Section 8 Company / NGO: Does distributing stipends to Interns/Trainees under a Government MoU trigger "Employer" compliance?

Labour, HR & Safeguarding
1

Hi everyone,

Seeking some advice on legal and labor compliance for our Section 8 company registered in Himachal Pradesh (focused on scientific research, biodiversity conservation and scientific education).

We recently signed an MoU with the local district administration to act as the implementing agency for a government project.

  • The Project: A 2-year program providing internships to 20 B.Ed. graduates to improve education quality in local government schools.

  • Our Role: We monitor the interns, conduct training workshops for them, and handle the payout of their stipends.

  • Funding: The district administration provides the entire budget for these expenses as a quarterly advance grant.

The interns will be physically deployed to selected government schools to teach science and math.

Given this setup, I have two primary questions regarding our compliance liabilities:

  1. Worker Classification: Since our Section 8 company handles the stipend payouts and monitoring, do these B.Ed. interns qualify as “employees” under the Code on Wages / New Labor Codes? Or do they strictly remain “trainees/interns”?

  2. Compliance Obligations: If they are classified as employees, what specific employer compliances (EPF, ESIC, Professional Tax, etc.) are triggered for us, keeping in mind the funds are coming via a government grant? Are there any specific Section 8 exemptions we should look into?

Would love to get insights from anyone who has handled similar government-backed NGO implementation models. Thanks in advance!

2

Thanks for your query.

Intern more appropriately called Apprentice is not an employee. Please see Section 2(k) of Code on Wages where an apprentice is excluded from the definition of employee. Since there is no employer-employee relationship, the Labour Codes do not apply.

You will need to ensure necessary compliance with provisions of Apprentices Act 1961 for engagement of apprentice (intern) i.e. sharing of contract on NA portal, stipend rates etc.

As a registered non-profit organization under Income Tax Act, please examine that this assignment/activity is a charitable purpose selected by you at the time of registration or is incidental to attainment of the main object if it is considered as a business income and will still be considered charitable for which the onus of proving is on you before the Department. This is essential since under ITA 2025, commercial activity by an RNPO is prohibited. Being a Section 8 company or any other type of charitable entity is of no consequence.

CS Sharad Bhargava