How to Register as an NGO – Section 8 Company in India

An NGO (Non-Government Organization) is a non-profit entity focused on charitable or social work. In India, NGOs can be registered as trusts, societies, or Section 8 companies. While trusts and societies are governed by the state government, Section 8 companies are regulated by the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013. Section 8 companies are often preferred for their credibility and the additional benefits they offer compared to trusts and societies.

Laws Governing NGOs in India

An NGO in India can be registered under one of the following laws:

1. Indian Trusts Act, 1882 – for trusts
2. Societies Registration Act, 1860 – for societies
3. Section 8 of Companies Act, 2013 – for Section 8 companies

What is a Section 8 Company?

A Section 8 company is formed to promote non-profit objectives such as:

• Commerce
• Art
• Science
• Sports
• Education
• Research
• Social Welfare
• Environmental Protection
• Charity

If the Central Government is satisfied with the purpose, it grants a license for the entity to register as a Section 8 company. The profits, if any, are reinvested to promote the company’s objectives, and no dividends are distributed to shareholders.

Benefits of Registering a Section 8 Company

1. No Minimum Capital Requirement: Section 8 companies do not require a minimum capital to start. Funds can be raised later through donations or subscriptions.
2. Tax Benefits: Section 8 companies are eligible for tax exemptions under Section 80G of the Income Tax Act, 1961, and the Company Auditor’s Report Order (CARO) does not apply.
3. No Stamp Duty: No stamp duty is required on the Memorandum of Association (MOA) and Articles of Association (AOA), unlike other types of companies.
4. Separate Legal Entity: The company has its own legal identity, separate from its members, and can continue to exist even if directors or members leave.
5. Limited Liability: Members have limited liability and are not personally responsible for the company’s losses.
6. Credibility: Section 8 companies are more credible as they are regulated under the Companies Act and must undergo mandatory audits.
7. Tax Exemptions for Donors: Donations made to Section 8 companies are eligible for tax deductions under Sections 12A and 80G of the Income Tax Act.

Eligibility Criteria for Section 8 Company Registration

• Individuals or HUFs (Hindu Undivided Families) can form a Section 8 company.
• Directors: The company must have at least two directors for private limited companies or three for public limited companies.
• Indian Resident: At least one director must be a resident of India.
• Non-Profit Objective: The company’s objective must focus on charity, education, social welfare, or other non-profit purposes.
• No Profit Distribution: Profits cannot be distributed to members or directors in any form.

Requirements for Section 8 Company Incorporation

1. Directors: At least two directors for private companies and three for public companies.
2. No Minimum Capital: No minimum paid-up capital is required for Section 8 companies.
3. Charitable Objects: The company’s MOA and AOA must clearly state its non-profit objectives.
4. Management: The company is managed by a Board of Directors according to its MOA and AOA, unlike trusts that are managed by trustees.
5. Regulations: A Section 8 company must comply with the Companies Act, Income Tax Act, and GST laws. It must maintain proper financial records and file annual returns.

Steps for Registering a Section 8 Company

1. Obtain DSC (Digital Signature Certificate): All directors must get a Class 3 DSC as the forms are submitted online.
2. Apply for DIN (Director Identification Number): You need to apply for a DIN for all directors, either through Form DIR-3 or SPICe+.
3. File Form INC-12: This form is filed to get a license for operating as a Section 8 company. Attach necessary documents like the MOA and AOA.
4. SPICe+ Form Submission: After obtaining the license, the SPICe+ form is filed for company incorporation along with relevant documents.
5. Incorporation Certificate: Once the application is approved, the ROC issues a Certificate of Incorporation along with a unique Company Identification Number (CIN).

Annual Compliance for Section 8 Companies

• Conduct a minimum of two board meetings every year
• Maintain proper financial records
• File annual returns and financial statements in the prescribed forms (AOC 4, MGT 7)
• Prepare for mandatory audits
• Ensure compliance with 12AA and 80G for tax benefits

Penalty for Non-Compliance

Non-compliance with the Companies Act can lead to severe penalties, including fines between Rs. 10 lakh and Rs. 1 crore. Directors can also face fines between Rs. 25,000 and Rs. 25 lakh.

By following these steps, you can register an NGO as a Section 8 company and enjoy various legal, financial, and operational benefits. For any queries, contact us.

Frequently Asked Questions

What is a Section 8 Company?
A Section 8 Company is a non-profit organization registered under the Companies Act, 2013, primarily established for promoting charitable, educational, religious, or social welfare objectives. Unlike other companies, its profits are not distributed to members but reinvested for achieving the organization’s goals.

What are the benefits of registering as a Section 8 Company?
Benefits include tax exemptions under Section 12A and 80G of the Income Tax Act, credibility among donors and government agencies, limited liability for members, no minimum capital requirement, and no stamp duty for incorporation.

What is the difference between a Section 8 Company, a Trust, and a Society?
A Section 8 Company is regulated by the Ministry of Corporate Affairs (MCA) and provides more legal benefits, while a Trust is governed by the Indian Trusts Act and a Society by the Societies Registration Act. Section 8 Companies are seen as more credible by government bodies and donors compared to trusts and societies.

Who can form a Section 8 Company?
Individuals, HUFs, or two or more people can form a Section 8 Company. There must be at least one director who is a resident of India.

Can profits of a Section 8 Company be distributed to its members?
No, any profits earned by a Section 8 Company must be used solely for furthering its non-profit objectives and cannot be distributed among its members or directors.

What are the documents required for Section 8 Company registration?
Documents include the Memorandum of Association (MOA), Articles of Association (AOA), Digital Signature Certificate (DSC), Director Identification Number (DIN), income and expenditure estimates, and identity/address proofs of the directors.

What is the process to register a Section 8 Company?
The process involves obtaining DSC and DIN, applying for a license by filing Form INC-12, and finally filing the SPICe+ form for incorporation. Upon approval, the company receives a Certificate of Incorporation.

Is there a minimum capital requirement for registering a Section 8 Company?
No, there is no minimum capital requirement for a Section 8 Company. Funds can be raised later through donations or subscriptions.

What are the annual compliance requirements for a Section 8 Company?
Annual compliances include conducting board meetings, maintaining books of accounts, preparing financial statements, filing income tax returns, and submitting financial statements in Form AOC-4 and annual returns in Form MGT-7.

Can a Section 8 Company be converted into a regular company?
No, a Section 8 Company cannot be converted into a regular for-profit company, as it is established strictly for non-profit purposes. However, its license can be revoked if it fails to comply with the legal provisions of the Companies Act.