What is Social Stock Exchange? Know how it will function and its objective

Social Stock Exchange Meaning: Social Stock Exchange or SSE is for enterprises that work for the welfare of the society or community. These enterprises should be set up as charitable associations. SSE's objective is to provide an alternative fund-raising instrument to such organisations. SSE functioning will come under the regulatory ambit of SEBI.

What is Social Stock Exchange: It aims to provide an alternative fund-raising instrument. Pic: Pixabay

What is Social Stock Exchange: Social Stock Exchange (SSE) is a segment of the existing Stock Exchange, that can help social enterprises raise funds from the public through the stock exchange mechanism. It aims to provide an alternative fund-raising instrument. In simpler words, SSE is a medium between social enterprises and fund providers.

The concept of SSE gained momentum during the pandemic, highlighting the need for social capital for enterprises and voluntary organisations that are working for social welfare.

What is a social enterprise?

Social Stock Exchange identifies social enterprises as the ones engaged in creating positive impact in the society. These are the following two forms of social enterprises:

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Not-for-profit organization
For profit social enterprise

What is a not-for-profit organization (NPO)?

NPOs work for the welfare of society, the community and are set up as charitable associations.

What is a for profit organisation?

A for profit organisation is a corporate body or a company in the social space, operating for profit.

SSE is touted to be a novel concept, under the regulatory ambit of the Securities and Exchange Board of India (SEBI), which will serve private and non-profit sector providers by channelling greater capital to them.

It is to be noted that foreign investors including NRIs are not allowed to invest in NPOs fundraising.

With regard to fundraising on SSE, NPOs may raise funds through the issuance of zero coupon zero principal bonds and donations through mutual funds schemes.

Also read- Income tax calculator AY 2023-23 launched: Calculate how much tax you will pay in new tax regime vs old

Income tax filing: SSE tax benefits-deduction under Section 80G

Investors can claim a deduction under Section 80G. Under this section, a taxpayer is allowed to claim a deduction for making contributions to certain relief funds and charitable institutions.
As per NSE, social enterprises can register on SSE and undertake to make continuous disclosures on their social impact.

Also read- 5 tax saving options other than 80C

SSE participation eligibility: Not-for-profit organisation

As per NSE, an NPO should fulfill the following criteria:

i. a charitable trust registered under the public trust statute of the relevant state;

ii. a charitable society registered under the Societies Registration Act, 1860 (21 of 1860);

iii. a company incorporated under section 8 of the Companies Act, 2013 (18 of 2013);

iv. any other entity as may be specified by SEBI;

SSE participation eligibility: For-profit organisation

As per NSE, an enterprise must meet the following criteria:

i. A company under the Companies Act, 2013, operating for profit and does not include a company incorporated under section 8 of the Companies Act, 2013 (18 of 2013);

ii. A body corporate operating for profit

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