Register Section 8 Company (NPO/NGO)
24,710/- (inclusive of all taxes & fees)
Important Points
- - Section 8 registration in 25 to 30 days with License.
- - No minimum capital requirement.
- - Best substitute for trust, society registration.
Section 8 Company
Know what is Section 8 Company and how it is Registered.
What is a Section 8 Company?
A section 8 company which earlier was known as section 25 company is a legal form for non profit organizations (NPO) or Non Governmental organizations (NGO). Section 8 company is licensed company which is authorized to work anywhere in the country.
How to register section 8 Company in India ?
Section 8 company registration in India is unique and different concept. It is an non profit entity engaged in social work for the benefit of the country. The registration can be divided into three parts:
# Prepare DSC and file Name Approval: The first step is to prepare DSC and DIN. This takes sometime one to two days. Thereafter, you need to file for name approval. The name should be unique and should end with words like foundation, sanstha etc.
# File for License: After getting name approved, the next step is to prepare all the documents and then apply for license to the Regional director via form INC 12. This approval takes most of the time.
# File for Incorporation: After getting the license, we need to file for incorporation and once company is incorporated, you can start the social work under this company.
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Documents Required for Section 8 Company Registration
For Directors/Shareholders
- Copy of PAN Card
- Aadhar Card
- Address Proof (Bank Statement, Mobile Bill, Telephone Bill)
- Passport Size Photo
For Registered Office
- Ownership Proof (Electricity Bill etc)
- Utility Bill (Gas Bill, Electricity Bill)
- NOC(Download format)
Section 8 Company Registration Process
Section 8 company registration process requires at-least two people to start with. Further, there is no limit for initial capital and hence, it may be started with Rs.10,000. Here is a section 8 Company registration procedure:
# Step 1 - Prepare DSC. DIN & Name approval: Before even applying for the DSC, DIN etc one must arrange all the documents properly, because most of the rejection happens due to improper documentation.
# Step 2 - Apply for License: The second and the most important part is to get license from the government to do the social work in India. This is done through e-form no.12 with proper application and attachments.
# Step 3 -File for incorporation: The third step is to file the incorporation along with all necessary documents.The form is attached with all the important attachments like MOA, AOA, declarations etc.
Time & Cost for Section 8 Company Registration
The Total Cost Breakup
| Items | Qty | Price |
|---|---|---|
| Digital Signature Certificate (DSC) | 2 | 1,998 |
| Director Identification Number (DIN) | 2 | Nil |
| Name Approval | 1 | 1,000 |
| RD Approval Fees | - | 2,000 |
| MOA, AOA and Incorporation Fee | - | 6,000 |
| PAN and Tan Application | - | 180 |
| Professional Fee (Inclusive of Taxes) | - | 11,321 |
| Total NPO/NGO/Section 8 Registration Cost in India | 24,710 | |
Note: Stamp duty Extra for States: Punjab, Kerala and Madhya Pradesh.
Time for Section 8 Company Registration
It takes around 25 to 30 day to register a micro finance business if all documents are submitted on time.
Income Tax Exemptions to Section 8 Companies
Only by registering a section 8 company does not result into income tax exemption and further exemption to the donators. Rather section 8 company is the first step to claim the income tax exemption. There are basically two types of income Tax exemptions which are as follows:
- - Exemption to Section 8 Company from Income Tax: This exemption is claimed under Section 12AA of the Income tax Act, 1961. As per section 12AA, an application is filed to the Income tax commissioner along with the necessary supporting documents. If Income tax commissioner is satisfied, then he shall grant the tax exemption to the company.However, complying with section 11 to section 13 is very important to avoid revocation of exemption.
- - Exemption to donators under Income tax: This exemption is claimed by donators under section 80G. However,the donators is only eligible to take tax exemption if the section 8 company is registered under section 80G. This exemption can be filed along with section 12 exemption or anytime after that.
Mandatory Requirements for Section 8 Company Registration
Section 8 company are formed by those who do not have any profit motive, rather they have a social objective which they want to achieve. Hence, there mandatory requirement to start the section 8 company are as follows:
- Minimum of two persons are required along with the documents stated above.
- You must have a plan for your social objectives, as ROC may ask for the same.
- Whatever, you choose the capital of the company, you must invest the same into company within 2 months.
Donations / Funding of NGO / NPO or Section 8 Company
Section 8 company are not allowed to raise funds by way of deposits but they can accept donations from the general public. Let us discuss the ways by which it can raise funding:
- Foreign Donations: Foreign donations are allowed only when FCRA registration has been taken. FCRA license can only be applied after three years from the date of registration. However, if it is really urgent to receive foreign donations, then you may apply for prior permission from commissioner.
- Equity Funding: Section 8 company can also raise funding by issuing new equity shares at a higher value.
- Domestic donations: There is no restriction on the domestic donations, however a proper check must be kept in order to avoid the money laundering cases.
