India’s long history of philanthropy has gotten more attention in recent years, and many wealthy individuals are stepping forward to donate to the country’s poor. Non-governmental organisations (NGOs) play an important role in this process as well.
Tata Trusts, the Tata Group’s CSR arm, is directly involved in charitable activities by a policy established by Mr Ratan Tata years ago. As part of its philanthropy, Tata Trusts, which owns two-thirds of Tata Sons, will establish various charitable programmes in various new geographies in collaboration with the government and corporations.
Trusts, Societies, and Section 8 Companies are the three legal forms available in India for non-profit organisations. Indian Trusts are governed by no single law; Indian Societies are governed by distinct legal and institutional frameworks from state to state, whereas Section 8 businesses are governed by the Companies Act, 2013.
This comprehensive Act governs the establishment, management, and responsibility of a Section 8 Company, making it more carefully controlled and monitored than trusts and societies, and making it internationally recognised. A non-profit corporation, also known as a Section 8 corporation, is one that: promotes business, art, science, sports, education, research, social welfare, religion, charity, environmental protection, or any other aim.
A Section 8 company, as defined by the Companies Act of 2013,is an entity formed to promote the fine arts, science, literature, or knowledge sharing for a charitable purpose. These are limited liability businesses formed under the Companies Act. Under Section 8 of the Companies Act, the government provides these businesses with an exclusive licence.
Section 8 Company Registration Documents
Section 8 Company registration needs the following documents:
- Directors’ and Shareholders’ PAN Card
- The Aadhaar Card is a one-of-a-kind identification card issued by the Indian government.
- The most recent bank statement
- A phone bill or an electric bill
- A voter ID card, a passport, or a driver’s licence are all acceptable forms of identification.
- Photographs of all the directors and shareholders in passport size
- If the property is rented for the registered office, a copy of the rental agreement is required.
Section 8 Company Registration Benefits
The benefits of forming an NGO or NPO under Section 8 of the Companies Act 2013 are numerous. The following are a few of them:
- There is no requirement for minimum capital for a Section 8 Company Registration in India.
- Benefits of Section 8 Company Registration in India include a slew of tax advantages.
- There is no stamp duty: The establishment of a Section 8 company in India is exempt from stamp duty since it violates the requirement requiring the payment of stamp duty on the MOA and AOA of a private limited company.
- Section 8 Company Registration has a separate legal identity from the rest of the company. It gets its own legal identity from its members.
- Section 8 Company has a higher level of credibility than any other type of charitable organisation. It is subject to the severe provisions of the Companies Act, which mandates an annual audit.
- Exemption for donators: If the section 8 company is registered under section 80G, the exemption is granted to the donators.
Checklist for Section 8 Company Formation
The following are the requirements for registering a Section 8 company:
- A Section 8 company registration in India can be established by an individual, a HUF, or a limited company.
- Two or more people who will act as shareholders or directors of the company must meet all of the Section 8 Company registration criteria and compliances.
- One of the directors must be an Indian citizen. A firm, on the other hand, maybe a member of a corporation registered under this provision.
- The goal should be to promote sports, social welfare, scientific and artistic advancement, education, and financial help to low-income populations.
- The surplus generated must be used only to accomplish the section 8 company’s primary objective.
- The company’s founders, members, and directors are prohibited from receiving any compensation in cash or kind.
- Directly or indirectly, no profit should be distributed among the company’s members and directors.
- For the next three years, the company should have a defined goal and project plan.
In India, there is a fee for registering a company under Section 8 of the Companies Act
The following are the registration fees for a Section 8 corporation:
- DSC & DIN- Rs 3000
- Reservation of a company name – Rs 1000
- For MOA&AOA, Government Fees, and Incorporation Fees- Rs 6000-8000
- Stamps and Notaries – Rs 2000
- Professional fees- Rs 8000-10000
Annual compliance for Section 8 companies
Annual compliances for section 8 corporations are the same as for other businesses:
- A minimum of two board meetings are held each year.
- Accounting records must be updated on a regular basis.
- Financial Statements Preparation
- Audits are required.
- Submitting a tax return
- Form AOC 4 is used to file financial statements.
- Every year, along with other e-filing forms such as MGT 7, an annual return must be filed.
- Additional registration requirements, such as 12AA, 80G, and so on.
In India, the procedure for forming a Section 8 company is as follows:
To form a section 8 corporation in India, follow the steps below:
Prepare the DSC and submit the Name Approval form.
The first step in forming a Section 8 corporation is to create a DSC. As soon as possible, apply for a Digital Signature Certificate (DSC). Words like Foundation, Society, Association, Council, Club, Charity, Academy, organisation, Federation, Institute, Chamber of Commerce, Development, and others should be used in Section 8 corporations.
