Establishing a company for charitable purposes is a noble endeavor that requires proper legal incorporation. Section 8 company registration is the most popular method for setting up non-profit organizations in India. This guide dives into the process, requirements, and benefits of Section 8 companies while addressing how it differs from private limited company registration, OPC registration, and subsidiary companies.

What is a Section 8 Company?

A Section 8 company is a legal entity established under the Companies Act, 2013, for promoting charitable objectives like education, social welfare, arts, science, and environmental protection. Unlike other companies, Section 8 companies reinvest their profits into achieving their goals rather than distributing them to members.

Key Features of Section 8 Company

1. Charitable objectives: Operates solely for charitable purposes.

2. Profit Utilization: Profits are reinvested into the organization’s activities.

3. Tax Exemptions: Enjoys specific tax benefits under the Income Tax Act.

4. No Minimum Capital Requirement: Section 8 companies can be formed without a fixed capital requirement.

Benefits of Section 8 Company Registration

-Tax Benefits: Reduced tax liabilities under Section 80G and Section 12A of the Income Tax Act.

-Credibility: A registered Section 8 company is trusted more by donors and government bodies.

-Grants and Donations: Eligible to receive government grants and foreign contributions.

-Separate Legal Identity: Operates independently of its members, offering limited liability protection.

Difference Between Section 8 Company and Private Limited Company Registration

Section 8 Company vs OPC Registration

An OPC (One Person Company) is ideal for solo entrepreneurs who want limited liability while running a business. In contrast, a Section 8 company requires at least two members and is exclusively for non-profit purposes. OPCs focus on profit-making, while Section 8 companies are entirely charitable.

Who Can Register a Section 8 Company?

Any individual, association, or group of individuals can apply for Section 8 company registration, provided their objectives align with charitable purposes, including:

-Promotion of commerce, art, science, or literature.

-Advancing education, research, or sports.

-Environmental protection or welfare initiatives.

Step-by-Step Section 8 Company Registration Process

1. Obtain Digital Signature Certificate (DSC)

-All directors must obtain a DSC to file documents online.

-This can be acquired from certified agencies.

2. Acquire Director Identification Number (DIN)

-Register all directors with the Ministry of Corporate Affairs (MCA) by obtaining their unique DIN.

3. Name Reservation

-Apply for a unique company name through the RUN (Reserve Unique Name) facility on the MCA portal.

-Ensure the name reflects the charitable purpose.

4. Draft Memorandum and Articles of Association (MoA and AoA)

-MoA specifies the objectives of the company.

-AoA outlines operational rules and management processes.

5. Apply for License Under Section 8

-Submit Form INC-12 to the Registrar of Companies (RoC) along with the MoA, AoA, and other required documents.

-The license is granted after thorough verification.

6. Incorporation Filing

-Submit SPICe+ (Simplified Proforma for Incorporating Company Electronically) form along with supporting documents.

-Once approved, the RoC issues a Certificate of Incorporation.

Documents Required for Section 8 Company Registration

1. Identity Proof: PAN card, Aadhaar card, or passport of directors and members.

2. Address Proof: Utility bills, voter ID, or bank statement of directors and members.

3. Registered Office Address Proof: Rental agreement and no-objection certificate (NOC) from the landlord.

4. MoA and AoA: Clearly defining the company’s objectives and rules.

5. Photographs: Passport-sized photographs of directors and members.

Section 8 Company vs Subsidiary Company

A subsidiary company is a business entity controlled by a parent company, primarily established for profit-oriented objectives. In contrast, Section 8 companies are standalone entities focused on charitable goals and governed by strict legal requirements.

Role of AD Code Registration in Section 8 Companies

AD Code (Authorized Dealer Code) registration is essential for Section 8 companies that intend to engage in import-export activities. This code, issued by banks, enables the company to clear customs and receive foreign contributions.

Post-Registration Compliance for Section 8 Companies

1. PAN and TAN Application: Obtain Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN).

2. Income Tax Filing: File annual income tax returns and claim tax exemptions under Sections 80G and 12A.

3. GST Registration: If the company’s turnover exceeds ₹20 lakhs, register for GST using the GST portal.

4. Annual Filing with MCA: Submit Form AOC-4 (financial statements) and MGT-7 (annual return) annually.

5. Audit and Reporting: Maintain accurate records of financial transactions and undergo mandatory audits.

Comparison: Section 8 Company, Private Limited Company, OPC, and Subsidiary Company

Key Advantages of Section 8 Company Over Trust or Society

-Legal Standing: Section 8 companies enjoy greater credibility and recognition compared to trusts or societies.

-Ease of Fundraising: Eligible for grants and donations from government and foreign entities.

-Transparency: Governed by stricter compliance and audit requirements.

Conclusion

Section 8 company registration is a critical step for individuals or groups aiming to contribute to society through charitable initiatives. With benefits like tax exemptions, credibility, and access to grants, this structure is ideal for non-profit ventures. The registration process, compliance requirements, and comparisons with private limited companies, OPCs, and subsidiary companies ensure a smoother journey toward achieving your goals.

FAQs

1. Can a Section 8 company have shareholders?

Ans No, Section 8 companies do not have shareholders. Instead, they have members who contribute to the company’s objectives.

2. What is the cost of Section 8 company registration?

Ans The cost varies between ₹8,000 to ₹15,000, depending on professional fees and document requirements.

3. Can a Section 8 company apply for GST registration?

Ans Yes, Section 8 companies must register for GST if their turnover exceeds the specified threshold or if they engage in interstate trade.

4. How long does it take to register a Section 8 company?

Ans The registration process typically takes 15–30 days, depending on document accuracy and government processing times.

5. Can a Section 8 company own property?

Ans Yes, a Section 8 company can own property in its name as a separate legal entity.

6. Can foreign donations be received by a Section 8 company?

Ans Yes, provided the company complies with the Foreign Contribution Regulation Act (FCRA).

For more information click the linkn below:

https://www.compliancecalendar.in/ad-code-registration

https://www.compliancecalendar.in/subsidiary-company

https://www.compliancecalendar.in/section-8-company

https://www.compliancecalendar.in/gst-cancellation

https://www.compliancecalendar.in/gst-registration

https://www.compliancecalendar.in/private-limited-company-registration