Question 1

Does a Section 8 company pay tax?

Accepted Answer

No, Section 8 companies are generally exempt from paying income tax on their income derived from activities aligned with their objectives, such as social welfare, education, or research. This exemption is granted underSection 12AA of the Income Tax Act, 1961.
However, there are few exceptions:

Income from commercial activities: If a Section 8 company generates income from activities unrelated to its charitable objectives, such as running a commercial restaurant, that income will be subject to regular income tax.

Excess income not applied for objectivesAny income earned beyond what's reasonably needed for achieving the company's objectives is also subject to tax.

Question 2

What is the minimum requirement for a Section 8 company?

Accepted Answer

There are no minimum requirements in terms of capital or shareholding for starting a Section 8 company. However, it must have:

At least two promoters/subscribers: These individuals will initiate the incorporation process and become the initial directors.

A well-defined objective:The objective should be explicitly mentioned in the company's Memorandum of Association (MoA) and aligned with Section 8 purposes like education, environment, or promoting art and culture.

Limited liability protection:Shareholders and directors have limited liability, meaning their personal assets are not at risk for the company's debts.

Question 3

Do Section 8 companies need GST registration?

Accepted Answer

Whether a Section 8 company needs GST registration depends on its annual turnover and activities. If the company's turnover exceeds the prescribed threshold (currently 40 lakhs in most states), it needs to register for GST. Additionally, even if the turnover is below the threshold, registration might be necessary if the company:

Makes interstate supplies of goods or services.

Imports goods or services.

Acts as a supplier of goods or services to a GST-registered business.

Question 4

How do I convert my company to a Section 8 Company?

Accepted Answer

Converting an existing company into a Section 8 Company involves the alteration of the company's Memorandum and Articles of Association and obtaining approval from the Registrar of Companies (RoC). You will need to meet the eligibility criteria, prepare the necessary documents, and follow the prescribed procedure as per the Companies Act, 2013.

Question 5

Is a Section 8 Company a public or a private company?

Accepted Answer

A Section 8 Company can be either a private or a public company, depending on its structure and the number of members. It follows the same classification criteria as other companies under the Companies Act, 2013.

Question 6

How can I check if a Section 8 Company is registered or not?

Accepted Answer

You can check the registration status of a Section 8 Company by searching the Ministry of Corporate Affairs (MCA) portal in India. The MCA provides online access to information about registered companies, including Section 8 Companies.

Question 7

Is there any maximum limit for the number of members in a Section 8 company?

Accepted Answer

There is no maximum limit for the number of members in a Section 8 Company. The company can have any number of members as required for achieving its objectives.

Question 8

What are the other alternatives for starting an NGO?

Accepted Answer

Alternatives for starting a non-profit organization (NGO) in India include forming a Trust, a Society, or a Section 8 Company. The choice depends on the specific goals, governance structure, and legal requirements of the organization.

Question 9

Is an office required for starting a Section 8 Company?

Accepted Answer

Yes, a registered office address is required for starting a Section 8 Company in India. You must provide a physical location where official communications can be received.

Question 10

Do I have to be present in-person to incorporate a Section 8 Company?

Accepted Answer

No, physical presence is not mandatory for incorporating a Section 8 Company. The incorporation process can be completed online or through the assistance of legal professionals.

Question 11

Can NRIs/Foreign Nationals be Directors in a Section 8 Company?

Accepted Answer

Yes, NRIs (Non-Resident Indians) and foreign nationals can be Directors in a Section 8 Company in India. However, they must comply with regulatory requirements, such as obtaining a Director Identification Number (DIN) and fulfilling other legal obligations.

Question 12

What is the purpose of Section 8 Company Registration in India?

Accepted Answer

The primary purpose of Section 8 Company registration in India is to promote charitable activities, social welfare, and non-profit objectives. These companies are formed to utilize their profits for the betterment of society rather than distributing dividends to members.

Question 13

What are the annual compliances to be followed by a Section 8 Company?

Accepted Answer

Section 8 Companies are required to comply with various annual compliances, including filing financial statements, annual returns, and conducting board meetings. The specific requirements may vary based on the company's structure and activities.

Question 14

Are there any disadvantages under Section 8 Company registration?

Accepted Answer

While Section 8 Companies enjoy certain tax benefits and have a charitable focus, they also face restrictions on distributing profits to members and must adhere to strict compliance requirements. Additionally, obtaining Section 8 status can be time-consuming and involves regulatory scrutiny.

Question 15

Can a Section 8 Company raise Foreign Funding?

Accepted Answer

Yes, Section 8 Companies can raise foreign funding with the approval of the government authorities and compliance with the Foreign Contribution (Regulation) Act, 2010.

Question 16

Whether a Section 8 Company is Private or Public?

Accepted Answer

A Section 8 Company can be either a private or a public company, depending on its Articles of Association and the number of members it has.

Question 17

Can a Section 8 Company be registered as MSME (Micro, Small, and Medium Enterprises)?

Accepted Answer

Yes, a Section 8 Company can be registered as an MSME if it meets the criteria specified by the MSME Ministry of India, based on factors like turnover and investment in plant and machinery or equipment.

Section 8 Company Registration

Section 8 Company Registration FAQ's

Recent Updates

As on 1 April, 2021, per CBDT's notification number 19/2021, issued 26 March 2021, the government included explicit clauses in the Finance Act of 2020. Some of the significant changes are provided below.

Trusted by 400,000 clients and counting, including …