To register a Section 8 Company in India offers many advantages. It provides legal recognition, tax exemptions under Sections 12A and 80G, and allows access to foreign funding through FCRA. Section 8 Companies also get exemptions from stamp duty and enjoy perpetual succession, meaning they continue to exist even if members leave. They are trusted by donors, governments, and international NGOs, making it easier to raise funds and build credibility. It’s an ideal choice for promoting education, charity, art, environment, and social welfare.
In this article, we’ll cover the key benefits of Section 8 Company registration in India.
What is a Section 8 Company?
Before diving into the benefits of Section 8 Company registration in India, it’s essential to understand what a Section 8 company is?
Section 8 companies are non-profit organizations formed with the objective of promoting social welfare, charity, education, science, religion, or art. These companies are governed by the Companies Act, 2013.
Unlike private or public limited companies, their profits are reinvested back into the company for expansion and growth and are not distributed as dividends to members.
Benefits of Section 8 Company Registration in India
1. Legal Recognition and Credibility
One of the major benefits of Section 8 Company registration in India is the legal recognition it offers. Due to stringent regulatory oversight, Section 8 Companies are perceived as more transparent and credible by donors, government agencies, and other stakeholders.
2. Tax Exemptions
Organizations can apply for 12A and 80G registrations and their donors can avail tax benefits. This advantage is one of the key reasons why many NGOs prefer to register as a Section 8 company.
3. No Minimum Capital Requirement
In line with the relaxation announced for private limited companies, section 8 companies too are no longer required to maintain a minimum share capital.
4. Separate Legal Entity and Limited Liability
A Section 8 Company holds a separate legal identity, distinct from its members. It remains operational despite changes in membership, and even registered partnership firms can participate as members or directors in their individual capacity.
Moreover, the liability of members is limited.
5. Exemption from Stamp Duty
The section 8 companies are exempt from paying stamp duty on their Memorandum and Articles of Association, which is otherwise applicable to other types of companies.
6. Perpetual Succession
A Section 8 Company enjoys perpetual succession, meaning it continues to exist and operate even if its members resign or pass away.
7. Access to Foreign Funding (FCRA)
Section 8 companies can receive foreign donations by registering under the Foreign Contribution Regulation Act (FCRA), allowing them to accept contributions from non-residents or overseas donors.
8. Collaborate With International NGOs
Due to their organized and professional structure, Section 8 companies are well-positioned to collaborate with international non-profit organizations for joint ventures and funding.
Comparison with Other Types of NGOs
To better understand the benefits of Section 8 Company registration in India, it’s essential to compare it with other forms like Trusts and Societies:
| Feature | Trust | Society | Section 8 Company |
|---|---|---|---|
| Governing Law | Indian Trusts Act/state laws | Societies Registration Act, 1860 | Companies Act, 2013 |
| Registration Authority | Sub-Registrar | Registrar of Societies | Registrar of Companies (RoC) |
| Compliance Requirement | Low | Moderate | High |
| Suitable For | Family, religious causes | Community-based projects | Corporate-style NGOs |
| Minimum Members | 2 Trustees | 7 Members | 2 Directors |
| Charter Document | Trust Deed | MOA and Rules & Regulations | MOA and AOA |
| Preference in registration under FCRA | Low Preference | Low Preference | Preferred |
| Transparency | Low | Low | High |
| Registration Period(approximately) | 15-20 days | 15-20 days | 5-7 days |
| Grants and subsidies from the government | Not much | Not much | Preferred |
| 80G and 12A Registration | Possible | Possible | Possible |
Minimum Requirement for Section 8 Company
To enjoy the benefits of Section 8 Company registration in India, certain minimum requirements must be met:
- Section 8 Company must be formed with objectives focusing on social causes such as commerce, education, science, art, charity, sports, environmental protection, or other similar purposes.
- the proposed company should intend to apply its profits, if any or other income in promoting its objectives.
- Prohibit the payment of dividends to its members.
- A Section 8 Company requires at least 2 shareholders for a private limited NGO and 7 shareholders for a public limited NGO.
- DIN is mandatory for all directors.
- DSC is required for all directors.
- A Section 8 Company must have at least one director who has been a resident of India for a minimum of 182 days during the financial year. In the case of newly incorporated companies, the requirement is applied proportionately by the end of the first financial year.
Conclusion
Registering as a Section 8 Company in India is the best option for anyone who wants to run a non-profit organization. It gives your organization legal recognition, and tax benefits, and makes it easier to get donations and collaborate with others—even from outside India. There’s no need for more capital, and the company can keep running even if members leave. If you want to make a difference, starting a Section 8 Company is a smart and easy step.
Frequently Asked Questions
1. What are the major benefits of registering a Section 8 Company?
The Key benefits includes:
- Exemption from stamp duty
- Legal recognition and credibility
- Eligibility for tax exemptions (12A, 80G)
- No minimum capital requirement
- Perpetual succession and Limited liability
- Access to foreign funding through FCRA
- Collaboration with international NGOs
2. Do Section 8 Companies eligible for income tax exemption under Section 12A.?
Yes, Section 8 Companies are eligible for income tax exemption under Section 12A. Donors can also claim deductions on donations made to the companies.
3. Does a Section 8 Company require a minimum capital to be registered?
No, there is no minimum capital requirement for registering a Section 8 Company in India, making it easier for individuals to establish non-profit organizations.
4. Are Section 8 Companies eligible to receive foreign donations?
Yes, Section 8 Companies can register under the Foreign Contribution Regulation Act (FCRA) to receive donations from outside India.
5. Can a Section 8 Company own property or enter into contracts?
Yes, a Section 8 Company can own property and enter into contracts.
6. What are the advantages of a Section 8 Company over a Trust or Society?
Section 8 Companies offer higher legal credibility, better transparency, and compliance requirements compared to Trusts and Societies. They are often preferred for receiving government grants, CSR funding, and international collaborations.
7. Do Section 8 Companies have perpetual succession?
Yes, a Section 8 Company continues to exist even if its members resign or pass away.
8. Do Section 8 Companies pay stamp duty during incorporation?
No, they are exempt from stamp duty on the Memorandum and Articles of Association.
9. What are the minimum requirements to register a Section 8 Company?
- Minimum 2 shareholders (private) or 7 shareholders (public)
- At least 1 director must be an Indian resident
- The objective should be charitable in nature
- Profits must be used only to promote the stated objectives.
10. Who should register a Section 8 Company?
Anyone looking to run a non-profit organization in India—especially in sectors like education, environment, and healthcare- should consider registering as a Section 8 Company to avail of benefits like as legal recognition, tax exemptions, and easy access to funding opportunities.
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