Section 8 Company: Non-Profit Organization Registration

In India, organizations focused on promoting charitable, educational, scientific, or social welfare activities often choose to register as a Section 8 Company. These entities are recognized under the Companies Act, 2013, and offer several benefits for non-profit organizations, including tax exemptions, legal recognition, and enhanced credibility.

This complete guide will explore everything you need to know about Section 8 Company registration, the registration process, compliance requirements like GST registration, and even details about GST cancellation if your organization no longer needs to be registered. We’ll also compare Section 8 Companies with other popular business structures, such as the One Person Company (OPC), to help you make an informed decision.

What is a Section 8 Company?

A Section 8 Company is a type of non-profit organization established under Section 8 of the Companies Act, 2013 in India. The primary objective of such companies is to promote commerce, art, science, education, sports, social welfare, religion, charity, environmental protection, or any other similar objective. Unlike traditional companies, Section 8 Companies cannot distribute profits to their members. Any income or surplus must be reinvested to achieve the organization’s stated goals.

Key Features of a Section 8 Company

1.Non-Profit Objective: The organization’s primary goal is charitable or social welfare, not profit-making.

2.Limited Liability: Members' liability is limited to the extent of their shareholding, similar to other corporate structures.

3.Separate Legal Entity: A Section 8 Company enjoys a distinct legal identity, independent of its members.

4.No Dividend Distribution: Profits must be reinvested into the company’s activities and cannot be distributed to shareholders.

5.Government License: To operate legally, a Section 8 Company must obtain a special license from the Ministry of Corporate Affairs (MCA).

Benefits of Section 8 Company Registration

1.Tax Exemptions: Section 8 Companies are eligible for tax exemptions under Section 12A and 80G of the Income Tax Act, which makes them attractive to donors and stakeholders.

2.Credibility and Trust: Being registered under the Companies Act enhances the organization's credibility among donors, government agencies, and international bodies.

3.Exemption from Stamp Duty: Section 8 Companies are exempt from paying stamp duty on their Memorandum of Association (MOA) and Articles of Association (AOA).

4.Perpetual Succession: The company continues to exist irrespective of changes in membership.

5.Limited Liability Protection: Directors and members are protected from personal liability in case of legal disputes.

Section 8 Company Registration Process

Registering a Section 8 Company in India involves several steps to ensure legal compliance. Here’s a step-by-step guide to the Section 8 company registration process:

Step 1: Obtain Digital Signature Certificate (DSC)

Since company registration is done online, the first step is to obtain a Digital Signature Certificate (DSC) for all proposed directors. This certificate is used to sign electronic documents submitted to the Ministry of Corporate Affairs (MCA).

Step 2: Apply for Director Identification Number (DIN)

Next, apply for a Director Identification Number (DIN) for all proposed directors. This unique number is mandatory for anyone wishing to serve as a director in an Indian company.

Step 3: Name Reservation

Submit an application for name approval using the RUN (Reserve Unique Name) service on the MCA portal. The proposed name should reflect the organization’s charitable purpose and must comply with naming guidelines set by the MCA.

Step 4: Drafting of Memorandum and Articles of Association

Prepare the Memorandum of Association (MOA) and Articles of Association (AOA), which outline the company's objectives, governance structure, and operational rules. These documents must emphasize the non-profit nature of the organization.

Step 5: Apply for Section 8 License

File Form INC-12 with the MCA to obtain a license under Section 8. Attach required documents such as the MOA, AOA, declarations by directors, and financial projections.

Step 6: File Incorporation Forms

Once the license is obtained, file Form spice+ (Simplified Proforma for Incorporating Company Electronically Plus) along with the license and other necessary documents. This form integrates company incorporation with other registrations like GST.

Step 7: PAN, TAN, and GST Registration

Upon successful incorporation, the company automatically receives its Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN). If applicable, you can also apply for GST registration through the SPICe+ form.

Step 8: Certificate of Incorporation

After successful verification, the MCA will issue a Certificate of Incorporation, officially recognizing the Section 8 Company as a legal entity.

Documents Required for Section 8 Company Registration

•Identity Proof: PAN card and Aadhaar card of all directors and members.

•Address Proof: Utility bills, rental agreements, or ownership documents of the registered office.

•Registered Office Proof: No Objection Certificate (NOC) from the property owner, if applicable.

•Memorandum of Association (MOA) and Articles of Association (AOA).

•Declaration by Directors: Stating the non-profit nature of the organization.

GST Registration for Section 8 Companies

Although Section 8 Companies are non-profit organizations, they may still be required to register for Goods and Services Tax (GST) under certain conditions.

When is GST Registration Required for Section 8 Companies?

1.Turnover Exceeds Threshold: If the annual turnover exceeds ₹20 lakhs (₹10 lakhs for special category states), GST registration becomes mandatory.

2.Inter-State Supply: If the company supplies goods or services across state borders, it must register for GST regardless of turnover.

3.Voluntary Registration: Even if the turnover threshold isn’t met, organizations can opt for voluntary GST registration to avail of input tax credits.

How to Apply for GST Registration?

1.Visit the GST Portal: Go to www.gst.gov.in.

2.Click on 'Register Now': Under the 'Taxpayer' section.

3.Fill in Part A: Enter basic details and verify using OTP.

4.Fill in Part B: Provide detailed business information and upload required documents.

5.Submit Application: Use a Digital Signature Certificate (DSC) for submission.

6.Receive GSTIN: After verification, the company will receive its GST Identification Number (GSTIN).

Cancellation of GST Registration for Section 8 Companies

If a Section 8 Company no longer requires GST registration—perhaps due to a decline in turnover or cessation of taxable activities—it can apply for GST cancellation.

How to Cancel GST Registration?

1.Login to the GST Portal: Use your GST credentials.

2.Direct to Services → Registration → Application for Cancellation.

3.Select Reason for Cancellation: Choose the appropriate reason, such as business closure or turnover below the threshold.

4.Submit Supporting Documents: Provide necessary documents, like a closure certificate if applicable.

5.File Final Return (GSTR-10): Submit the final GST return within three months of cancellation.

6.Receive Confirmation: Once approved, you’ll receive an official confirmation of GST cancellation.

Section 8 Company vs. One Person Company (OPC)

While both Section 8 Companies and One Person Companies (OPCs) offer limited liability protection, they serve different purposes.

Compliance Requirements After Section 8 Company Registration

After registration, Section 8 Companies must adhere to specific compliance requirements to maintain their legal status.

1.Annual Filings: Submit annual financial statements and returns to the MCA.

2.GST Compliance: If registered, file monthly or quarterly GST returns.

3.income Tax Filings: File annual income tax returns, even if the company is exempt from certain taxes.

4.Statutory Audits: Conduct regular audits to maintain financial transparency.

5.Board Meetings: Maintain records of board meetings and resolutions.

Conclusion

Registering a Section 8 Company is an excellent option for individuals and organizations dedicated to promoting charitable and social causes. The Section 8 company registration process ensures that the organization is recognized as a legal entity, offering benefits like tax exemptions, limited liability, and enhanced credibility. Identifying related compliance requirements, such as GST registration and the process for cancellation of GST registration, is necessary for maintaining the organization’s legal standing.

Whether you’re setting up a Section 8 Company or exploring other structures like the One Person Company (OPC), choosing the right business structure aligned with your goals is essential for long-term success.