NGO does not preclude the company from making a profit or earning an income. It means that the company can make money, but the promoters will not benefit from it. The profits of the company cannot be shared among the promoters. All profits must be used to promote the object. Certain exemptions and benefits are provided for both “NGOs and NPO” under Section 8 of the Companies Act 2013.
However, The following benefits are extended to Section 8 Companies:
- A separate legal identity:
Section 8 Company is a different legal entity from its members. The company exists in perpetuity in addition to having more organised operations and greater flexibility.
- No stamp duty of Moa and AOA
A Section 8 Company is exempt from paying stamp duty on the Memorandum of Association (MoA) and Articles of Association (AoA) of a private or public limited company, which is required for the registration of other types of company structures.
- No minimum capital requirement
There is no minimum capital requirement for a Section 8 company in India. Also, the capital structure can be changed at any time to meet the company’s growing needs.
This means that it can be formed without the need for any share capital. The funds required to run the business can later be raised through charitable contributions and/or subscriptions from both members and the general public.
Suffixes such as “Public Limited or Private Limited” are not required next to a Section 8 company’s legal name.
These companies can be registered with names such as “Society, Association, Council, Charities, Club, Foundation, Institute, Academy, Federation, and Organisation”.
- Need for CARO
Requirements of Companies Auditor’s Report Order (CARO) do not apply to Section 8 Companies.
- Tax benefits
Many tax benefits are available to Section 8 Companies in India.
Section 8 Companies are more trustworthy than any other type of charitable organisation. They are bound by the Companies Act and are strictly regulated. Such as the necessity of a mandatory annual audit, which cannot be changed at any stage or situation.
The rules for managing the company’s profits and losses make these companies credible.
- Exemption to donors
Donors who contribute to a Section 8 company are qualified for tax exemptions under sections 12A and 80G of the Income Tax Act.
A registered partnership firm can join as an individual member and gain directorship.
Frequently asked questions regarding Section 8 company registration
Is it necessary to obtain permission from the central government?
Yes, we must obtain permission or approval from the central government for section 8 company registration in India. Before section 8 company registration, CG approval is required.
How long is the Company’s registration valid?
Once incorporated, a company will be active and in existence as long as the annual compliances are met regularly. If annual compliances are not met, the company will become dormant and may be struck off the register after a while. A struck-off company can be resurrected for up to 20 years.
What exactly is the Director Identification Number?
A Director Identification Number is a unique identifier assigned to all current and proposed Directors of a Company. A Director Identification Number is required for all current and proposed Directors. A Director Identification Number has no expiration date and a person can only have one Director Identification Number.
Can NRIs/Foreign Nationals serve as directors of Section 8 companies?
Yes, after obtaining a Director Identification Number, an NRI or Foreign National can be a Director in a Section 8 Company. At least one Director on the Board of Directors, however, must be an Indian resident.
Is a digital signature required to complete registration procedures?
The only secure and authentic way to submit a document electronically is with a digital signature. All e-form filings on the MCA Portal must include the digital signatures of the person authorised to sign the documents.