Overview

In India, starting an NGO first involves choosing the right legal structure. Section 8 companies offer national presence and government backing, and several other benefits. If you envision your NGO growing nationwide and attracting grants, registering as a Section 8 company is the way to go.

Type of NGO

Society

Society is a non-profit organisation formed by a group of people with a shared interest in a social, cultural, educational, or religious cause. They typically operate under a constitution and are managed by a committee or governing board. Funding comes from memberships, donations, and grants. Examples include literary societies or professional associations. Society can be formed at the State level or National level. In order to form a National level Society, you must require a minimum of 7 members from different states.

Trust

A trust is established to manage assets (money, property) for a specific purpose, often charitable. It's created with an initial donation given by the settlor and governed by a deed outlining how the trustees manage the assets to fulfil the trust's goals. Examples include scholarship trusts or environmental conservation trusts.

Section 8 Company

A Section 8 company is the most transparent form of NGO registered under the records of ministry of corporate affairs [MCA] similar to a private limited company, but with a focus on promoting charitable activities for the public good. Such companies can't distribute profits to members and any surplus funds must be utilized to further their social goals. Donations and grants are their primary source of funding.

What is Section 8 Company?

Establishing an organisation under Section 8 of the Companies Act, 2013, [earlier known as a Section 25 Company under the Companies Act, 1956], provides a structured approach for those seeking to make a positive impact in society. These entities operate within the regulatory framework outlined in the Companies Act, 2013, and are classified as limited companies.

Under Section 8, the MCA grants exclusive license to these organisations, subject to three key conditions:

#. Charitable Purpose: The organization must be registered with the primary & sole objective of serving charitable causes.

#. Income Allocation: All generated income and profits are earmarked for fulfilling the charitable objectives.

#. Dividend Restrictions: Members of the organization are prohibited from receiving dividends/surplus/profits.

By adhering to these requirements, your NGO not only contributes to societal welfare but also benefits from the advantages associated with Section 8 Company Registration.

Benefits of Section 8 Company Registration in India

# Save on taxes: Section 8 companies qualify for complete tax exemption on profits with 12A and 80G Registration used for charitable purposes. Thus, helping you have significant tax savings.

# No Minimum Capital Requirement: There's no minimum capital requirement to register a Section 8 company.

# Reduced registration fees: Section 8 companies are exempt from stamp duty during registration, saving you money on establishment costs.

# Separate legal entity: Section 8 companies operate as a distinct legal entity, fostering credibility and autonomy.

# Enhanced trust: Strict adherence to legal guidelines makes Section 8 companies more trustworthy compared to society and trusts.

# Greater naming freedom: You can choose a name that best reflects your organisation's mission without being required to include "Section 8" in the title.

Eligibility Criteria for Section 8 Company Registration

You have to satisfy the following three conditions to be eligible for Section 8 Company Registration:

#1. Promoting social good: This includes a wide range of areas such as science, commerce, education, art, sports, research, religion, charity, social welfare, and environmental protection.

#2. Reinvesting profits: Any income generated by the company must be used to further its social objectives, not distributed as dividends to members.

#3. Non-profit focus: Distributing profits to members is not a goal of a Section 8 Company.

Mandatory legal requirements for Section 8 Company

There is no prescription with respect to minimum or maximum directors in a section 8 Company.

Number of Members:

The Ministry of Corporate Affairs (MCA) sets limits on the number of members based on the company structure.

Capital Requirement and Name:

The Companies Act of 2013 offers some flexibility for Section 8 Companies:

- Minimum Capital: There is no requirement for a minimum paid-up capital.

- Naming: Unlike private limited companies, Section 8 NGOs are not obligated to include terms like "private limited" or "limited" in their name.

However, it is mandatory that the name of section 8 Company shall include the words such as – Foundation, forum, association, federation, chamber, confederation, Council, electoral trust etc.

Documents Requirement for Section 8 Company Registration

1. Identity Proof (Directors):

# PAN Card

# Passport size Photo

# One of the following identity proof for each director & Shareholder(copies):

- Voter ID Card

- Passport

- Driving License

2. Address Proof (Directors & Shareholder):

# Provide one of the following documents (not older than two months) for each director:

- Latest Bank Statement

- Electricity Bill

- Telephone Bill

- Mobile Bill

3. Registered Office Proof:

# Owned Property:

- Electricity Bill (not older than two months)

- Registry Proof (copy) OR House Tax Receipt (copy)

4. Rented Property:

# Electricity Bill (not older than two months)

# Notarized copy of the Rent Agreement

# No Objection Certificate (NOC) from the property owner (original)

Section 8 Company Registration Tax Exemptions and Reliefs

Section 8 Company can provide tax exemptions to donors after having 12A and 80G Registration. Thus, donors who contribute to a Section 8 company can claim tax deductions under Section 80G of the Income Tax Act. Furthermore, 12A and 80G Registration signifies legitimacy and enhances the trust of donors.

Know more about 12A and 80G Registration or call experts: 8881-069-069

Compliances of Section 8 Company Registration

1. Audit & Accounts:

#. Auditor Appointment (Form ADT-1): Required within 30 days of incorporation (5-year term).

#. Statutory Registers: Maintain registers for members, loans, charges, directors, etc. (as per Companies Act 2013).

#. Board Meetings: Atleast one meeting within every six calender months.

#. Annual Audit: By a Chartered Accountant (CA).

#. Financial Statements (Form AOC-4): Audited financials filed within 30 days of the AGM.

2. Meetings & Reports:

#. AGM Notice: Minimum 14 days' notice required for general meetings (annual or extraordinary).

#. Annual General Meeting (AGM): Held within 6 months of fiscal year-end (except for the first year, which can be within 9 months). Subsequent AGMs must be within 15 months of each other.

#. Board Report: Filed in Form AOC-4, including financial statements and annexures.

3. Tax & Filings:

#. Income Tax Returns: Due by October 31st of each assessment year.

#. Tax Audit (Form 10B): Applicable to charitable/religious trusts registered under Section 12A or applying for registration under Section 10A. Due by September 30th.

#. Annual Return (Form MGT-7): Filed with the Registrar of Companies (ROC) within 60 days of the AGM (includes management & shareholder details).

#. DIN KYC: Due by September 30th for individuals with a Director Identification Number (DIN) who has allotted DIN by MCA on or Before March 31st.

Due Dates Summary Table for Section 8 Company: