Section 8 Company

The primary purpose of registering a company as a Section 8 Company is to promote non-profit objectives such as trade, commerce, arts, charity, education, religion, environment protection, social welfare, sports research, etc.

Section 8 Company Registration

Check out details with the procedure for registration of section 8 with companies Act, 2013

• The primary purpose of registering a company as a Section 8 Company is to promote non-profit objectives such as trade, commerce, arts, charity, education, religion, environment protection, social welfare, sports research, etc.
• To incorporate a Section 8 Company, a minimum of two directors are required. Also, there is no requirement of minimum paid-up capital in the case of Section 8 Company.
• In India, a non-profit organization can be registered under the Registrar of societies or as a Non-profit company under the Section 8 Company of the Company Act,2013.
• The profits of this company, if there are any, are applied towards promoting the objectives of the company and not distributed as dividends to its shareholders.
• A Section 8 Company is the same as the Section 25 Company under the old Companies Act, 1956. As per the new Companies Act of 2013, Section 25 has now become Section 8.

Section 8 Company Eligibility

Who can Incorporate a Section 8 Company?

An individual or group of individuals can apply for Section 8 Company Registration if it holds the below-mentioned intentions. The objectives have to be confirmed to the satisfaction of the Central Government.

• If the company intends to promote science, commerce, education, art, sports, research, charity, social welfare, protection of the environment, or other objectives
• If the company has the intention to invest all the profits or the income generated after incorporation in the promotion of such objects only;
• When the company is not intending to pay any dividends to its members.

Documents Required for Registering a Section 8 Company

• Director Identification Number (DIN)
• Digital Signature Certificate
• Memorandum of Association
• Articles of Association
• Passport size Photographs
• Members Id Proof such as Aadhar Card, Passport, Voter ID.
• Details of Director
• Address Proof

How to obtain Digital Signature for Directors?

In India, a Trust is controlled by the trustees mentioned in the Trust Deed. Section 8 Company will be governed by the Board of Directors, similar to a Private Limited Company.

During the process of incorporation, the DSC is obtained for the proposed directors. The following documents must be submitted.

• PAN or Aadhar card.
• Drivers License/ Passport/ Election ID/ Government Issued ID.

After submitting these documents, the applicant must complete an OTP and eKYC procedure to obtain a DSC in their name.

Section 8 Company Name Approval

• Simultaneous to the Digital signature application processing, an application for name approval can be initiated for the Section 8 Company to the MCA.
• The name of a Section 8 Company must end with the words like Foundation, forum, association, federation, chambers, council, electoral trust. Etc.
• The Name approval process can be completed within with24-72 hours.
• Memorandum of Association and AOA (Articles of Association)
• They are drafted after obtaining the name approval and other documents included in INC12 filed with the ROC.
• It is necessary to sign and mention his name, description, address, and occupation in the MOA and AOA subscription.
• It is necessary to have one witness present who will attest the signature.

Process of Incorporation

Step by step procedure to incorporate a Section 8 Company

• In the first step, we obtain the DSC for the proposed Directors of the Section 8 Company.
  After obtaining the DSC, file form DIR 3 with the ROC for getting a Director Identification Numbers.
• After the DIR 3 is approved, the ROC will allot the Director Identification Number to the proposed Director.
• To apply for a company name, it is necessary to file Form INC 1 with ROC.
• After the approval to apply for a license for the Section 8 Company, it is necessary to File Form INC 12
• After the approval, a license under section 8 will be issued in Form INC 16.
• File SPICe Form 32 with the ROC for incorporation along with the affidavits, declarations, KYC, consent letter, draft MOA, and AOA after he obtains the license
  If the ROC is satisfied with the submitted forms, the ROC is issued a Certificate of incorporation.

80 G Certificate

The 80 G Certificate exempts the individuals who have made donations to the charitable trusts or the Section 8 company fully or partially from paying the taxes. For example, A charitable organizations or trust that is registered under 12 A allows an individual to avail tax exemption under Section 80 G.

There is a maximum allowable deduction criterion. If the amount donated exceeds 10% of the total gross income, then the excess amount will not qualify for tax benefits.

Who can avail tax savings under 80G?

An individual who makes an eligible donation is entitled to avail tax exemption under the 80 G

Donations that are made to a listed trust and organizations only qualify for deduction u/s 80 G

Who cannot avail of tax savings under section 80G?

• If the donation is made to a foreign trust, you cannot qualify for tax saving under section 80 G
• The deduction cannot be claimed if the donations are made to one or more political parties.
• The deduction cannot be claimed even for printing or publishing brochures, flyers, and pamphlets.
• Donations by NRI if made to eligible institutions and trusts also qualify for tax exemptions under section 80 G
• If the donation is made from salary and if the donation receipt carries the name of the employer, then employees can claim under Section 80 G

How to obtain an 80 G Certificate?

Registration under this section will be processed by the commissioner of Income-tax after receiving an application from the applicant in Form 10 G. The application should be accompanied by the following documents.

• Registration Certificate
• MOA /Trust Deed
• NOC from the proprietor of the land where the registered office is situated.
• Copy of the Pan Card of the Trust/Institution.
• Copy of electricity bill, house tax receipt, or water bill
• Proof of welfare activities pursued
• Progress Report since the Foundation of the NGO or for the previous three years
• The statement of accounts and balance sheet since the foundation/previous three years
• List of contributors along with their address and PAN.
• List of the governing body of trustees with their contact details
• 11.Copy of registration granted under section 12A or copy of notification issued under section 10(23)or section 10(23C)

12 A Registration

The Income Tax Department grants 12 A registration, one-time registration to trusts and other non-profit organizations. The 12 A registration aim at exempting from the payment of income tax.

Immediately after incorporation, generally, an application for 12 A registration is made. Trusts and NGOs which have obtained 12 registrations enjoy exemption from paying taxes on their surplus income. All entities can get 12 A registration.

Benefits of 12 A registration

• The key benefit of 12 registration is the income tax exemption benefit concerning income utilization. For instance, all income utilized by a 12A registered entity for charitable/religious purposes will be considered an income application.
• If the organization is registered under Section 12 A, it becomes eligible to receive grants from Government and various private sectors.
• Organizations registered under 12 A are also eligible for availing benefits under Section 80 G. NGOs have to apply separately for 80 G registration.

FCRA Registration

The Foreign Contribution Regulation Act 2010 is called FCRA registration, which is necessary to obtain charitable trusts, societies, Section 8 Company that receive foreign contribution or donation.

The Objective of FCRA 2010

• The main objectives of the FCRA Act 2021 are:
• Regulate the acceptance and utilization of foreign contribution by specific individuals or companies
• To restrict the acceptance and utilization of foreign hospitality or foreign contribution for any activities that are unfavorable to national interest and for matters related to in addition to that or incidental to it.