How to Raise Funding in a Public Limited Company?
Finance is a lifeline of any business and in todays world every competition is neck to neck, availability of good finance is needed in order to sustain. You may refer the practical example of Flipkart, Ola etc. Hence, you must follow the following in private company in order to raise funds:
- Build a plan and a working business model: Gone are those days when you can get funding on the basis of an idea.Now, is the time, that you should test your own idea, reach a MVP and then build a strong future plan.
- Reach investors and list on stock exchange: You may reach the private investors or list your shares on stock exchange. However, initiating a IPO is a very complex task.
- Prepare Documents: Once you sign the term sheet, next and final step is to prepare documents like Shareholder agreement etc.
Section 8 Company vs Trust vs Society - A Comparison
Let us understand the basic difference between the trust, section 8 company and society. In India, if you want to start a NGO/NPO, then you have three option to start with, Society, trust and Section 8 company. Let us understand which is better based upon number of factors:
| Factors | Section 8 Company | Trust/Society |
|---|---|---|
| Introduction | Section 8 company is a registered entity and has recognition all over India. | Trust and societies are registered at DGM locally and has recognition state wise. |
| Trust | Section 8 companies are treated more trust worthy because they have license. | They are registered with local state authorities hence, lacks trust factor initially. |
| Compliance | Compliances are high here and even need to comply in case of no revenue. | There are very few compliances to be made in comparison to section 8. |
| Governing Doc | Section 8 company is governed by MOA and AOA of the company. | Trust and Societies are governed by their trust deed or bye laws. |
| Closure | Section 8 Company can be closed within the parameters of law. | The irrevocable trust cannot be closed. |
| Cost | The maintenance cost is high in section 8 company. | Cost is very low as compared to the section 8 company. |
Mandatory Compliances for Section 8 Company
There are many compliances which are to complied by the section 8 company, however the most important compliances are as follows:
Income Tax
If company is registered under Income Tax act, then company needs to comply with the IT provisions.
Company Act
Section 8 company also needs to comply with the Companies Act in similar terms as any other company.
Other
There are other laws as well which are to be taken care off like PMLA etc.
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What all a Section 8 Company can do?
A Section 8 Company can do:
Can do any activity which is done without any profit motive.
Can open branches as there is no specific restriction,however advised to open in limited numbers.
Give salaries to members/director for there services.
Can claim income tax exemption by registering under section 12AA and section 80G.
A Section 8 Company cannot do:
Cannot take profit from the company directly, but can take in the form of salary, official expenses etc.
Run with profit motive otherwise all the existing tax exemption shall be withdrawn.
Cannot take deposits from general public.
Advantages & Disadvantages of Section 8 Company
Advantages of Section 8 Company
No minimum capital requirement
Income Tax exemption
Best form to start your NGO/NPO
Can accept donations
Disadvantages of Section 8 Company
Restricted foreign funding
Strict Compliances
Cannot take profits from company
Costly compliance
FAQs about NPO/NGO/Section 8
Q. For which purposes the section 8 company can be registered?
Section 8 company can be registered for many social factors like
- Education
- Poverty
- Disease
- Blood bank
- Environment protection
- Other objects for general public utility.
Q. Is there any CG approval required to Register a Section 8 companies in India?
Yes, to register the section 8 company in India, the central government approval is required. CG approval is applied before company registration. When the government is satisfied that registration is seek for some serious stuff and not for tax planning, then they proceed and grant the registration.
Q. What is the minimum capital requirement for section 8 company?
There is no minimum capital requirement for Section 8 Company in India. If you are planning to register a section 8 Company, then you don’t need to worry about the capital required.
Q. How to appoint auditor under section 8 Company?
Auditor under section 8 company is being appointed within 30 days by the board of Directors and no Central Government approval is required.
Q. Explain the difference between trust, societies and Section 8 company?
The difference between the three terms is as follows:
|
Trust |
Societies |
Section 8 |
|
It is an simple registered NGO and does not have any specific authority. |
Societies are registered under the Societies registration act and hence authentic. |
Section 8 company is the most authentic NPO or NGO which is registered under Companies Act, 2013. |
|
Lacks trust factor |
Mild trust, as membership is an important criteria. |
High on trust factor. |
|
Trust deed is the most important document. |
Deed of Societies is most important document. |
Memorandum of Association is the most important document. |
|
Registration cost is low. |
Registration cost is somewhere between 15000 to 20,000 |
Registration cost is around 25000, due to work load involved. |
|
No Compliances |
Compliances as per deed |
Various compliances including audit prescribed. |
Q. Is there any requirement for minimum number of members for section 8 Company?
No, there is no concept of minimum number of members for section 8 Company. Anyone who can register the section 8 company need not worry regarding the membership. The requirement of having the membership is under Nidhi Company and not under section 8 company.
