A Section 8 Company is related to endorsement of religion, social welfare, charity, science, art, research, education, sports, protection of the environment, and other similar entity. The sec 8 company formation proposes to implement entire income, earning, and profit in promoting these entities.
There is no clause of income and or dividend to its members. These companies are considered limited companies due to their registration under the Companies Act. They will be regarded as a limited company but without the name “limited” addition to their name. These companies can be registered under public limited and private limited companies.
Section 8 Companies are legal entities for Non-Governmental organizations (NGOs) or Non-Profit Organizations (NPOs). Section 25 Company (under Companies Act, 1956) is an earlier form legal entity to the same objects. Section 8 Company has the authorization to work everywhere in the nation. The Section 8 company registration gives you many advantages.
The income earned by NPO can’t be used to pay out dividends to the company’s members and needs to be used for promoting charitable objectives only. These companies need to obtain an incorporation certificate from the central government and have to adhere to all the rules mentioned by the government to start with the section 8 company registration procedure.
What is the key objective of Section 8 Company?
The objective of Section 8 Company mandatory is the promotion of Charity, Welfare, Protection of Environment, Commerce, Sports, Social, Religion, Research, Education, Art, Science, or any such subsequent entities.
Key Takeaways
- Section 8 Company has no Minimum Capital requirement.
- The donors of a Section 8 company can avail of the benefits of tax rebate under Section 80G and 12A of the Income Tax Act.
- Section 8 Organizations are more trustworthy as compared to other types of charitable organizations. They are firmly controlled and regulated by the Companies Act. For example, the need for a compulsory yearly audit, AOA, and MOA can ever be modified for any reason.
- A Section 8 registered company is free from paying any stamp duty as compared to other forms of company.
Eligibility to Apply for Section 8 Company: Register Section 8 Company
An individual or an association of individuals can apply for company registration under section 8 in case they meet the criteria. Also, the objective of the company must be confirmed to the satisfaction of the Central Government.
- When the company wants to promote science, commerce, education, art, sports, research, religion, charity, social welfare, protection of the environment, or alike other objectives.
- When the company aimed at investing all the profits (if any) or any other income generated after incorporation for promoting such objects only.
- When the company doesn’t want to pay any dividend to its members. It doesn’t allow any payment of dividends or income to its members.
- Section 8 Company is for those who don’t want to generate profitable revenue from the company. Even all the income, funds and profit applied to some portion of social structure.
Documents needed for the Section 8 Company formation
The list of the documents required for section 8 company registration includes:
· Digital Signature Certificate
· Memorandum of Association
· Articles of Association
· Passport Size Photographs
· Members’ ID card like Aadhar Card, Passport, Voter ID, etc.
· Details of Director
· Address proof
· Director Identification Number
Procedure to Register a Section 8 Company in India
The procedure for registration of a section 8 company in India is:
· The first and foremost step for Section 8 company registration is to make DSC. Section 8 companies must contain words such as Foundation, Society, Association, Council, Club, charities, Academy, organization, Federation, Institute, etc.
· After that fill out Section 8 Incorporation Forms on MCA Portal. Post getting all the clarifications, the ROC will issue a Certificate of Incorporation along with a Company Identification Number (CIN) as a part of sec 8 company incorporation.
· Post getting the License, it is important to draft the MoA and AoA to file section 8 company registration applications.
· Keep your PAN, TAN and bank account ready while doing Section- 8 Company registration in India.
Advantages of Section 8 Company Registration
There are various perks to register a NGO or NPO as per the Section 8 of Companies Act 2013.
Some of them are as follows:
Name
The best part of Section 8 Company is that you don’t have to use suffix Limited or Private Limited to its registered name. You can register section 8 company with words containing Federation, organization, Institute, Academy, Association, Society, Club, Charities, Council and Foundation
No minimum capital
There is no minimum capital requirement for doing Section 8 Company Registration in India. Moreover, the Capital Structure of Section 8 Company can be modified at any stage depends upon the needs of the organization. It clearly shows that this type of company can be registered and formed without the help of any capital investment. The necessary funds can be obtained through donations, subsidies, and charity from the general public and other organizations.
Tax Benefits
There are various tax advantages under Section 8 Company Registration in India.
No Stamp Duty
There is no stamp duty on the establishment of Section 8 Company in India as it is not in the favour of the payment of stamp duty on the MoA and AoA of the Pvt. Limited Firm.
Separate Legal Identity
Section 8 Company registration has a separate legal entity and it requires a distinct legal identity from its members. Registering a Section 8 company means you have availed a distinct legal identity. It means that it has a different identity other than its members. The company has permanent existence along with having structured functions and flexibility.
Membership
An incorporated partnership company can become a member of its person capacity and acquire Directorship.
Credibility/ Goodwill
Section 8 Company has more credibility than any other kind of a charitable organization. Section 8 company is under the strict provision of the Companies Act requiring a compulsory audit annually.
Exemption to donators
According to the Section 80G, the exemption is given to the donators in case the section 8 company is registered as per the section 80G.
Some other benefits for the Incorporation of Section 8 Company
- By establishing the section-8 company, the intention must be to do any activity beneficial for the society and obtain integrity and commitment.
- The reliability of section 8 company is more related to the communities and the extra charitable firms.
- As per the communities of trust, grants and subsidies via the government and the additional institutions are considered by the section-8 company.
Annual Compliances for Section 8 companies – Companies Act 2013
As per the Companies Act 2013, the annual compliances of section 8 company are written below:
· Organizing at least 2 board meetings in a year.
· Maintenance of Books of Accounts
· Preparation of Financial Statements
· Mandatory Audit
· Income tax return filing
· Filing of financial statements under AOC 4
· An annual return needs to be filed annually with other e- filing forms like MGT 7.
· Additional compliances to meet the registration process like 12AA, 80G etc.
