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Register Section 8 Company (NPO/NGO)

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Register Section 8 Company (NPO/NGO)

Important Points

  • – Section 8 registration in 25 to 30 days with License.
  • – No minimum capital requirement.
  • – Best substitute for trust, society registration.

What is a Section 8 Company?

A section 8 company which earlier was known as section 25 company is a legal form for non profit organizations (NPO) or Non Governmental organizations (NGO). Section 8 company is licensed company which is authorized to work anywhere in the country.

How to register section 8 Company in India ?

Section 8 company registration in India is unique and different concept. It is an non profit entity engaged in social work for the benefit of the country. The registration can be divided into three parts:

# Prepare DSC and file Name Approval: The first step is to prepare DSC and DIN. This takes sometime one to two days. Thereafter, you need to file for name approval. The name should be unique and should end with words like foundation, sanstha etc.

# File for License: After getting name approved, the next step is to prepare all the documents and then apply for license to the Regional director via form INC 12. This approval takes most of the time.

# File for Incorporation: After getting the license, we need to file for incorporation and once company is incorporated, you can start the social work under this company.

Documents Required for Section 8 Company Registration

For Directors/Shareholders

  • Copy of PAN Card
  • Aadhar Card
  • Address Proof (Bank Statement, Mobile Bill, Telephone Bill)
  • Passport Size Photo

For Registered Office

  • Ownership Proof (Electricity Bill etc)
  • Utility Bill (Gas Bill, Electricity Bill)
  • NOC(Download format)

Section 8 Company Registration Process

Section 8 company registration process requires at-least two people to start with. Further, there is no limit for initial capital and hence, it may be started with Rs.10,000. Here is a section 8 Company registration procedure:

# Step 1 – Prepare DSC. DIN & Name approval: Before even applying for the DSC, DIN etc one must arrange all the documents properly, because most of the rejection happens due to improper documentation.

# Step 2 – Apply for License: The second and the most important part is to get license from the government to do the social work in India. This is done through e-form no.12 with proper application and attachments.

# Step 3 –File for incorporation: The third step is to file the incorporation along with all necessary documents.The form is attached with all the important attachments like MOA, AOA, declarations etc.

Time & Cost for Section 8 Company Registration

The Total Cost Breakup

9,999

Items Qty Price
Digital Signature Certificate (DSC) 2 2,000
Director Identification Number (DIN) 2 1,000
Name Approval 1 1,000
RD Approval Fees 2,000
MOA, AOA and Incorporation Fee 6,000
PAN and Tan Application 500
Professional Fee (Inclusive of Taxes)
Total NPO/NGO/Section 8 Registration Cost in India 22,499

Note: Stamp duty Extra for States: Punjab, Kerala and Madhya Pradesh.

Time for Section 8 Company Registration

It takes around 25 to 30 day to register a micro finance business if all documents are submitted on time.

Income Tax Exemptions to Section 8 Companies

Only by registering a section 8 company does not result into income tax exemption and further exemption to the donators. Rather section 8 company is the first step to claim the income tax exemption. There are basically two types of income Tax exemptions which are as follows:

  • – Exemption to Section 8 Company from Income Tax: This exemption is claimed under Section 12AA of the Income tax Act, 1961. As per section 12AA, an application is filed to the Income tax commissioner along with the necessary supporting documents. If Income tax commissioner is satisfied, then he shall grant the tax exemption to the company.However, complying with section 11 to section 13 is very important to avoid revocation of exemption.
  • – Exemption to donators under Income tax: This exemption is claimed by donators under section 80G. However,the donators is only eligible to take tax exemption if the section 8 company is registered under section 80G. This exemption can be filed along with section 12 exemption or anytime after that.

Mandatory Requirements for Section 8 Company Registration

Section 8 company are formed by those who do not have any profit motive, rather they have a social objective which they want to achieve. Hence, there mandatory requirement to start the section 8 company are as follows:

  • Minimum of two persons are required along with the documents stated above.
  • You must have a plan for your social objectives, as ROC may ask for the same.
  • Whatever, you choose the capital of the company, you must invest the same into company within 2 months.

Donations / Funding of NGO / NPO or Section 8 Company

Section 8 company are not allowed to raise funds by way of deposits but they can accept donations from the general public. Let us discuss the ways by which it can raise funding:

  • Foreign Donations: Foreign donations are allowed only when FCRA registration has been taken. FCRA license can only be applied after three years from the date of registration. However, if it is really urgent to receive foreign donations, then you may apply for prior permission from commissioner.
  • Equity Funding: Section 8 company can also raise funding by issuing new equity shares at a higher value.
  • Domestic donations: There is no restriction on the domestic donations, however a proper check must be kept in order to avoid the money laundering cases.

How to Raise Funding in a Public Limited Company?

Finance is a lifeline of any business and in todays world every competition is neck to neck, availability of good finance is needed in order to sustain. You may refer the practical example of Flipkart, Ola etc. Hence, you must follow the following in private company in order to raise funds:

  • Build a plan and a working business model: Gone are those days when you can get funding on the basis of an idea.Now, is the time, that you should test your own idea, reach a MVP and then build a strong future plan.
  • Reach investors and list on stock exchange: You may reach the private investors or list your shares on stock exchange. However, initiating a IPO is a very complex task.
  • Prepare Documents: Once you sign the term sheet, next and final step is to prepare documents like Shareholder agreement etc.

Section 8 Company vs Trust vs Society – A Comparison

Let us understand the basic difference between the trust, section 8 company and society. In India, if you want to start a NGO/NPO, then you have three option to start with, Society, trust and Section 8 company. Let us understand which is better based upon number of factors:

Factors Section 8 Company Trust/Society
Introduction Section 8 company is a registered entity and has recognition all over India. Trust and societies are registered at DGM locally and has recognition state wise.
Trust Section 8 companies are treated more trust worthy because they have license. They are registered with local state authorities hence, lacks trust factor initially.
Compliance Compliances are high here and even need to comply in case of no revenue. There are very few compliances to be made in comparison to section 8.
Governing Doc Section 8 company is governed by MOA and AOA of the company. Trust and Societies are governed by their trust deed or bye laws.
Closure Section 8 Company can be closed within the parameters of law. The irrevocable trust cannot be closed.
Cost The maintenance cost is high in section 8 company. Cost is very low as compared to the section 8 company.

Mandatory Compliances for Section 8 Company

There are many compliances which are to complied by the section 8 company, however the most important compliances are as follows:

Income Tax

If company is registered under Income Tax act, then company needs to comply with the IT provisions.

Company Act

Section 8 company also needs to comply with the Companies Act in similar terms as any other company.

Other

There are other laws as well which are to be taken care off like PMLA etc.