Last updated: March 16th, 2023 4:36 PM

What is a Section 8 Company?

Section 8 Companies are established under Section 8 of the Companies Act, 2013 and governed by the Ministry of Corporate Affairs (MCA). This section outlines the registration requirements for businesses that have charitable objectives or that promote anything akin to those in the arts, sciences, sports, education, research, social welfare, and religion. These companies are registered for non-profit activities and cannot distribute profits or dividends to their members.

Benefits of Section 8 Company

In recent years, India has seen a considerable rise in Section 8 companies, as they offer certain advantages that other companies do not.

Easy to Set Up

Setting up a Section 8 company is much easier than a regular one. All that is required is a minimum of two members who share a common vision and submit the necessary documents to the Registrar of Companies (RoC).

Tax Exemptions

Under the Income Tax Act 1961, section 8 companies are eligible for tax exemptions. This is a significant benefit for companies engaged in charitable activities, allowing them to save on taxes.

Government Grants

Section 8 companies are eligible for government grants and funding. This provides them with an additional source of income, which can be used to further their objectives and activities.

Reputation

A Section 8 company is seen as a credible and reliable organization by the public. This can attract more donations and investments, which can be used to further the objectives of the company.

Easier Compliance

Section 8 companies are not required to comply with the stringent regulations that are applicable to other companies. This makes it easier for them to focus on their activities without worrying about meeting compliance requirements.

Eligibility for Section 8 Company

In order to be eligible for registration as a Section 8 company, the organization must fulfil specific criteria. Firstly, the company must have a minimum of two members who are subscribing to the Memorandum of Association. The members must also be Indian citizens and at least one of them must have a Director Identification Number (DIN). Furthermore, the proposed company must also have a minimum of three directors, who must also be Indian citizens and should possess DINs. The registered office of the entity must be situated in India and the company must also have Rs. 1 lakh as minimum paid-up capital. In addition, the company must also have a name that is approved by the Registrar of Companies (ROC). The name should include the words