bars it from paying dividends to its members.

Tax registration is separate

Forming the entity does not make its income tax-exempt. It must separately register with the Income Tax Department for exemption, and obtain a further approval if donors are to claim a tax deduction for their gifts.

CSR funds need one more registration

To receive corporate social responsibility funds from companies, the organisation must also register with the Ministry of Corporate Affairs by filing Form CSR-1.

Changing course later

Converting one form into another is slow and not always possible, so the choice should follow who will control the body and who will fund it.

Subject to amendment, extension or clarification by the authorities after the date above.

Primary sources: Companies Act, 2013 (MCA) (opens in a new tab) · Income Tax Department (opens in a new tab)

Registration or prior permission

Registration is for organisations with an established record of activity. A newer organisation can apply for prior permission, which covers a named donor, amount and purpose.

Rules that apply after receipt

Foreign contribution cannot be transferred to another person or organisation. Administrative expenses paid from it are capped at 20 per cent of the contribution received in a year. Separate books and annual returns are required.

Where problems usually start

Receiving funds in an ordinary bank account, mixing foreign and local funds, and late annual returns are the most common causes of notices and suspensions.

Subject to amendment, extension or clarification by the authorities after the date above.

Primary sources: FCRA online services, Ministry of Home Affairs (opens in a new tab)

Liaison office

Suited to market study and relationship work. Its expenses are met by remittances from the parent. It is set up with approval under the foreign exchange rules, through an authorised dealer bank. Applicants from certain neighbouring countries, and proposals in sectors such as defence, telecom and private security, need prior approval from the Reserve Bank and the government.

Branch office

Permitted activities include export and import, consultancy and research. Retail trading and, outside special economic zones, manufacturing are not permitted. The same prior-approval rule for certain neighbouring countries and sensitive sectors applies.

Wholly owned subsidiary

Incorporated under the Companies Act, 2013. Foreign investment is allowed under the automatic route in most sectors, with caps and conditions in others. Investors from countries that share a land border with India need government approval in every sector. It is taxed as an Indian company and needs its own audit and filings.

Subject to amendment, extension or clarification by the authorities after the date above.

Primary sources: Reserve Bank of India: Master Directions (FEMA) (opens in a new tab) · Department for Promotion of Industry and Internal Trade: FDI policy (opens in a new tab)