Section 8 company are formed by those who do not have any profit motive, rather they have a social objective which they want to achieve. Hence, the mandatory requirements to start a section 8 company are as follows:
Minimum of two persons are required along with the documents stated above.
You must have a plan for your social objectives, as ROC may ask for the same.
Assure the prohibition on payments of dividends to any of its members.
Filing Application form
Obtaining DSC and DPIN for director of OPC
Verification and Name Approva
Obtaining Section-8 Company Licence
Drafting of necessary documents and their Submission with the Concerned Authority
COI and Delivery of Documents
PAN, TAN Card and the Bank Account of the Company Registered
Copy of Pan Card of Directors
Copy of Adhaar/ Election Card of Directors
Passport Size Photographs
Copy of ownership/rented property
Landlord Noc (if Rented)
A section 8 company which earlier was known as section 25 company is a legal form for non profit organizations (NPO) or Non Governmental organizations (NGO) having objective of promotion of arts, commerce, charity, education, protection of environment, science, social welfare, sports, research, religion and intends to apply its profits, if any, or other income in promoting its objects.
The income of the Company must be used to promote only charitable objects and cannot pay any dividend to the members of the company. The central government provides an incorporation certificate to all such companies and also inform them about some restrictions and conditions.
- No Minimum Share Capital Requirement
- Easy Transfer of Ownership
- Tax Benefits
- No need to use “Section 8” or “Limited” title
- No Stamp Duty
- Clear Objectives for easy donations and loans
- Easy to Manage
- Exemptions and Privileges under Companies Act, 2013
- Relaxation in Compliances
Any individual/organization can become the member of Section 8 Company including foreigners/NRI’s
Section 8 company can be registered for many social factors like
- Blood bank
- Environment protection
- Other objects for general public utility.
Yes, to register the section 8 company in India, the central government approval is required. CG approval is applied before company registration. When the government is satisfied that registration is sought for some social causes and not for tax planning, then they proceed and grant the registration.
There is no minimum capital requirement for Section 8 Company in India. If you are planning to register a section 8 Company, then you don’t need to worry about the capital required.
The annual compliances of the section 8 company are very similar to normal companies. The highlights of which are as follows:
- Need to hold atleast two board meetings during the year.
- Audit is mandatory
- Annual return is to be filed every year with other e-filing forms like MGT 7 , AOC 4.
- Further every year income tax return is also required to be filed.
- Additional compliances to fulfill the registration like 12AA, 80G etc.
Section 8 company is a registered entity and has recognition all over India.They are treated more trustworthy because they have a license. Compliances are high here and even need to comply in case of no revenue. Such Company is governed by the MOA and AOA of the company. It can be closed within the parameters of law. The maintenance cost is high in section 8 company.
Trust and societies are registered at DGM locally and has recognition state wise.They are registered with local state authorities hence, lacks trust factor initially.There are very few compliances to be made in comparison to section 8.Trust and Societies are governed by their trust deed or bye laws.The irrevocable trust cannot be closed. Cost is very low as compared to the section 8 company.
Section 8 company is non-profit company which aims to support the social objectives of the society. There are many advantages of this form over trust and society registration:
- It is easier to register under Income tax act, 1961 because section 8 company have proper documentation.
- It is the registered form of NPO and hence more trust factor to people donating into it.
- Section 8 company can work on PAN India basis and does not require any separate approval.
- Section 8 company is formed after Central Government approval and hence offers more authenticity.
Section 8 company is one of the best forms to register in case you are planning to register a NGO. However, it has certain disadvantages which are as follows:
- Section 8 company is difficult to start because it requires Central Government Approval.
- Section 8 compliance cost is high as compared to any other NGO/NPO form.
- Penalty provisions are little harsh under section 8 company.
Only by registering a section 8 company does not result into income tax exemption and further exemption to the donators. Rather section 8 company is the first step to claim the income tax exemption. There are basically two types of Income Tax exemptions which are as follows:
- Exemption to Section 8 Company from Income Tax: This exemption is claimed under Section 12AA of the Income tax Act, 1961. As per section 12AA, an application is filed to the Income tax commissioner along with the necessary supporting documents. If Income tax commissioner is satisfied, then he shall grant the tax exemption to the company.However, complying with section 11 to section 13 is very important to avoid revocation of exemption.
- Exemption to donors under Income tax: This exemption is claimed by donors under section 80G. However,the donor is only eligible to take tax exemption if the section 8 company is registered under section 80G. This exemption can be filed along with section 12 exemption or anytime after that.