Submission of MOA and AOA files:
To file section 8 company registration applications, you must first prepare the Memorandum of Association (MOA) and Articles of Association (AOA).
PAN (Personal Identification Number), TAN (Taxpayer Identification Number), and Bank Account
When registering a Section 8 company in India, you must have your PAN, TAN, and bank account available.
Apply to the MCA’s Regional Director for a Section 8 Company Registration License (INC-12)
- The regional director will review the plans and goals before approving a Section 8 Company registration permit. A licence to operate as a section 8 company is usually issued by RD in 15 days.
- On the MCA Portal, you can file Section 8 Incorporation Forms.
- We will proceed to file the section 8 company registration application with the required documents with the ROC after receiving approval from the regional director.
On the MCA Portal, organizations can file Section 8 Incorporation Forms:
We will proceed to file the section 8 company registration application with the required documents with the ROC after obtaining approvals from the regional director. The ROC will issue a Certificate of Incorporation and a Company Identification Number after receiving all clarifications .This would be done under the standards of SPICE plus (Spice +).
In India, Section 8 company formation is in a class by itself. It is a non-profit organisation dedicated to social service for the betterment of society and the country.
Section 8 companies in India are subject to the following restrictions:
- Profits should only be used to promote the company or to achieve its goals of encouraging the arts, commerce, and science, for example. Apart from that, no one else, whether a director or a shareholder, can claim the company’s profit.
- Members of the company cannot be appointed as the remunerating officer, unlike other companies.
- Changes to the company’s MOA and AOA are not possible due to the company’s strict rules and regulations. This can be measured in terms of both benefits and drawbacks.
- It is not permitted to declare a dividend or distribute profits among its members.
- Furthermore, no benefit or remuneration shall be paid to its members, whether servants or officers of the company, except reimbursement of out-of-pocket expenses, reasonable rent on the premises, or reasonable interest on lent funds.
Penalty for Non-Compliance:
If the company fails to comply with the Act’s legal provisions, the Central Government will revoke its Section 8 company licence. The licence can be revoked if the company’s objectives are carried out fraudulently or in violation of the goals for which it was established.
If a company fails to comply with the Act’s provisions, it will be fined not less than Rs.10 lakh and up to Rs.1 crore. If the company’s directors and officers violate the Act’s provisions, they will be fined not less than Rs.25,000 and up to Rs.25 lakh or both.
In India, what is Section 8 Company Registration?
A Section 8 corporation is also known as a non-profit corporation. NGO stands for non-governmental organisation. A non-profit organisation can register under the Trust Act or the Companies Act of 2013. NGO can be formed to promote art, science, commerce, technology, sports, education, social research, social welfare, religion, charity, and environmental protection, among other things.
The Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industries are two examples of Section 8 companies.
What is the purpose of registering a company under Section 8 of the Indian Companies Act?
The Section 8 Company Registration in India serves the following purposes.
- Blood bank
- Environment protection
- Other objects of general public utility
Is it necessary to seek permission from the central government?
Yes, we must obtain permission or approval from the central government to register a section 8 company in India. Before registering a section 8 company, the CG must approve it.
Is it more expensive to register a business under Section 8?
Yes, forming a section 8 corporation is more expensive than forming a trust or a society.
What are Section 8 Company’s annual compliance requirements?
Annual compliances for section 8 companies are the same as for other businesses.
- At least two Board meetings should be held throughout the year.
- Audit Requirement
- Every year, along with other e-filing forms such as MGT 7, AOC 4, an annual return must be filed.
- Every year, a tax return must be filed.
- Additional registration requirements, such as 12AA, 80G, and so on.
How does a Section 8 company appoint an auditor?
The auditor is appointed by the board of directors within 30 days of Section 8 company registration, and no Central Government approval is required.
Are there any drawbacks to registering a company under Section 8?
The following are the disadvantages of registering a company under Section 8:
- Starting a Section 8 company is difficult because it requires approval from the central government.
- In comparison to any other trust or society, the cost of Section 8 compliance is high.
- Section 8 company has harsh penalty provisions.
What other requirements must a Section 8 Company meet to claim a tax exemption?
- Income Tax Act, Section 12AA
- FCRA Registration for Donors under Section 80G
As you can see, the section 8 registration company process entails a number of complicated steps and requires precise documentation. If you want to avoid all of these hassles, feel free to use Compliance Calendar LLP’s best-in-class services.
With a team of Company Secretaries, Chartered Accountants, Lawyers, and Finance Professionals who are experts in their fields, Compliance Calendar LLP is here to take on your compliance burden and reduce the risk of being non-compliant under various laws of the land. For queries, reach out to us at firstname.lastname@example.org or connect at 9988424211