Q. How taxation works under Section 8 company?
Taxation over section 8 company is treated at par with other companies. The profits are taxes @30%. However, if section 8 company is registered under section 12AA (tax exemption) of the income tax act, then Section 8 profit is completely exempt and no tax is levied on the company.
However, certain compliances is to be made every year to continue enjoying the tax exemption.
Q. Is closing (winding up) the section 8 company is a simple task?
No, closure of section 8 company takes a lot of time and energy. It cannot be closed under any fast track mode like Strike off rules recently released. If you want to close the section 8 company, then we need to follow the full lengthy procedure to close down the company.
Further, before closure of the company, we need to get the compliance upto date. Because without making fully compliant company, the application for closure will not be accepted.
Q. Important checklist for section 8 Company registration?
The important checklist to register the section 8 company is as follows:
- You must be clear with your social objectives
- You must have some idea on source of your funds and the utilization of the same.
- The documents of atleast two person are required to register the section 8 company.
- Draft your objectives under memorandum very clearly to avoid any rejection from the government department.
Q. Is registration fees for section 8 company is more than that of trust registration?
Yes, section 8 company is more costly than the simple trust registration. Section 8 company requires Central Government approval and many other additional requirements to start with.
On the other hand, the trust registration is done at the local SDM office and generally takes Rs.6000 to register. However, Section 8 company is more authentic and offers more satisfaction and trust to the general public.
Q. What are annual Compliances/filing for section 8 Company?
The annual compliances of the section 8 company is very similar to normal companies. The highlights of which are as follows:
- Need to take atleast two board meeting during the year.
- Audit is mandatory
- Annual return is to be filed every year with other efiling forms like MGT 7 , AOC 4.
- Further every year income tax return is also required to be filed.
- Additional compliances to fulfill the registration like 12AA, 80G etc.
Q. Why it is called NPO, NGO and how it is different from trust registration?
Section 8 company is a company without any profit motive. Its main objective is to achieve the social causes and to help the society in any way possible. NPO, NGO are similar terms and are used inter changeably. NPO and NGO is another name for trust, section 8 company. Trust registration is another option to register NPO in case section 8 company is good for you.
Q. What are the disadvantages (cons/demerits) for Section 8 Company?
Section 8 company is one of the best forms to register in case you planning to register a NGO. However, it has certain disadvantages which are as follows:
- Section 8 company is difficult to start because it requires Central Government Approval.
- Section 8 compliance cost is high as compared to any other NGO/NPO form.
- Penalty provisions are little harsh under section 8 company.
Q. What are the advantages for Section 8 (pros/merits) company?
Section 8 company is nonprofit company which aims to support the social objectives of the society. There are many advantages of this form over trust and society registration:
- It is easier to register under Income tax act, 1961 because section 8 company have proper documentation.
- It is the registered form of NPO and hence more trust factor to people donating into it.
- Section 8 company can work on PAN India basis and does not require any separate approval.
- Section 8 company is formed after Central Government approval and hence offers more authenticity.
Q. What other licenses are required for section 8 company to claim tax exemption?
Section 8 company registration is the first step to start your NPO/NGO in India. It does not provide you any tax exemption. Tax exemption is given by Income Tax Act, 1961. The two important registration required for tax exemption are as follows:
- Section 12AA Registration to exempt the income of the Company: To claim any exemption under the income tax act, you need to register under the section 12AA registration. Once registered, you need to comply with the provisions to avoid any scrutiny by the tax department.
- Section 80G Registration to provide exemption to the donors: This is a one step ahead registration. If you are registered under section 80G, then any person donating to your company can also claim the exemption in his IT return.
- FCRA Registration: In case you want to claim the donations from the foreign country, then you need to take registration under FCRA Act. However, to be eligible to take the foreign donations/contribution you should be atleast 3 years old company or you should apply for prior permission.
Q. Why it is called a Section 8 Company with examples? What is the difference between Section 25 Company registration and Section 8 Company registration?
A NGO registered as a company under Companies Act, 2013 is known as section 8 Company. It is called section 8 company because the provisions relating to registration of this type of company is mentioned in section 8 of the Companies Act, 2013.
Section 25 Company is the old name of Section 8 Company. Earlier, before enactment of Companies Act, 2013, company law was governed by Companies Act, 1956. Under the Companies, act 1956 the law relating to NGO registration was mentioned in section 25 of the companies act, 1956 and hence earlier it was also called the Section 25 Company in India.
Q. How to Select Name for Section 8 Company?
Section 8 company is the nonprofit organization which aims to work on the social matters of the society. Further, a section 8 company does not need to end the company name with the word “limited” or “private limited.” The names under section 8 companies may end with “foundation” “cry” or you may choose any other word.
The first word under section 8 company should be your brand or the name which you want to use in your NGO like PlantinIndia, being human etc.
Important Point: The new company name should not match the existing company or any existing trademark in India.
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