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Section 8 Company Registration – An Overview
Section 8 Company Registration is essential to encourage non-profitable goals. Donations made to Section 8 Companies are eligible for deductions under the rules of the Income Tax Act, and these companies enjoy tax exemptions. The sole purpose of the establishment is to promote social entrepreneurship and charity in India to help the ones in need.
Before applying for incorporation with the Registrar of Companies (ROC), the applicant must get a license from the Central Government to incorporate a Section 8 company in India. To ensure compliance, it is imperative to strictly adhere to the goals set forth during registration.
What is a Section 8 Company?
A non-profit organization created to advance business, the arts, science, sports, education, research, social welfare, religion, charity, the environment, or any other comparable goal is known as a Section 8 Company under the Companies Act of 2013.
In contrast to other businesses, it uses the money it makes to achieve its declared goals rather than dividing it up among its members.
Characteristics of Section 8 Company
Certain unique characteristics of Section 8 company needs to be looked at. These are as follows:
1- Non-profit Entities
Section 8 company registration is made to start an organization with the sole purpose of doing charitable and philanthropic work as per the objectives established at the time of its incorporation.
2Profit Utilization
All the profits, income, or donations received by these entities must be utilized to carry forward with their objective and not to share them between the partners. None of the profits accrued by the organization goes into the pockets of the partners.
3.Dividend Distribution
Along with profits, no dividend is distributed among the members of the organization. These all are reinvested to promote the objectives of the organization and help as many individuals as possible.
Benefits of the Section 8 Company Registration
Section 8 Companies enjoy tax exemptions. The significant benefits of Section 8 Company Registration are mentioned below–
1.Legal Recognition
By obtaining the Section 8 Company Registration, the entity gets the legal recognition in the country making them eligible to accept donations and funding from outside sources. It also ensures tax exemptions as per the Income Tax Act, of 1961 for the donors.
2.Limited Liability
The registration ensures that the members, shareholders, directors, and partners are not fully liable for anything. They share a limited liability based on their contribution to the entity.
3.Perpetual Existence
Incorporating a Section 8 Company makes sure that even after the non-involvement of founding members, the entity will be able to function in the country without any hindrance.
4.Taxation Benefits
The donors in the entity get tax exemptions for registration under section 12A and donations under section 80G. This helps them raise more funding through outside sources to meet the objectives of the organization.
5.Impact on Society
The main purpose of these entities is to serve the people in need and promote social services around the country. These services make a very positive impact on society and promote harmony among people.
6.Collaborations
Section 8 Company Registration ensures that other entities or foreign bodies collaborate with them and work on their objectives together. These collaborations help them in achieving their target quickly and work for a better public cause.
7.Government Grants
The incorporated entities tend to get more government benefits and grants to carry forward their objective of social cause.
Eligibility Criteria for Section 8 Company Registration
Certain eligibility criteria must be met to proceed with the Section 8 Company Registration as per the Companies Act 2013. These are as follows:
Documents Required for Section 8 Company Registration
To start with the process of registration, the applicant first needs to know the documents required for Section 8 Company Registration. These are as follows –
Procedure for Section 8 Company Registration
Certain procedures have been laid down to get the Section 8 Company Registration. These procedures are as follows –
1.Name Approval
To start the Section 8 Company Registration procedure, the applicant needs to obtain a name approval for the entity from the Ministry of Corporate Affairs. It must be taken into notice that the company name must end with certain words like association, foundation, federation, forum, council, etc.
2.Obtaining DSC & DIN
The directors of the organization need to attain the Digital Signature Certificate and the Director Identification Number. These documents are necessary for the directors to take charge of the organization and continue with its goals.
3.Drafting MoA and AoA
The incorporating company must draft the Memorandum of Association and the Articles of Association, which must depict the objectives of the organization and the rules and regulations of the organization. The objectives must be contained in the MoA, and the by-laws must be mentioned in the AoA.
4.Section 8 Company License Application
A Form INC-12 must be filled out to the regional director stating the objectives of the organization to be incorporated, to get the section 8 company license. The application is made online through the official website of the Ministry of Corporate Affairs which grants license approval through Form INC-16.
5.Filling out the Application Form
As soon as the entity gets approval from the regional directors in Form INC-16, they can proceed to fill out the application form online through the official website of the Ministry of Corporate Affairs in the SPICe+ Form INC-32.
The Registrar of Company (ROC) looks into all the relevant forms and documents submitted by the applicant and upon all clarifications, issues the certificate of incorporation with the Company Identification Number.
6.Incorporation Certificate Issuance
Following application submission, the Registrar of Companies (ROC) thoroughly examines all supplied information and supporting documentation. The Registrar of Companies registers the business for the purpose specified in the application if all the verifications are completed satisfactorily.
