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Section 8 Company Compliance

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Section 8 Company Compliance - Overview

What are Section 8 Companies?

Section 8 companies in India are non-profit organizations. They are formed under the Companies Act, 2013. These companies promote social welfare, education, art, science, religion, research, or similar objectives. Unlike traditional companies, Section 8 companies cannot distribute profits to their members. They are also not allowed to use the words 'Limited' or 'Private Limited' in their names.

Benefits of Section 8 Company Compliance

Charitable Objectives

Section 8 Companies aim to improve society by promoting education, social welfare, religion, and charity. Individuals can contribute to making society better.

Limited Liability

Section 8 Companies offer limited liability to their members. This means that their personal assets are protected if the company has debts or legal problems. Limited liability promotes a secure environment for philanthropic initiatives.

No Minimum Capital Requirement

Section 8 Companies are different from other company structures because they don't need a minimum capital requirement. This makes them easier to access for people who want to create non-profit organizations without a big initial investment.

Tax Exemptions

Section 8 Companies can receive tax exemptions and benefits. This encourages people and organizations to participate in charitable activities without paying too much in taxes.

Perpetual Succession

Section 8 Companies have perpetual succession, meaning their existence is not affected by changes in membership. This ensures continuity in pursuing long-term charitable goals.

Ease of Funding

These companies can get money from people, government, and other organizations. This money helps them do good things.

Recognition and Trust

The Section 8 tag is linked to non-profit and charitable goals. It creates trust among stakeholders, donors, and the public, and improves the organization's credibility.

Corporate Structure

Companies in Section 8 can choose a corporate structure. This helps with efficient management, decision-making, and following legal regulations.

Social Impact

Section 8 Companies contribute to society by focusing on charitable causes. They address critical issues and make a tangible impact on the community.

Compliance Framework

Compliance requirements are important. They ensure transparency, accountability, and legal recognition. This reinforces the credibility of Section 8 Companies.

Access to Grants and Funding

Section 8 Companies can access various grants, subsidies, and funding opportunities from government and non-governmental organizations to support their philanthropic endeavors.

Ease of Registration

The registration process for Section 8 Companies is easier than other business structures. It helps more people get involved in charitable activities.

Documents Required for Section 8 Company Compliance

To comply with Section 8 company regulations in India, these are the necessary documents:

1. Core Documents:

  • Memorandum of Association (MoA): The MoA defines what the company aims to achieve, what it can do, and what its activities include.
  • Articles of Association (AoA): The AoA sets the company's internal rules and regulations. It governs the company's management and operations.
  • Certificate of Incorporation: This document proves that the company is legally established.
  • Digital Signature Certificate (DSC): You need a DSC to file electronic forms and documents with the Ministry of Corporate Affairs (MCA).
  • 2. Financial Documents:

  • Financial Statements: A qualified chartered accountant prepares and audits the balance sheet, profit and loss account, and cash flow statement every year. Talk to our CA today
  • Auditor's Report: The auditor's report assesses the company's financial statements independently.
  • Income Tax Return (ITR-7): Section 8 companies must file income tax returns each year, even if they have no taxable income.File your ITR with us today!
  • 3. Compliance Documents:

  • Annual Return (Form MGT-7): This form has complete information about the company's directors, shareholders, registered office, and other important details.
  • Form AOC-4: Use this form to file the company's financial statements with the Registrar of Companies.
  • Form ADT-1: This form is used to appoint an auditor for the company.
  • 4. Additional Compliances (if applicable):

  • Section 12AA Registration: Section 8 companies must register to get tax exemption. They need to register under Section 12A of the Income Tax Act.
  • Section 80G Registration: Donors can claim tax benefits for donations made to the Section 8 company with this registration.
  • 5. Other Documents (as needed):

  • Board resolutions: These resolutions document decisions made by the company's board of directors.
  • Minutes of meetings: These minutes record the proceedings of shareholder and board meetings.
  • Statutory registers: The registers keep records of shareholders. They also keep records of directors, meetings, and other important company information.
  • Compliance Timelines:

