How to Register as an NGO in India: Section 8 Company Registration
- Farheen Mukadam
- Aug 19
- 9 min read
An organisation that operates for charitable or non-profit goals is known as an NGO (Non-Government Organisation). The Ministry of Corporate Affairs (MCA) is responsible for an NGO established as a Section 8 company under the Companies Act, 2013. In contrast, an NGO registered as a trust or society is under the jurisdiction of the registrar of state of the State Government. Section 8 company registration has more benefits than just boosting society and trust. There are more advantages to Section 8 company registration than to a trust or society. This kind of business is more reputable with government agencies, sponsors, and other interested parties.
Table of Contents
Purpose of an NGO
The objective of forming a Section 8 corporation is to advance non-profit purposes. These may include the following:
Commerce
Art
Science
Sports
Education
Research
Social welfare
Religion
Charity
Environmental protection
Other relevant fields.
The Central Government will grant a licence to register as a Section 8 company under the Companies Act, 2013 (the "Act") after it is convinced that an individual or group of individuals intends to incorporate a limited company with the stated aims. The Section 8 company's profits/income, if any, are used to promote the company's objectives rather than being dispersed as dividends to its shareholders.
Laws Applicable to an NGO in India
NGOs in India can be registered under:
Trust under the Indian Trusts Act, 1882.
Society under the Societies Registration Act, 1860.
Section 8 of the Companies Act, 2013.
What is Section 8 Company Registration for NGOs
Section 8 corporate procedures and criteria are outlined for a limited corporation. This includes all of the rights and liabilities associated with such a limited business. This is the sole area in which there are multiple varieties, such as a Section 8 company being unable to use the terms "Section 8" or "Limited" in its name. The Companies Act 2013 has a comparable method for registering a Section 8 business that includes an NGO, trust, or cooperative organisation. Section 8 of the Companies Act 2013 specifies an extra condition for getting a licence from the Central Government. Essentially, the licence entitles them to remove Private / Public Limited from their name. With this licence, the corporation gains various legal exemptions and receives a fee reduction. The potential Section 8 company requires at least two promoters if registered as a private limited company. However, a public limited section 8 business must have at least 7 promoters.
Eligibility for Section 8 Company Registration
In India, a Section 8 corporation may be formed by an individual or HUF.
Two or more individuals who will function as directors or shareholders must comply with all the requirements of the Section 8 business incorporation criteria.
At least one director of the Section 8 corporation must be an Indian resident.
The goal must include one or more of the following: sports promotion, social welfare, scientific and artistic advancement, education, and financial help to low-income groups.
The company's founders, directors, and members are not entitled to any reward in cash or in kind.
Direct or indirect distribution of any profit to the directors or members of the company is prohibited.
Benefits of Section 8 Company Registration
There are no minimum capital needs: A Section 8 corporation can be incorporated with no minimum capital and its capital structure can be altered at any time to accommodate the firm's expanding needs.
Tax Advantages: Section 8 businesses are exempt from the Company Auditor's Report Order (CARO). A Section 8 firm is eligible for tax incentives under Section 80G of the Income Tax Act of 1961.
No stamp duty: In India, Section 8 company formation is free of stamp duty. Section 8 corporations are exempt from stamp duty on their Memorandum of Association (MOA) or Articles of Association (AOA), whether they are private or public limited companies
.
Separate legal identity: Section 8 Company registration confers a distinct legal character upon its members. It is possible for a registered partnership firm to become a director of a Section 8 company. It exists in perpetuity, therefore the arrival or exit of any member has no effect on the Section 8 company's activity.
Limited Liability: Members of the Section 8 corporation have limited responsibility based on the number of shares they subscribed to. They are not held personally responsible for the business's losses.
Credibility: Section 8 corporations are more respectable and trustworthy than any other type of charitable organisation. It is governed by the Act's rules; therefore, annual audits are required, and the Memorandum of Association relating to the company's non-profit aims cannot be changed.
An exemption for the contributors: According to Sections 12A and 80G of the Income Tax Act of 1961, donations received by a section 8 corporation are exempt from taxes.
Requirement for Incorporation of a Section 8 Company
Directors: The Section 8 company must have two directors at least to be incorporated as a private limited company. Furthermore, three directors should be there if it is to be incorporated as a public limited company. A private limited corporation can have a maximum of 200 members, whereas there is no such limit for a public limited company.
Capital needs and name: No minimum paid-up capital is applicable to the creation of a Section 8 company. NGOs created as Section 8 companies are not required to use the words 'Limited' or 'Private Limited' in their names.
Charitable Objectives: Section 8 companies are established to advance non-profit objectives. The non-profit mission or reason for which the MOA and AOA were founded must be included in both. Any earnings earned by the Section 8 corporation are used to further its major aims, such as charity causes, or are reinvested in the company. Profits will not be dispersed to its members.
Management: According to the company’s MOA and AOA, the Board of Directors oversees Section 8 companies. On the other hand, other trusts are administered by Trustees in accordance with the Trust Deed.
Regulation under several Acts: A Section 8 business must obey the laws and regulations established by the Companies Act of 2013. It must keep books of account and file returns with the Registrar of Companies. Section 8 companies are not allowed to alter the conditions of the AoA and MoA without the Central Government's prior approval. It should also adhere to the Income Tax Act and the GST Law.
Obtain a Digital Signature Certificate (DSC): The proposed directors' digital signatures are required because the registration forms must be filed electronically and digitally signed. Digital signature certificates (DSC) are issued by government-approved certification agencies. The list of such certified agencies can be seen here. You must get a Class 3 DSC.
