Overview of Section 8 Company Registration

Given below are the benefits of registering a section 8 company in India:

1. Tax Exemption

• Section 8 companies registered under Section 12AA of the Income Tax Act enjoy a 100% tax exemption.
• The profits generated by Section 8 entities used for charitable purposes are entirely non-taxable.
• Enhanced financial resources lead to a more significant positive impact and more philanthropic activities for society.

2. No Minimum Capital Requirement

• Section 8 companies are not subject to any minimum capital requirement, providing greater financial flexibility.
• Founders and stakeholders can determine the initial capital based on the organisation's needs and objectives.
• The company can adjust its capital structure as it grows and expands its activities without legal constraints.

3. No Need for Paying Stamp Duty

• Section 8 companies are exempt from paying stamp duty for registration, resulting in cost savings.
• Stamp duty is a tax imposed on certain legal documents for them to be legally valid.
• Public limited companies and private limited companies are generally liable to pay stamp duty during registration.

4. Separate Legal Entity

• Section 8 companies have the status of a separate legal entity, independent of their members or founders.
• This legal separation protects the personal assets of the company's members.
• The company can own property, enter into contracts and sue or be sued in its own name.

5. Increased Credibility

• Section 8 companies show higher credibility due to hard compliance requirements.
• These entities function under a more stringent legal framework established by relevant authorities.
• Transparent and accountable utilisation of funds and resources is needed for charitable purposes.
• Enhanced trust and confidence of donors, beneficiaries and stakeholders.

6. No Title Required

• Section 8 companies have the freedom to choose a name that reflects their mission and purpose.
• Unlike other registered structures, they are not obligated to include the term ‘Section 8’ in their name.
• This naming flexibility allows the organisation to create a brand identity aligned with its values and objectives.
• Better recognition and understanding of the organisation's mission in society, avoiding potential misconceptions.

Given below are the essential documents needed for section 8 company registration in India:

• PAN Card of the Directors and Shareholders: A valid PAN (Permanent Account Number) card of all the directors and shareholders is necessary for the registration process.
• Aadhaar Card: The Aadhaar card serves as an important identity proof for the directors and shareholders during the registration of the Section 8 company.
• Latest Bank Statement: A recent bank statement showcasing the financial transactions of the directors and shareholders is required as part of the registration process.
• Telephone Bill or Electricity Bill: An active telephone bill or electricity bill is needed to verify the residential address of the directors and shareholders.
• Voter ID or Passport or Driving License: Any of these government-issued identity proofs are essential to establish the identity and address of the directors and shareholders.
• Passport Size Photograph of all the Directors and Shareholders: Recent passport-sized photographs of each director and shareholder are necessary for identification and documentation purposes.
• Copy of the Rental Agreement, in case the property is on rent for the registered office: If the registered office is on rented premises, a copy of the rental agreement along with the No Objection Certificate (NOC) from the property owner is required for verification.

The eligibility criteria for section 8 companies are as follows:

1. Minimum 2 People:

• At least 2 individuals are mandatory to hold the positions of shareholders/directors in the company.
• The number of shareholders cannot exceed 200 as per regulations.

2. No Minimum Capital:

• There is no specific minimum capital requirement prescribed for Section 8 companies.
• The capital amount is determined based on business needs and the registration fee is calculated as a percentage of the capital.

3. One Resident Director:

• A Section 8 company must have at least one director who is a citizen of India and a resident in the country.

4. Unique Name:

• The name of the Section 8 company must be distinct and not similar to any other existing company or trademark.

5. Social or Welfare Object:

• Section 8 company should focus on betterment in various fields, including:
  • Marketing
  • Science
  • Art
  • Research
  • Education
  • Social Welfare
  • Religion
  • Charity
  • Protection of Environment

6. No Profit Distribution:

• Revenues earned by Section 8 companies must be utilised solely for the objectives on which the company is formed.
• Members of the company are not allowed to use the funds for personal purposes and profit distribution is not permitted.

Given below is the process for incorporating a Section 8 company:

Step 1: Secure DSC from the MCA authorised agencies

• Obtain Digital Signature Certificate (DSC) from MCA authorised agencies.
• DSC serves as a digital tool for signing e-forms and scanned copies of documents.
• Proposed directors of the Section 8 company must secure the DSC for signing key documentations.

Step 2: Visit the MCA Portal to File Spice+ Form

• Create an account on the MCA portal.
• Select the Spice+ form option from the Service section on the home page.
• The form has two vital parts, Part A and Part B.
• Part A: Register the proposed company name.
• Part B: Offers various services, including company incorporation, DIN allotment, PAN allotment, TAN allotment, GSTIN allotment, EPFO allotment, ESIC allotment, Opening of Bank Account for the Company and Profession Tax Registration.

Step 3: Upload Mandatory Documents and Submit the Form

• Upload the mandatory documents as mentioned in the process.
• Proceed to the payment section and submit the standard fees.
• Click on the submit button to complete the application submission formalities.

Given below is the list of compliances for section 8 companies post registration:

1. Annual Compliances:

• A Section 8 company must adhere to annual compliances similar to other companies.
• Failure to comply may result in the company being treated as dormant and could be struck off from the register.

2. CSR Compliances:

• Section 8 companies are required to fulfil Corporate Social Responsibility (CSR) compliances.
• CSR activities must be carried out as part of the company's commitment to social welfare.

Penalty for Non-Compliance

The penalties for non-compliance post registration for these companies can be:

1. Revocation of Registration:

• If a Section 8 company violates legal requirements under the Act, the Government may revoke its registration.
• The company's registration may be at risk if its activities deviate from the established objectives.

1. Fine for Non-Compliance:

• Firms or entities that violate the rules may face fines starting at 10 lakh and reaching up to Rs.1 crore.
• Company officers and directors involved in non-compliance may face fines ranging from Rs. 25,000 to Rs. 25 lakhs.

Applicability of Tax Exemption

• To qualify for tax exemptions, a Section 8 company must obtain certifications such as Section 12A, 80G, etc., from the Income Tax Authorities. These certifications validate the company's eligibility for tax benefits based on its charitable objectives and activities.

Startupfino is a company that specialises in providing comprehensive Section 8 Company Registration services. We can assist you with everything from first guidance to ensuring that you complete all of the relevant standards and keep your establishment in good legal standing.

Our services include the following:

• Digital Signature Certificate (DSC) Services.
• MCA Portal Assistance for creation and filing the Spice+ form.
• Document Upload and Submission along with standard fees.
• Eligibility Assessment and Guidance.
• Post-registration compliance support for Section 8 companies.

By availing our services, entrepreneurs can avoid the negative outcomes of non-followance of rules and compliances. StartupFino works hard to provide services that are prompt and effective, so you can manage your business without any issues and without facing penalties or problems