  • Annual Return (Form MGT-7): Due within 60 days of the Annual General Meeting (AGM).
  • Financial Statements: Due within 30 days of the AGM.
  • Income Tax Return (ITR-7): Due on or before 30th September of the following financial year.
  • List of Mandatory Section 8 Company Compliances

    • Holding Annual General Meeting (AGM) within six months of the financial year-end
    • Filing of Annual Return (Form MGT-7) with the Registrar of Companies (RoC)
    • Filing of Financial Statements (balance sheet, profit & loss account, cash flow statement) with RoC
    • Appointment of auditors
    • Auditor's report submission to RoC
    • Filing of income tax return (Form ITR-7) with the IT department
    • Maintenance of books of accounts and financial records
    • Regular audits by a qualified Chartered Accountant (CA)
    • Complying with the restrictions on utilisation of funds for charitable purposes
    • Displaying the company's name and registration number on all official documents and communications
    • Keeping register of members and debenture holders
    • Maintaining register of directors and key managerial personnel
    • Complying with other provisions of the Companies Act, 2013, and any amendments or rules issued by the government.

    Section 8 Company compliance checklist

    Incorporation:

    • Obtain Digital Signature Certificates (DSC) for directors and members.
    • Apply for Director Identification Number (DIN) for directors.
    • Reserve a unique name for the Section 8 Company.
    • File the application for incorporation with the Ministry of Corporate Affairs (MCA).

    Memorandum and Articles of Association:

    • Submit the Memorandum of Association (MOA) and Articles of Association (AOA) to the MCA.

    Obtaining License:

    • Get a license from the Central Government for a Section 8 Company. Attach the necessary documents.

    PAN and TAN:

    • Apply for and obtain Permanent Account Number (PAN) for the Section 8 Company.
    • Apply for and obtain Tax Deduction and Collection Account Number (TAN).

    Statutory Meetings:

    • Conduct the first Board Meeting within 30 days of incorporation.
    • Hold the first Annual General Meeting (AGM) within 9 months after closing the financial year.

    Compliance with Accounting Standards:

    • Maintain proper accounting records in compliance with Accounting Standards.
    • Prepare and file audited financial statements annually.

    Compliance with Annual Return Filing:

    • File the annual return with the Registrar of Companies (RoC) within 60 days of the AGM

    Regulatory Filings:

    • File necessary forms with the MCA for changes in the company's structure, directors, or registered office address.

    Tax Compliance:

    • Comply with income tax regulations applicable to Section 8 Companies.
    • File income tax returns on time.

    Utilization of Funds:

    • Ensure that the funds and income are utilized only for the charitable or non-profit objectives mentioned in the MOA.

    Changes in MoA and AoA:

    • Obtain approval from the Central Government for any changes to the MOA and AOA.

    Annual Report:

    • Prepare an annual report detailing the activities undertaken for the promotion of the company's objectives.

    Record Maintenance:

    • Maintain and update all statutory registers, minutes of meetings, and other records as required by law.

    Compliance with Section 135 (CSR):

    • Comply with Corporate Social Responsibility (CSR) provisions, if applicable.

    Compliance with Other Applicable Laws:

    • Ensure compliance with other applicable laws, such as the Goods and Services Tax (GST) Act, if applicable.

    Regular Compliance Review:

    • Conduct regular internal compliance reviews to identify and address any potential issues.

    Event-based Annual Compliances of Section 8 Company

    As a Section 8 company in India, there are certain event-based annual compliances that you need to fulfill to maintain regulatory compliance and enjoy the benefits associated with your non-profit status. These compliances are in addition to the regular annual compliances required for all types of companies.

    Annual General Meeting (AGM)

    Just like other companies, a Section 8 company is required to hold an AGM within six months from the end of the financial year. During the AGM, the financial statements, including the Balance Sheet and Profit and Loss Account, are presented and approved by the members.

    Income Tax Return (ITR)

    Section 8 companies must file their income tax returns annually with the Income Tax Department. The deadline for filing ITR is generally on or before the specified due date, which is usually July 31st of the assessment year.

