Contrary to the popular view of a layman, an NTO is not an organisation which does not make profits. It is a well established fact that no organisation can survive without profit and that one of the prime motives of any organisation is to earn and maximise profits. Profit in commercial parlance is defined as the excess of income or revenue over expenditure during a specific period, by whatever name called. In the case of an NTO the profit earned by it is called "surplus". Hence' an NTO earns profit and calls it surplus. Then what is the difference between an NTO an a profit-making organisation is lies in the fact the NTO does not distribute its surplus among its members(as is the case with other organisations). The surplus earned is transferred to a Capital Fund and is used for the benefit and development of the organisation. This is the prime point of difference between an NTO and a profit-making organisation and the most effective rule of identifying an NTO. It is not enough for a charitable organisation to be called an NTO if it does not pass this test.
