A Section 8 Company under the Companies Act 2013 is a non-profit organisation formed for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, or any other useful objective. It is the corporate form of an NGO. Section 8 Companies enjoy several tax benefits and compliance relaxations.
Why Choose Section 8 Company Over Trust or Society?
| Feature | Section 8 Company | Trust | Society |
|---|---|---|---|
| Governing law | Companies Act 2013 | Indian Trusts Act / State law | Societies Registration Act |
| Regulator | MCA (RoC) | State Charity Commissioner | State Registrar |
| Perpetual succession | Yes | Yes (irrevocable trust) | Limited |
| Members | Min. 2 shareholders | Settlor + beneficiaries | Min. 7 members |
| Credibility | Highest (MCA regulated) | Medium | Medium |
| Foreign grants (FCRA) | Eligible | Eligible | Eligible |
Incorporation Process
- Obtain DSC and DIN for all proposed directors
- Reserve name via RUN (must suggest a name reflecting the charitable object)
- Apply for Central Government Licence via Form SPICe+ (INC-12 for licence)
- Prepare MOA/AOA reflecting non-profit objects and dividend restriction
- On licence grant, proceed with SPICe+ incorporation
Key Conditions for Section 8 Licence
- Profits/income must be applied only towards the stated objects — no dividend distribution to members
- Remuneration to officers must be for genuine services, not distribution of profits
- On dissolution, assets must be transferred to another Section 8 company or charitable institution
Tax Benefits
- Income applied towards charitable objects: exempt under Section 11 (ITA 2025) if registered u/s 12AB
- Donations to Section 8 Company eligible for 80G deduction (if approved)
- Stamp duty: Exempt on registration documents in many states
Annual Compliance
- AOC-4 (Financial Statements) and MGT-7A (Annual Return) as per normal Companies Act requirements
- CSR recipient: Section 8 Companies are eligible CSR partners
- FCRA registration: Required to receive foreign contributions
- ITR-7: Annual income tax return
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Frequently Asked Questions
What is a Section 8 Company?
A non-profit company formed under the Companies Act 2013 for charitable, educational, scientific, or social welfare purposes. Profits must be applied to stated objects; no dividends to members.
Can Section 8 Company pay salary to directors?
Yes. Directors and officers can receive reasonable remuneration for genuine services. The restriction is only on distributing profits as dividends.
Does Section 8 Company need to file annual returns?
Yes. AOC-4 (financial statements), MGT-7A (annual return), and ITR-7 (income tax return) must be filed.
What is the minimum membership for Section 8 Company?
Minimum 2 members (shareholders) and 2 directors — same as a normal Private Limited Company.
Can Section 8 Company receive foreign donations?
Yes, with FCRA (Foreign Contribution Regulation Act) registration from the Ministry of Home Affairs.
Are donations to Section 8 Company tax-deductible?
If the Section 8 Company obtains 80G approval from Income Tax authorities, donors can claim deduction (50% or 100% depending on the institution type).
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