    Financial Statements

    Section 8 companies must prepare and file their financial statements, which include the Balance Sheet, Profit and Loss Account, and other required statements, within 30 days from the conclusion of the AGM.

    Annual Return

    Companies, including Section 8 companies, must file an annual return with the Registrar of Companies (RoC) within 60 days from the conclusion of the AGM. The annual return provides essential information about the company's activities, shareholding pattern, and details of its directors and key management personnel.

    Board Meetings

    Section 8 companies are required to hold at least four board meetings in a calendar year, with a maximum gap of 120 days between two consecutive board meetings.

    Changes in Board of Directors

    If there are any changes in the Board of Directors, such as appointment, resignation, or removal of directors, the company must intimate the RoC through the appropriate forms within the specified time frame.

    Change in Registered Office

    If there is any change in the registered office address of the Section 8 company, the RoC must be informed through the relevant forms within the prescribed time.

    Foreign Contributions (if applicable)

    If the Section 8 company is registered under the Foreign Contribution Regulation Act (FCRA) and receives foreign contributions, it must submit an annual report detailing the receipts and utilisation of foreign funds.

    GST Compliance (if applicable)

    If the Section 8 company is registered under the Goods and Services Tax (GST) Act, it must comply with the GST regulations, including filing GST returns regularly.

    Annual Compliances for Section 8 Company

    1. Appointment of Auditor:

    • Appoint a qualified auditor to audit the company's financial statements annually.
    • File Form ADT-1 with the Registrar of Companies (ROC) within 15 days of the appointment.

    2. Maintenance of Books of Accounts:

    • Maintain accurate and up-to-date books of accounts, including:
    • Cash book
    • Ledgers
    • Journals
    • Receipt and payment accounts
    • Profit and loss accounts
    • Balance sheets

    3. Statutory Meetings:

    • Conduct the following meetings within the specified timelines:
    • Annual General Meeting (AGM): Within 6 months of the financial year-end.
    • Board Meeting: At least once in every 3 months.

    4. Financial Statements:

    • Prepare and file the company's financial statements with the ROC within 30 days of the AGM.
    • Financial statements include:
    • Balance sheet
    • Profit and loss account
    • Cash flow statement (if applicable)

    5. Income Tax Return (ITR):

    • File the company's income tax return (ITR-7) annually, even if it's exempt from tax.
    • The due date for filing ITR is 30th September of the following financial year.

    6. Annual Return (Form MGT-7):

    • File Form MGT-7 with the ROC within 60 days of the AGM.
    • This form provides information about the company's:
    • Directors
    • Shareholders
    • Key events and changes during the year

    7. Other Compliances (as applicable):

    • Compliance under Micro, Small and Medium Enterprises (MSME) Act:
    • File Form MSME-1, if applicable.
    • Compliance under Companies (Acceptance of Deposits) Rules:
    • File Form DPT-3, if applicable.
    • Compliance under Foreign Contribution (Regulation) Act (FCRA):
    • File Form FC-4, if applicable.

    Non-Compliance Penalties:

    • Failure to comply with these annual requirements can result in penalties and fines imposed by the ROC.
    • It can also lead to legal complications and tarnish the company's reputation.

    Compliances applicable to the Non-Profit Companies (Section-8 Companies)

    1. Pre-Incorporation Compliances:

    • Memorandum of Association (MoA)
    • Articles of Association (AoA)
    • Digital Signature Certificate (DSC)
    • Section 8 License (granted by Central Government)

    2. Annual Compliances:

    Meetings:

    • Annual General Meeting (AGM) within 6 months of financial year-end
    • Board Meeting at least once in every 3 months

    Filings:

    • Form ADT-1 (Appointment of Auditor) within 15 days of appointment
    • Financial Statements (AOC-4) within 30 days of AGM
    • Annual Return (Form MGT-7) within 60 days of AGM
    • Income Tax Return (ITR-7) by 30th September of the following financial year

    Other:

    • Maintain accurate books of accounts

    3. Post-Compliance

    Tax Exemptions:

    • Section 12AA (if applicable)
    • Section 80G (if applicable)

    4. Additional Compliances (as applicable):

    Foreign Contribution (Regulation) Act (FCRA): File Form FC-4

    • MSME Act: File Form MSME-1
    • Companies (Acceptance of Deposits) Rules: File Form DPT-3

    Tax Compliance for Section 8 Companies

    Tax compliance for Section 8 companies in India is essential to their operations. While these companies enjoy certain tax benefits due to their non-profit nature, they are still required to fulfil specific tax-related obligations.

    1. Income Tax: Section 8 companies are eligible for tax exemptions under Section 11 and Section 12 of the Income Tax Act, 1961. However, to avail of these exemptions, the company must ensure that its income is applied solely for charitable or religious purposes, and not for the benefit of any particular member or group of members. The income should be utilised for promoting the objectives specified in the company's Memorandum of Association.

    2. 12A Registration: To claim income tax exemptions, Section 8 companies need to obtain 12A registration from the Income Tax Department. This registration grants the organisation tax-exempt status for its income derived from charitable activities.

    3. 80G Registration: Section 8 companies can also apply for 80G registration, which allows donors to claim tax deductions on donations made to the organisation. It incentivizes individuals and entities to contribute to the company's charitable objectives.

    4. TDS (Tax Deducted at Source): If the Section 8 company is making payments that attract TDS, such as payments to vendors or contractors, it must deduct TDS at the prescribed rates and deposit it with the government within the specified time frames.

    5. Goods and Services Tax (GST): Section 8 companies are subject to GST compliance if their annual turnover exceeds the threshold limit prescribed by the GST Act (which is subject to change). They must register under GST, file regular GST returns, and comply with GST rules and regulations.

    6. Foreign Contributions (FCRA): If the Section 8 company receives foreign contributions, it must comply with the regulations under the Foreign Contribution Regulation Act (FCRA). FCRA registration is required to accept foreign donations and grants for charitable purposes.

    7. Form 10BB: Section 8 companies are required to file Form 10BB with the Income Tax Department. This form contains details of the funds received and the activities carried out in line with the company's objectives.

    8. Audit Requirements: Section 8 companies are generally required to get their accounts audited by a qualified Chartered Accountant each financial year, irrespective of their turnover. The audit report should be filed with the Income Tax Department along with the annual income tax return.

    Process of Section 8 Company Registration

    To register a Section 8 company in India, follow these steps:

    1. Obtain a Digital Signature Certificate (DSC):

    • Apply for a DSC from a licensed certifying authority (CA).
    • You must use DSC to electronically file forms and documents with the Registrar of Companies (ROC).

    2. Apply for Director Identification Number (DIN):

    • Each proposed director of the company must have a DIN.
    • Apply for DIN using Form DIR-3 on the MCA portal.

    3. Reserve a Unique Company Name:

    • Propose at least two names for the company.
    • Check for availability and reserve the desired name using Form INC-1 on the MCA portal.

    4. Apply for Section 8 License:

    • File Form INC-12 with the ROC, outlining the company's objectives and activities to prove its non-profit nature.
    • Attach required documents like MoA, AoA, and declaration by directors.
    • Upon approval, the Central Government grants a license under Section 8 (Form INC-16).

    5. File Incorporation Forms:

    • Use the SPICe+ (INC-32) form to submit incorporation applications and other integrated forms on the MCA portal.
    • Include details of directors, members, registered office address, and capital structure.
    • Attach mandatory e-MoA (INC-33) and e-AoA (INC-34).

    6. Obtain Certificate of Incorporation:

    • Upon successful verification, the ROC issues the Certificate of Incorporation, legally establishing the company.

    7. Post-Incorporation Compliances:

    • Obtain PAN, TAN, and bank account for the company.
    • File Form ADT-1 for auditor appointment.
    • File annual returns (Form MGT-7) and financial statements (AOC-4) with the ROC.
    • Apply for tax exemption under Section 12AA and 80G (if applicable).

