What is Section 8 company Registration in India?
Section 8 Company is often called as Non- Profit Organization Company. A non-profit organization is often known as NGO. An NGO can register under Trust Act or Societies Act or under Section 8 companies act, 2013 (earlier Section 25 of Companies Act 1956). The NGO can be registered for promoting art, science, commerce, Technology, sports, education, social research, social welfare, religion, charity and protection of environment etc.
Section 8 Company Registration under Companies Act 2013
Where it is proved to the satisfaction of the Central Government that a person or an association of persons proposed to be registered under this Act as a limited company—
(a) Has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, and charity, protection of the environment or any such other object;
(b) Intends to apply its profits, if any, or other income in promoting its objects; and
(c) intends to prohibit the payment of any dividend to its members,
the Central Government may, by license issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word "Limited", or as the case may be, the words "Private Limited” and thereupon the Registrar shall, on application, in the prescribed form, register such person or association of persons as a company under this section.
Eligibility Criteria for Section 8 Company Registration in India
An Individual or HUF or limited Company is eligible to start a Section- 8 company registration in India. Two or more person who will act as a shareholder or Director of the company should fulfill all the requirements and compliances of the Section- 8 Company registration. At least one of the directors shall be a resident of India. However, a firm may be a member of the company registered under this section.
The Following are the other eligibility criteria for a Section 8 company registration –
- The major objective should be the promotion of sports, social welfare, the promotion of science and art, education and financial assistance to lower income groups.
- The surplus generated must be used for the meeting the principal objective of the company only.
- No profit should be distributed among the members and director of the company directly or indirectly.
- Founders, members, and directors of the company cannot draw any remuneration in any form of cash or kind.
- The company should have the clear vision and project plan for the next 3 years
How to apply for Section 8 Company registration in India?
Section 8 company registration in India is a class by itself. It is a non- profit organization engaged in the social work for the welfare of the society and the country. Section 8 company registration procedure is as follows-
- Prepare DSC and file Name Approval
The very first step for Section 8 company registration is to prepare DSC. Apply for Digital Signature Certificate or DSC as soon as possible along with the SPICe Form or RUN form for the name approval. We will file an application for reservation of a name for section 8 company registration before the ministry of corporate affairs which usually, it takes 3-5 working days.
Section 8 companies should contain words like Foundation, Society, Association, Council, Club, charities, Academy, organization, Federation, Institute, Chamber of Commerce, Development and many more.
- Apply for Section 8 Company registration license from Regional Director, MCA (INC-12)
After Name approval, we will apply for Section 8 company registration license from Regional director; the regional director will review the objectives, plans and will grant a license for Section 8 Company registration. RD usually takes 15 days to issue a license to operate as a section 8 companies.
- Filing of Incorporation Forms on MCA Portal
After getting approval from the regional director, we will proceed to file the section 8 company registration application with the requisite documents before ROC. Once all clarifications are provided to ROC, the ROC shall issue a Certificate of Incorporation along with a Company Identification Number (CIN). The procedure for section 8 company registration under SPICe form is similar to other company.
- MoA and AoA file submission
Once you get the License, you need to draft the Memorandum of Association and Article of Association to file section 8 company registration application. The Object of the company will be detailed in the MoA and the rules and the by-laws will be detailed in the AoA.
- PAN, TAN and Bank Account
You must have your PAN, TAN and bank account ready while going for Section- 8 Company registration in India.
Documents required for Section 8 company Registration in India
Following documents are required for Section 8 Company registration:
- PAN Card of the Director or shareholder
- Aadhar Card
- Latest bank statement
- Telephone bill or electricity bill
- Voter’s ID or Passport or Driving license
- Passport size photograph of all director and shareholder
- Scan copy of the signature
- Copy of the Rental agreement in case the property is on rent for registered office
Section 8 Company Registration Fee in India
The Registration fees for Section 8 company registration is as follows
- DSC & DIN – 3000
- Company Name Reservation – 1000
- MoA& AoA& Government Fees & Incorporation fees - Rs 6000*
- Notary and Stamps – 2000
- Professional Fees- 13000
*Stamp duty included in the incorporation fees may vary according to the states.
