A Section 8 Company is the most respected and legally structured form of non-profit organisation in India. Registered under Section 8 of the Companies Act 2013 (which replaced Section 25 of the old Companies Act 1956), it is formed to promote charitable, educational, research, social welfare, artistic or environmental objectives. Unlike a trust or society, a Section 8 Company has the full legal infrastructure of a company with added tax benefits and credibility.
What is a Section 8 Company?
A Section 8 Company is a company licensed by the Central Government to operate as a non-profit. Any surplus profits must be applied only towards the promotion of the company's objectives — they cannot be distributed as dividends to members. The company can hold property, enter contracts and sue or be sued in its own name.
Eligible Objects for Section 8 Company
- Promotion of commerce, art, science, sports, education, research
- Social welfare and poverty alleviation
- Protection of environment
- Promotion of religion or charitable purposes
- Any other similar object approved by the Central Government
Benefits of Section 8 Company
- Exemption from minimum paid-up capital requirements
- "Limited" suffix not required — only the word added to the name to reflect non-profit status
- Eligible for income tax exemptions under Sections 12A, 12AB and 80G of the Income Tax Act
- Can receive donations from Indian donors with 80G tax benefits to donors
- Can receive FCRA (Foreign Contribution Regulation Act) registration to receive foreign funds
- High credibility with government bodies, CSR donors and international organisations
Documents Required
- PAN, Aadhaar and address proof of all directors (minimum 2)
- Proof of registered office
- Draft MOA and AOA aligned with non-profit objects
- Declaration of the promoters regarding application of income and profits
- Estimated income and expenditure for the next 3 years
- DSC and DIN for all directors
Registration Process
Step 1: File Form INC-12 — Application for Licence under Section 8 — with the Regional Director (RD) along with MOA, AOA and all attachments. This application must include the declaration of promoters that profits will not be distributed.
Step 2: The RD reviews the application and may seek clarifications. If satisfied, the RD issues a Licence under Section 8.
Step 3: After obtaining the Section 8 Licence, file Form SPICe+ for incorporation with the ROC, attaching the licence. The company receives a Certificate of Incorporation.
Annual Compliance
A Section 8 Company must file all ROC returns like any other company — MGT-7 (annual return), AOC-4 (financial statements). It must also maintain records of all receipts, expenditures and assets. For income tax exemptions, the company must apply separately for 12AB and 80G registration under the Income Tax Act.
Conclusion
A Section 8 Company provides the most robust legal framework for non-profit activities in India. SPOTON helps founders of charitable organisations, NGOs and social enterprises set up and maintain their Section 8 Companies with full regulatory compliance. Contact us today.
Need Expert Help?
Our CAs & CSs are ready — free consultation.