Learn why 12A registration is compulsory for Section 8 companies in India. Discover the benefits of obtaining this certification and the consequences of not doing so.

Introduction

Section 8 companies are non-profit organizations that are formed with the purpose of promoting charitable causes, social welfare, and other altruistic objectives.

These companies are governed by the Companies Act, 2013 and are registered under Section 8 of the Act. The registration process involves obtaining a license from the Ministry of Corporate Affairs (MCA) and fulfilling certain conditions.

One of the conditions of a Section 8 company Registration is the requirement of obtaining a 12A registration from the Income Tax Department. This registration is mandatory for all charitable organizations in India, and failure to obtain it can result in a loss of tax exemptions and benefits.

But is the 12A registration compulsory for a Section 8 company? In this blog, we will explore this question in detail and provide insights into the registration process and its significance.

Understanding 12A Registration

The 12A registration is granted to charitable organizations by the Income Tax Department under Section 12A of the Income Tax Act, 1961. This registration is essential for availing of tax exemptions and benefits, including exemption from income tax on the income generated by the organization.

To obtain 12A registration, the organisation must submit an application to the Commissioner of Income Tax (Exemptions) in the prescribed format. The application must be accompanied by various documents, including the Memorandum of Association (MoA) and the Articles of Association (AoA), details of the activities of the organisation, and its financial statements.

Once the application is submitted, the Income Tax Department verifies the details provided and conducts an inspection of the organisation’s premises. If the department is satisfied with the organisation’s objectives and activities, it grants the 12A registration.

Importance of 12A Registration for Section 8 Companies

As mentioned earlier, the 12A registration is mandatory for all charitable organisations, including Section 8 companies. Without this registration, the organisation cannot avail of tax exemptions and benefits, which can be detrimental to its financial health.

In addition, the 12A registration is a prerequisite for obtaining other registrations and certifications, such as the 80G registration, which allows donors to claim tax deductions on their donations to the organisation. It also gives the organisation credibility and legitimacy in the eyes of donors, supporters, and the public.

Therefore, it is crucial for a Section 8 company to obtain 12A registration as soon as possible after its incorporation. The registration process can take several months, and the organisation cannot claim any tax exemptions until the registration is granted.

However, it is important to note that 12A registration is not a one-time process. The organisation must renew its registration every few years, depending on the discretion of the Income Tax Department. Failure to renew the registration can result in the loss of tax benefits and exemptions.

Is 12A Registration Compulsory for Section 8 Companies?

Now, coming back to our initial question, is 12A registration compulsory for Section 8 companies? The answer is yes. As per the Companies Act, 2013, a Section 8 company must obtain 12A registration within one year of its incorporation.

Section 8 companies are formed with the sole purpose of promoting charitable causes and social welfare, and therefore, they are classified as charitable organizations under the Income Tax Act, 1961. As per Section 2(15) of the Act, an organization is considered charitable if its activities promote education, relief of poverty or distress, advancement of any other object of general public utility, or the welfare of certain sections of the public, such as women, children, senior citizens, etc.

Since Section 8 companies fulfill the criteria of a charitable organization, they are required to obtain 12A registration for availing of tax exemptions and benefits. Failure to obtain the registration can result in the loss of tax exemptions, which can have a significant impact on the organization’s financial health and ability to carry out its charitable activities.

It is also important to note that even if a Section 8 company does not generate any income or profit, it still needs to obtain 12A registration. This is because the organization may receive donations or grants, and these funds may be taxable if the organization does not have 12A registration.

Conclusion:-

Vakilsearch, India’s leading legal and tax advisory service provider, can assist you in obtaining 12A registration for your Section 8 company. With a team of experienced professionals and a wealth of knowledge in legal and regulatory compliance, Vakilsearch can help streamline the registration process and ensure that your organisation obtains the necessary certifications and approvals.

By choosing Vakilsearch, you can be assured of a hassle-free and efficient registration process, allowing you to focus on your organisation’s core mission of promoting charitable causes and social welfare. With Vakilsearch’s assistance, you can obtain 12A registration and enjoy the tax exemptions and benefits that come with it, giving your organisation credibility and legitimacy in the eyes of donors and supporters.

In conclusion, if you are planning to start a Section 8 company, it is essential to obtain 12A registration to avail of tax exemptions and benefits. Vakilsearch can assist you in this process, ensuring that your organisation meets all legal and regulatory requirements and can carry out its noble mission of promoting social welfare and charitable causes.

Read more:-

• What Documents We Need to Apply for Section 8?
• Does a Section 8 company have to Register for GST?
• How to Close a Section 8 Company?