The firm is subsequently granted a Certificate of Registration, which is the official document attesting to the registration. In addition, the corporation is given a Corporate Identity Number (CIN) to help with its distinctive identity.
List of Forms Required for Section 8 Company Registration
To go through the process, certain forms are required. The list of forms required for Section 8 Company Registration is as follows –
Section 8 Company Registration Compliance
Section 8 company registration compliances are necessary to follow to avoid any legal issues in the future leading to company dissolution. These compliances are as follows –
1.Director Availability
At all times in the organization, there must be at least two directors in which one should mandatorily be an Indian. Along with the directors, there must be a minimum of two members as well.
2.Organization’s Object
The sole purpose of establishing a Section 8 company is to do charitable work for the general people of the society who are in dire need of support. At no point, such an object should change into profit profit-making business. The profits earned through any mode in the organization must be utilized for carrying forward the objective stated in the MoA submitted to the registrar.
Even the members of the organization are not allowed to share any profits or dividends.
3.Management
Section 8 companies are at all times managed by the board of directors working as per the MoA and AoA submitted to the registrar at the time of incorporation. They are responsible for carrying forward the objectives set for the organization.
4.The Companies Act, 2013 Regulations
Section 8 companies are incorporated under the Companies Act 2013, and they must follow all the regulations set for them in the act. For example, annual returns fillings, maintaining the books of accounts, holding meetings of the board of directors at regular intervals, financial statements filing in Form AOC 4, audit reports, etc.
5.Income Tax Act, 1961 Regulations
The donors in the entity get tax exemptions for registration under section 12A and donations under section 80G. To claim these deductions, the entity must acquire the 80G and 12A Registration certificate, which helps them get more donations and through which the donors get the benefit of tax deductions.
6.GST Compliance
The organization needs to attain a GST registration certificate in a case where the service-providing business does business with more than the threshold limit of Rs 20 Lakhs and the one that deals in goods has an annual turnover of more than Rs 40 lakhs.
Recent Updates on Section 8 Company Registration
As per notification no 19/2021 of CBDT, dated April 1st, 2021 issued on March 26th, 2021 there were significant changes brought to the Finance Act of 2020. These changes are as follows –
Fee for Section 8 Company Registration in India
The fee required for the Section 8 Company Registration depends on factors like whether or not the applicant has the DSC, DIN, Income Tax registrations, name approval, etc. If the applicant requires all the things and documents required for registration then the fee may range between Rs 20,000 – 25,000. The fee bifurcation is done below –
Section 8 Company Registration Timeline
The timeline required for Section 8 Company Registration depends upon how fast the applicant can complete the documentation process along with the DSC and DIN of directors. After all the documents are collected, the application form from the website of MCA has to be filled out online.
It usually takes around 15 – 20 days to get the Section 8 Company Registration certificate if all the documents are submitted as required and no objection or correction is happening from the end of the registrar of companies.
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Frequently Asked Questions
Section 8 Company under the Companies Act of 2013 is a non-profit organization created to advance business, the arts, science, sports, education, research, social welfare, religion, charity, the environment, or any other comparable goal.
To start the Section 8 Company Registration procedure, the applicant needs to obtain a name approval for the entity from the Ministry of Corporate Affairs. It must be taken into notice that the company name must end with certain words like association, foundation, federation, forum, council, etc.
A Form INC-12 must be filled out to the regional director stating the objectives of the organization to be incorporated, to get the section 8 company license.
Section 8 company is incorporated for purposes like advancing business, arts, science, sports, education, research, social welfare, religion, charity, the environment, or any other similar goals.
According to the old Companies Act of 1956, a Section 25 company was the same as a Section 8 company under the new Companies Act of 2013. The organizations, which were formerly known as Section 25 companies, were some of the most well-liked non-profit organizations in India. These non-profit corporations' categorization was changed from Section 25 to Section 8 with the passage of the revised Companies Act in 2013.
No, Section 8 Companies do not have to pay income tax as long as their profits and income are invested to serve the purpose of their objectives stated in the MoA. Section 12AA of the Income Tax Act, of 1961 grants this exemption. However, if the income is used for activities other than those mentioned in the objectives or income comes from any commercial activities then the tax has to be paid.
There must be a minimum of 2 members in a Section 8 company, however, there is no maximum limit on the number of members. The company can have as many members as are required to meet the objectives of the organization.
Yes, it is mandatory to have a registered office to proceed with the Section 8 Company Registration in India.
Yes, a foreign national as well as an NRI can be a director of a Section 8 company in India as long as he/she is following the regulations established to be a director of the company. However, there must be one director of Indian nationality in the organization.
The compliances of Section 8 Company as per the Companies Act are annual returns fillings, maintaining the books of accounts, holding meetings of the board of directors at regular intervals, financial statements filing in Form AOC 4, audit reports, etc.
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