As one of the largest markets in the world, India has a vast trade and commercial domain. However making profitts through trade and commerce is not the only factor which is prominent in the Indian market. India as a huge country lacks behind in sectors like education, employment, health care, food, and safety, etc. Our government is under a lot of pressure to ameliorate the conditions within the national legislation. The central government cannot address each and every issue simultaneously and this creates a space for specific organizations which assist the government working for the well-being of society. Such organizations are known as Non-profit organizations or non- government organizations.
A Non-profit organization can be registered as a Company under Section 8 of the Companies Act, 2013.It can also be registered as Trust or a Society. Section 8 company can be incorporated for promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object, provided it intends to apply its profits, if any, or other income in promoting its objects and intends to prohibit the payment of any dividend to its members.
PROS OF SECTION 8 COMPANY
NO MINIMUM PAID UP CAPITAL REQUIREMENT: As per Companies Act, 2013 unlike private and public limited companies, Section 8 Company do not require any minimum capital contribution for incorporation. They can commence there business without any share capital. The fund required for business can be brought in the form of donation and subscription from public and members of the Company.
TAX DEDUCTION: Since Section 8 Companies are non-profit making companies they are exempted from certain income tax provisions. They are also given numerous deductions and benefits. Individual Donating Money in Section 8 companies also avail the benefits of deduction under Section 80G of income Tax Act, 1961.
NO NEED TO USE TITLE : Unlike Private Limited company which uses ‘Private Limited’ as title after its name, Section 8 Company is not required to add any sufix or title to its name.
NO STAMP DUTY PAYABLE: A section 8 Company is exempted for the payment of stamp duty applicable for registration as applicable in case of other structures such as private limited or a public limited company.
CREDIBLE: A Section 8 Company has more credibility as compared to any other Non-profit organization structure be it a Trust or Society. As it is a licensed by the central government. It has more stringent regulations such as no change in MOA and AOA can be done at any stage or situation in a Section 8 Company. A section 8 company due its strict compliances as regard to functioning has a more reliable image in comparison to other legal structures.
POINT TO BE KEPT IN MIND BEFORE REGISTERING SECTION 8 COMPANIES:
A. Decide regarding the proposed name to be applied, objects to be carried by the Company, authorized capital.
B. Name of Section 8 Company shall include the words Foundation, Forum, Association, Federation, Chambers, Confederation, Council, Electoral trust and the like words.
C. It should intend to apply its profits, if any or other income in promoting its objects.
D. It should intend to prohibit the payment of dividend to its members.
E. A partnership firm is allowed to be a member of the Section 8 Company
MINIMUM REQUIREMENTS FOR SECTION-8 COMPANY:
A. At least two shareholders
B. Minimum two directors
C. Shareholders and Directors could be same.
D. At least one Director should be Indian resident
E. There is no minimum capital required.
F. Registered Office Address Proof (Rent agreement if the premises is not owned by the company)
G. Documents claiming the ownership such as Sale Deed or House Tax receipt along with an NOC.
PROCEDURE FOR INCORPORATION OF SECTION-8 COMPANY:
A. Get Digital Signature Certificate (DSC) of all members.
B. Get Director Identification number (DIN) of all Directors by using DSC.
C. Suggest at least Six Company name. We will do search for name availability.
D. Apply to ROC for name approval.
E. Once name is approved by ROC File application to Central Government in Form INC -12 for grant of License to start Section 8 Company.
F. Once Central Government issues License file Incorporation document with ROC like MOA AOA Consent of Director, Affidavit and declaration from directors etc.
G. Once Incorporation form is approved by ROC, ROC shall issue Certificate of Incorporation with PAN and TAN No.
Requirement to Apply for DSC:
All members should have DSC
- Pan Card Self Attested
- Residential Proof Self Attested
- Dully fill and sign DSC application form.
Requirement to Apply for DIN: (Minimum Two Directors are required)
- Photograph of the Applicant – To be Self-attested.
- PAN – To be Self-attested
- Mobile No.
- Email id.
- Educational Qualification
- Occupation
- Proof of residence of applicant
- Address proofs like passport, election (voter identity) card, ration card, driving licence, electricity bill, telephone bill or bank account statement shall be attached and should be in the name of applicant ( shall not be later than 2 months).
- DSC of Individual.
Requirement to Apply for Name Availability: - Six Proposed name with significance of Name
- Authorized Capital- Optional
- Jurisdiction of Registrar of Companies.
- Main Object to be pursued by Company
Requirement to Apply for Central Government License of Section 8Company: - Draft MOA & AOA
- INC -15 Declaration by each subscriber (On Non- judicial stamp paper of Rs. 100/- and duly notarized).
- Affidavit by each subscriber regarding non disqualification (On Non- judicial stamp paper of Rs. 100/- and duly notarized).
- Declaration by each subscriber regarding non acceptance of Public deposit (On Non- judicial stamp paper of Rs. 100/- and duly notarized).
- Consent from all Directors in DIR- 2
- Estimated statement of Income & Expenditure for Next three years and it should be signed the proposed Promoters.
- Estimated Balance Sheet for Next three years and it should be signed the proposed Promoters.
- List of proposed Promoters and Directors of the Company
- Statement of ground on which application is made.
Requirement to Apply for Incorporation of Section 8Company: - Registered office address of Company.
- Recent Address proof with NOC from Owner.
TIME PERIOD:
Time Required for Incorporation of Section 8 Company Shall be 30-60 days, depending on government approval.
REGISTRATION OF COMPANY UNDER SECTION 12A AND 80G OF INCOME TAX ACT.
Income of an organization is exempted if NGO has 12-A registration. This is one time registration.
If an organization has obtained certification under section 80-G of Income Tax Act then donors of that NGO can claim exemption from Income Tax.
Application for registration under section 12A and 80G can be applied just after registration of the NGO.It can be applied to the Commissioner of Income Tax (Exemption) having jurisdiction over the institution.
Both applications can be applied together or it can be also applied separately. If some organization is willing to apply both applications separately, then application for registration u/s 12A will be applied first. Getting 12A registration must for applying application for registration u/s 80G of Income Tax Act.
