Section 8 - Easystax

Section 8 Company Incorporation

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Introduction of Section 8

With the Introduction of concept such as Social welfare and CSR and adjoint benefits with such concept’s community is now driving more toward not-for-profit organizations. Generally known as Non-profit organizations and registered under the Ministry of Corporate Affairs according to Section 8 of Companies Act, 2013 and The Companies (Incorporation) Rules, 2014, Section 8 Company is one of the several forms of business in India for Organizations formed for Charitable Business or social causes.

Non-Profit Organization (NPO) in India can be registered under 3 forms-

through a trust deed,
as a society under the Registrar of Societies and
Non-profit company under Section 8 Company of the Companies Act, 2013 Section 8 Company is similar to a Trust or Society but there is an exception that a Section 8 Company is registered under the “Ministry of Corporate Affairs (MCA)” of the Central Government while the Societies and Trusts are registered under the regulations of the State Government. However, Section 8 Company has numerous advantages as compared to Trust or Society and also has better credibility among donors, departments of government, and other stakeholders.

A Section 8 company should:

In its objects have promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
Intend to apply its profits, if any, or other income in promoting its objects; and
Intend to prohibit the payment of any dividend to its members,

Process of Incorporation

Step 1

Check Eligibility & Requirements

Step 2

Obtain DSC

Step 3

Apply for DIN

Step 4

Name Reservation

Step 5

Draft MOA & AOA

Step 6

File Incorporation Forms

Step 7

Certificate of Incorporation

Step 8

Post-Incorporation Compliance

Documents Required for Registration

PAN Card

Identity Proof

Address Proof

Photograph

Email ID & Mobile Number

Registered Office Address Proof

Ownership Proof / Rent Agreement

Owner/Landlord NOC

Bank Details

Benefits of Section 8 Company

Incorporated for social welfare
A Section 8 company is incorporated for charity, social welfare and social promotion. Their main aim is to promote social welfare and work for society instead of earning profits. Their main objects depict the reasons for their incorporation. The objects could include Sports, Promote commerce, art, science, education, research, social welfare, religion, charity, protection of the environment, or any such other object.
No minimum capital
As compared to other companies, section 8 companies don’t require any prescribed minimum paid-up share capital. It can be incorporated with zero authorised/ paid up capital
Licensed by government
These types of companies are licensed by the central government under section 8 of The Companies Act 2013 and these companies work for society and receive a donation from other general public for the welfare work.
Limited liability
Section 8 Company also forms as a private limited or public limited company having limited liability. Members of this company have limited liability as per their share subscribed. Accordingly, their personal assets cannot be used to pay off any debts on which the company has defaulted/
No dividend distribution
According to the Companies Act 2013, A Section 8 company cannot distribute any dividends to its members. The profits can only be used in promoting their business objectives.
Stamp duty Relaxation
Some states such as Punjab, Gujarat, Delhi, West Bengal etc. are giving registration of Section 8 company with Zero Stamp Duty, however there are other states giving relaxation in stamp duty.
No suffix
Section 8 companies may not use suffixes like the private limited company or limited company.
Tax Benefits
Section 8 company is eligible for getting tax benefits. They can get registered under section 80G and 12AA of IT act thereby allowing them to provide tax exemptions to any donors.

Characteristics of Section 8 Company

Object in the Memorandum of Section 8 Company can only have objects such as, promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment etc.
Can be incorporated as a limited Company either a Private Limited Company or a Public Limited Company without addition of word”Limited”, or as the case may be, the words “Private Limited”.
The name of a Section 8 Company must end with the words like Foundation, forum, association, federation, chambers, council, electoral trust. Etc.
Minimum of 2 Director and 2 members in case of Private Limited and a Minimum of 3 Directors and 7 members in case incorporated as Public Limited Company.
No Minimum or Maximum requirement of Capital for Sec 8 Company.
During the Incorporation, on complete documents submission, Ministry will first issue License under Section 8 (1) of The Companies Act, 2013 in the form of INC 16, thereafter other documents such as COI, PAN, TAN etc. are issued.
After the Incorporation, Section 8 Company can take Taxation benefits provided under Income Tax Act, 1962 by getting registration under Section 12AA and 80G.
Any profit or income made by the company can be only applied towards promoting the objectives of the company and cannot be distributed as dividends to its members.

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