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Section 8 Company Registration in India
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Starting a Section 8 Company in India
A Section 8 Company is a non-profit organization registered under the Companies Act, 2013, dedicated to promoting charitable activities such as education, social welfare, arts, science, and environmental protection. Unlike other companies, its primary objective is not profit-making but utilizing income for social causes. To start a Section 8 Company, one must obtain approval from the Registrar of Companies (ROC) and comply with regulatory requirements, ensuring transparency and accountability.
Key Features of a Section 8 Company
- • The company’s profits must be used for charitable purposes, and no dividends are distributed to members.
- • Members’ liability is restricted to the amount they contribute, protecting personal assets.
- • Eligible for exemptions under Income Tax Act, 1961 and other government incentives for non-profit organizations.
What Is A Section 8 Company?
A Section 8 Company is a non-profit organization registered under the Companies Act, 2013, with the objective of promoting charitable activities such as education, social welfare, environment protection, arts, and science. Unlike other companies, it does not distribute profits to its members but instead uses them to advance its social or charitable mission.
Eligibility Criteria for Section 8 Company Registration in India
- ✔ Non-Profit Objective :The company must be formed for charitable, social, or non-profit purposes.
- ✔ Minimum Members : Requires at least two directors and two shareholders for a private company or three directors for a public company.
- ✔ No Profit Distribution : Profits or income must be reinvested in the company’s objectives and cannot be distributed as dividends.
- ✔ Approval from Government : Requires approval from the Registrar of Companies (ROC) and Central Government before incorporation.
- ✔ Registered Office Address : Must have a valid registered address in India for official communication.
- ✔ Compliance with Tax & Laws : Must comply with Income Tax Act provisions and can avail tax exemptions under Section 12A and 80G.
- ✔ Registered Office Address : Must have a valid registered address in India for official communication.
Silent Features
Non-Profit Nature
No Dividend Distribution
Limited Liability
Tax Exemptions
No Minimum Capital Requirement
Government Regulation
Advantages of a Section 8 Company
A Section 8 Company is a widely preferred business structure in India due to its numerous benefits. Here’s an overview:
- Tax Benefits : Eligible for exemptions under Section 12A and 80G of the Income Tax Act, reducing financial burdens.
- Limited Liability : Members’ personal assets are protected, as liability is limited to their contribution..
- No Minimum Capital Requirement : Can be started with any amount, making it accessible for smaller organizations.
- Legal Recognition : Enjoys a structured legal identity and credibility, making it easier to receive grants and donations.
- Exemption from Stamp Duty : Section 8 companies are exempt from paying stamp duty on registration.
- Higher Credibility :More trustworthiness compared to NGOs and societies due to stricter compliance and government approval.
Disadvantages of a Section 8 Company
While a Section 8 Company offers several benefits, it also comes with certain challenges:
- Strict Compliance Requirements : Must adhere to regulatory norms under the Companies Act, including annual filings and audits.
- Government Approval Needed : Incorporation requires prior approval from the Registrar of Companies (ROC) and Central Government.
- No Profit Distribution : Members cannot receive any dividends, as profits must be reinvested for charitable purposes.
- Limited Fundraising Options : Cannot raise capital by issuing shares, unlike other corporate entities.
- Time-Consuming Registration Process : Approval and incorporation take longer due to multiple legal verifications.
- Operational Restrictions :Bound to its original objectives, and any changes require government approval.
Documents Required
PAN card of all directors and shareholders.
Aadhaar card, passport, voter ID, or driving license of directors and shareholders..
Utility bills (electricity, telephone, or gas bill, not older than 2 months).
Rent agreement and NOC (No Objection Certificate) from the property owner or ownership documents if self-owned.
Defining the company's objectives, structure, and operational guidelines.
Form INC-14 (Declaration by a professional), Form INC-15 (Declaration by directors), and Form DIR-2 (Consent of directors).
Step-by-Step Guide For The Process
Here are 5 steps to complete your process
Step 1
Obtain a Digital Signature Certificate (DSC)
Step 2
Director Identification Number (DIN)
Step 3
Name Reservation (SPICe+ Part A)
Step 4
Draft Memorandum (MoA) & Articles of Association (AoA)
Step 5
Preparation & Submission of Incorporation Formst
Compliance Requirements for Section 8 Companies
Every Section 8 Company must comply with annual regulatory requirements set by the Ministry of Corporate Affairs (MCA) to maintain its nonprofit status. These include auditing financial records, filing returns, and adhering to legal documentation. Non-compliance may lead to penalties, revocation of tax exemptions, or legal action.
| Form | Compliance Requirement | Due Date | Penalty |
|---|---|---|---|
| INC-20A | Certificate for Commencement of Business | Within 180 days of incorporation | ₹50,000 for non-compliance |
| DIR-3 eKYC | KYC verification for Director Identification Number (DIN) | On or before 30th September every year | Deactivation of DIN, ₹5,000 late fee |
| ADT-1 | Appointment of Statutory Auditor | Within 15 days of auditor’s appointment | Late fees apply |
| AOC-4 | Filing of financial statements | Within 30 days of the Annual General Meeting (AGM) | ₹100 per day after due date till the filings is done |
| INC-12 | Application for grant of Section 8 License | Before starting operations | License revocation for non-compliance |
| Form MGT-7 | Filing of annual returns | Within 60 days of the AGM | ₹100 per day after due date till the filings is done |
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