    Penalties To Be Charged In Case Of Non-Compliance

    A firm that fails to comply with the requirements of Section 187 of the Companies Act,2013 will be subject to a fine of ₹5 lakh, and each officer who fails to do so will be subject to a fine of ₹50,000.

    Due Dates for Filling Section 8 Company Compliances

    Section 8 Company should follow the annual compliances within the below mentioned time:

    Form NoComplianceDue DateLast Date
    AOC-4 Directors ReportWithin 30 days of the Annual General Meeting 29 October
    MGT-7 Annual Returns Within 60 days of the Annual GeneralMeeting 28 November
    Form ITR -6 Income Tax Returns30 September 30 September

    Why Vakilsearch?

    Vakilsearch is a reliable choice for Section 8 company compliances due to our expertise and comprehensive services. Section 8 companies, which are established for promoting charitable or non-profit objectives, require diligent adherence to legal and regulatory requirements.

    We understand every unique compliance needs of Section 8 companies and offer specialised support to ensure their smooth functioning. With a team of experienced professionals, we assist in drafting and filing the necessary documents, obtaining approvals, and maintaining compliance with statutory obligations. Our thorough knowledge of the legal framework enables them to provide accurate guidance and timely updates on regulatory changes. By choosing Vakilsearch, Section 8 companies can focus on their core objectives while entrusting their compliance responsibilities to a trusted partner.

    FAQs on Section 8 Company Compliance

    These depend on specific events, such as:
  • Changes in directors or shareholders.
  • Alterations to MoA or AoA.
  • Acquisition or disposal of property.
  • Borrowing or lending money.
  • Companies must submit various reports to the Registrar of Companies (ROC) and other regulatory bodies, including:
  • Annual reports.
  • Auditor reports.
  • Financial statements.
  • Tax returns.
  • Companies must maintain and preserve various records, including:
  • Minutes of meetings.
  • Financial records.
  • Statutory registers.
  • Correspondence.
  • Non-compliance can lead to:
  • Penalties and fines.
  • Legal action.
  • Reputational damage.
  • Cancellation of registration.
  • No, Section 8 companies, also known as not-for-profit companies, are not eligible for full tax exemption. While they do enjoy certain tax benefits under the Income Tax Act, they are not exempt from paying taxes altogether. For more detailed information get on call with our tax experts today.
    Failing to file annual returns can lead to penalties and legal consequences for a Section 8 company. The Registrar of Companies (RoC) requires these companies to file their annual returns within the stipulated time frame.
    Yes, the Goods and Services Tax (GST) is applicable to Section 8 companies like any other entity engaged in providing taxable goods or services. However, certain activities of Section 8 companies may be exempt from GST, depending on the nature of their operations and the specific exemptions provided by the tax authorities.
    The annual compliance charge for a Section 8 company can vary and depends on several factors, including the company's authorised capital, paid-up capital, and the state in which it is registered. Additionally, there may be additional charges for late filing or other specific compliance requirements. It is best to consult with a professional chartered accountant or company secretary to determine the exact compliance charges for a particular Section 8 company.
    Annual compliances include:
  • Appointing an auditor and filing Form ADT-1.
  • Maintaining accurate books of accounts.
  • Conducting Annual General Meetings (AGMs) and Board Meetings.
  • Filing financial statements (AOC-4) and annual returns (Form MGT-7).
  • Filing income tax returns (ITR-7), even if exempt from tax.
  • As per the Companies Act, 2013, a Section 8 company is required to get its accounts audited annually. The audit is mandatory, regardless of the company's turnover or financial performance. There is no specific turnover limit for the audit of a Section 8 company; all such companies must undergo an annual audit.
    Section 8 companies, being not-for-profit organisations, may be eligible for certain exemptions under the Income Tax Act, 1961. These exemptions are typically related to their income, and they need to fulfil specific conditions to avail of such benefits. Consulting our tax advisor is recommended for specific guidance on tax exemptions for a Section 8 company.
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