Request a Director Identification Number (DIN): A DIN application is required for the company's intended directors. The application for DIN allotment must be submitted in Form DIR-3 or with the SPICe+ registration form. You must attach a scanned copy of the essential documents, such as a self-attested copy of PAN, directors' identity and address verification, to the form and submit it online via the MCA Portal. The form must be attested by a practising professional, such as a chartered accountant, company secretary, or cost accountant.
Forms Needed for Incorporation of a Section 8 Company
The table below shows a list of the forms required when incorporating a Section 8 company in India:
Name of the form | Purpose of the Form |
SPICE+ | Application for Incorporation of Company |
INC 12 | Application for License |
INC 13 | Memorandum of Association |
INC 14 | Declaration from a practising Chartered Accountant |
INC 15 | Declaration from each person making the application |
INC 16 | License to incorporate as Section 8 company |
INC 22 | Situation of Registered Office |
DIR 2 | Consent of Directors |
DIR 3 | Application to ROC to get DIN |
DIR 12 | Appointment of Directors |
Steps for Incorporation of a Section 8 Company
Step 1: Obtain a DSC for the directors. Once you have received a DSC, submit Form DIR-3 to the ROC to get a DIN. You must present identification and evidence of address in order to obtain a DSC.
Step 2: Once the DIR-3 is authorised, the ROC will assign a DIN to the prospective directors.
Step 3: As a part of the license procurement, submit Form INC-12 to the ROC, along with the required documentation listed above.
Step 4: A licence under Section 8 will be issued in Form INC-16 following form approval.
Step 5: After the licence is acquired, submit the SPICe+ Form to the ROC along with the relevant attachments.
If the ROC is satisfied with the submitted forms, it will issue a Certificate of Incorporation along with a unique Company Identification Number (CIN).
Documents Required for Section 8 Company Registration
Before you start the Section 8 company registration process, make sure that all the documents are ready and available. A list of some important documents includes:
PAN Cards: To register, a PAN card is required for each director and shareholder.
Aadhaar Cards: Directors and shareholders must provide their Aadhaar cards as proof of identification.
Latest bank statement: All directors and shareholders must provide a current bank statement as verification of their address.
Voter ID, Passport, and Driver's License: One of these documents is required for the identification of directors and shareholders.
Passport Size Photo: Each director and shareholder must submit a passport-sized photograph.
Rental Agreement: If the registered office is rented, please provide a copy of the leasing agreement.
DIN and DSC: Every director is required to get a Director Identification Number (DIN) and a Digital Signature Certificate (DSC).
Objectives and Proposed Work: The Section 8 Company must produce a thorough strategy outlining the anticipated activities and corporate objectives.
Financial statements: The company must produce financial statements, such as assets and liabilities, as well as a five-year prognosis. This is done to ensure sufficient money for the company's operations.
Annual Compliance for a Section 8 Company
Section 8 firms are subject to the same annual compliance requirements as other companies.
Hold at least two board meetings annually.
Maintaining books of accounts
Prepare financial statements.
Mandatory audit report.
Filing financial statements in Form AOC 4
An annual return must be filed every year along with other e-filing forms such as MGT 7
Additional compliances to complete the registration, such as 12AA, 80G, etc.
Consequences of Non-Compliance
The Central Government will cancel the Section 8 corporation licence if it fails to comply with the Act's legal restrictions. If the company's aims are carried out unlawfully or in violation of the purposes for which it was founded, the licence may be revoked. If a corporation fails to comply with the provisions of the Act, it would face a fine of at least Rs 10 lakh, which may rise to Rs 1 crore. Directors and officers violating these would face a fine of at least Rs 25,000. The penalty may even go up to Rs 25 lakh, or both.
Conclusion
An NGO can register as a trust under the Trust Act of 1882, a section 8 company under the Companies Act of 2013, or a society under the Societies Act of 1860. Registering as a Section 8 company under the Companies Act 2013 entails incorporating an NGO. An NGO that registers as a Section 8 corporation can carry out a variety of activities. These are aimed at advancing art, commerce, science, technology, sports, education, social welfare, social research, religion, charity, and environmental protection, among others. Once the registration process is completed, a Section 8 Company can operate anywhere in India.
Frequently Asked Questions
Can a Section 8 company be registered as a small company?
It should be emphasised that, regardless of the qualifications listed above, a public business, a subsidiary of another company, a Section 8 company, or a corporation governed by any Special Act would not be acknowledged as a small company.
What are the prerequisites of an NGO for the Section 8 company registration?
The company's purpose should be to promote a social cause. It could be charity, education, industry, or sports. Income and profits should be used solely for this purpose or object, with no dividends granted to its members.
What are the benefits of Section 8 company registration?
Advantages of registering to Section 8 Company:
No minimum capital needed: Section 8 firms do not have to meet a minimum capital threshold to register.
Tax benefits: Section 8 firms are eligible for a variety of tax benefits under the Income Tax Act.
No stamp duty: Unlike private limited corporations, no stamp duty is imposed on the incorporation of a Section 8 business in India.
Separate legal identity: Section 8 companies have a separate legal identity from their members.
Credibility: Section 8 businesses are more credible than other types of philanthropic organisations because of their severe compliance standards, which include mandated annual audits.
Exemption for donors: If a Section 8 corporation is registered under Section 80G, donors can claim tax breaks under the Income Tax Act.
What are the fees for the incorporation of a Section 8 company?
Registration fees for Section 8 corporations in India:
DSC and DIN: Around Rs. 3,000.
Company name reservation costs around Rs. 1,000.
Fees for MoA, AoA, Government, and Incorporation range from Rs. 6,000-8,000.
Notary and stamps cost approximately Rs. 2,000.
Professional fees range from Rs. 8,000 to 10,000.
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