Enquiry form
A Section 8 Company is a type of company that is formed for the purpose of promoting commerce, art, science, education, research, sports, charity, social welfare, religion, environmental protection, or any other purpose, and intends to use all of its profits, income, or other earnings to further these goals. It does not pay out any dividends or income to its members.
These are limited companies, which are registered under the Companies Act, and will be treated as limited companies without the phrase “limited” being added to their name.
A previous version is Section 25 Company (under the Companies Act, 1956). “Non-Profit Organizations (NPOs)” or “Non-Governmental Organizations (NGOs)” are legal forms of “Section 8 Companies.” A Section 8 Company has the authority to work anywhere in the country.
A Section 8 Company is a non-profit company formed for the purpose of charity donations rather than profit. Section 8 Company’s earnings or profits are solely used to promote charitable causes. All such companies are given an incorporation certificate by the central government, that also alerts them of various restrictions and criteria. If they are unable to meet the conditions, the government may decide to close their company. In the event of a fraud, the company’s officers will face legal prosecution.
Being a Non-Profit Organization (NPO) does not imply that the company cannot make a profit or generate revenue. It simply means that the company can make money, but the promoters are not entitled to any of the gains. The revenues will not be shared among the promoters. All profits must go toward promoting the object.
Nonetheless, under Section 8 of the Companies Act 2013, some exemptions and privileges have been allowed for both “NGO and NPO.” There are numerous tax exemptions available to such companies. Donors who contribute to the Section 8 Company are also entitled to receive a tax deduction for their contributions.
Some of the advantages are:
Section 8 Company is not allowed to raise capitals by way of deposits but they can accept donations from the general public. Below are some of the ways by which it can raise funding:
• The company should be formed for the promotion of a social cause. It may be charity, education, industry, sport, etc.
• Income and profits should be used for this purpose or object only.
• No dividend should be paid to its members.
A Section 8 Company is at first to be registered in the same manner as a limited company. After this registration procedure, it needs to obtain a license from the Central Government to be registered under this Section. This license is provided on the basis of the Company’s objectives which have been mentioned in MoA and AoA and some other criteria.
Yes. A Section 8 company can be converted into a private limited company after taking approval from ROC.
No. A promoter of an NPO cannot be a paid employee of the Company.
The annual compliances which must be met by a Section 8 Company are the same as other normal companies registered under the Companies Act.
1. Conducting 2 Board Meetings, at least, in a year.
2. Mandatory audit of the Books of Accounts.
3. Annual returns, along with other e-filing forms such as MGT-7, AOC-4, etc.
4. Income tax returns.
5. Additional compliances to fulfill the registration u/s12AA, 80G, of the Income Tax Act, applicable to donations, etc.
Foreign donations are allowed only when FCRA (Foreign Contribution Regulation Act 1976) registration has been done. FCRA license can only be applied after 3-years from the date of registration. However, if some really urgent foreign donations are necessary, then you may apply for a prior permission from the commissioner.
Yes. Section 8 Companies can invest in other companies. To meet the objectives of it’s formation.
Yes, it can form a subsidiary company which is normal and plans to make profits.