Compliances under Section- 8 Company Registration in India
- Minimum Requirement
A Section 8 Company is a company to be incorporated by the Ministry of Corporate Affairs. Minimum two directors and two members are required to incorporate it. No minimum share capital is required for section 8 company registration.
- Charitable object
Section 8 companies are required to be incorporated with non-profit objectives. Any profit earned through a section 8 company will not be distributed among its members. It will either be reinvested in the business or utilized with an objective of furtherance of its main objects i.e. charitable purpose.
The objective of the company cannot be altered without prior permission from the Central Government of India.
- Management Team
Unlike other Trusts which are managed by the Trustees as per a Trust Deed, section 8 Companies are managed by the Board of the Director as per the MoA and AoA of the Section 8 Company.
- Under Companies Act, 2013
Section 8 company also needs to follow the rules and regulation that are prescribed under companies act, 2013. Maintaining Book of accounts, filing of returns if any required.
- Income tax
If a company is registered under the Income tax act, then the company is required to implement the IT act provisions. Filing all returns, accounts should be according to the Income Tax Act. Profit is 100% tax-free if 12A registration is obtained from income tax department.
- GST Registration
Every person or company who is into providing goods and services in the market needs GST Registration for the company.
- Annual Compliances
The annual compliances of section 8 company are just like the other companies.
- At least two Board meeting during the year should be conducted.
- Mandatory Audit
- Annual return is to be filed every year with other e- filing forms like MGT 7, AOC 4.
- Income tax return is to be filed every year.
- Additional compliances to fulfill the registration like 12AA, 80G etc.
Exemption for Section 8 Company Registration in India
- Income Tax
Under section 12AA of the Income-tax Act, 1961 an application is needed to be filed under the Income Tax Commissioner along with the requisite documents. Contact us to know about it more.
- Exemption to the donators
Under Section 80G, the exemption is granted to the donators if the section 8 company is registered under section 80G.
Donation under Section 8 Company Registration in India
Section 8 companies are prohibited to accept deposit from the public but they can accept the donation from the general public undoubtedly. The following are the ways under which the company can raise funding-
- After having FCRA registration the company is allowed to have a foreign donation. FCRA license can be applied after completing three years of section 8 company registration. However, in case there is any urgency then the company can take prior permission from the Commissioner.
- Section 8 company can also raise funds from issuing equity shares at a higher value.
- The ground for domestic donation is open to all there are no closed doors but there will be a proper check as in order to avoid the money laundering cases.
Advantages under Section 8 Company Registration in India
- No minimum capital is asked at the door of Section 8 Company Registration in India. The registration fee is based on the amount of the capital invested in it.
- There are numerous tax benefits under the Section 8 Company Registration in India.
- There is no stamp duty imposed on the incorporation of Section 8 company in India as it is against the provision of the payment of stamp duty on the MoA and AoA of the private limited company.
- Section 8 Company registration has a separate legal entity which means it acquires a distinct legal identity from its members.
- Section 8 Company has more credibility than any other form of charitable organization. It is under the strict provision of the Companies’ act which requires a mandatory audit every year.
- It does not require any addition in the name like Pvt Ltd or ltd even if it is incorporated under the Companies Act, 2013 and can retain its identity with its name.
Difference between Section 8 Company or Trust or Society
|Factor||Section 8||Trust or society|
|Meaning||Section 8 company registration is done as per Companies Act 2013 and recognized all over India||Trust or Society are registered under DGM locally and recognized state wise|
|Trust||They treated as more trustworthy because of the license granted.||Trust or Society lacks in gaining trust.|
|Authentication||Governed by MoA and AoA||Governed by their trust deed or bye-laws|
|Compliances implemented||Compliances are high, couldn’t spare even if no revenue is there||Very few compliances are required to be followed in Trust or Societies|
|Wind up||Can be closed within the parameter of law||The irrevocable trust cannot be closed.|
DO's and Don'ts of Section 8 Company
|Can do any activity without any profit motive||Cannot take the profit except in the form of salary, official expense etc|
|Can open branches all over India||Cannot run for only profit purpose otherwise, the exemption will be withdrawn|
|Can give salaries to the members or director of the company||Cannot accept deposit from the general public|
|Can claim exemption, donations|