Building a Purpose-Driven Legal Entity
In an era where social entrepreneurship and impact-driven ventures are shaping the future, legal clarity and structured governance are key to credibility. Whether you are working in education, healthcare, climate change, rural development, women empowerment, or any charitable initiative, choosing the right legal vehicle to scale your vision is crucial.
A Section 8 Company, governed by the Companies Act, 2013, offers a robust, highly credible framework for non-profit entities. It is widely recognized in India and abroad as a legally sound structure for NGOs, making it ideal for fundraising, donor confidence, and strategic partnerships.
This article—based on real legal provisions, practical procedures, and strategic inputs—covers everything you need to know about Section 8 Companies in India. At RegistrationMART, with over 10 years of experience, we’ve helped several non-profit visionaries, social leaders, and international NGOs establish Section 8 entities for long-term impact.
Legal Basis of Section 8 Company
- Governing Law:
- Companies Act, 2013
- Specifically, Section 8 of the Act (hence the name)
- Governed and regulated by the Ministry of Corporate Affairs (MCA)
Legal Definition – Section 8(1): “A company… with charitable objects… which applies its profits or other income in promoting such objects, and prohibits the payment of any dividend to its members.”
- It has no profit motive
- It operates for charitable, scientific, religious, or social purposes
- Profits cannot be distributed to promoters
Why Section 8 is the Best NGO Model (Compared to Trusts or Societies)
| Criteria | Section 8 Company | Society | Trust |
|---|---|---|---|
| Legal Recognition | High (under Companies Act) | Medium | Medium |
| Regulatory Body | MCA | Registrar of Societies | Charity Commissioner |
| PAN India Jurisdiction | Yes | No (state-wise) | No |
| Foreign Funding (FCRA) | Preferred | Allowed | Allowed |
| Governance | Board of Directors | Governing Body | Trustees |
| Name Credibility | High | Medium | Medium |
| MOA & AOA Structure | Yes | No | No |
| Donor Preference | High | Medium | Medium |
Who Should Register a Section 8 Company?
- NGOs working in rural or urban development
- Educational institutions or skill training centers
- Medical relief and health foundations
- Foundations promoting sports, culture, or fine arts
- Environmental or wildlife conservation groups
- Women/child welfare missions
- Religious or spiritual missions (non-political)
- Startups with social missions (impact-based businesses)
Eligibility Criteria
| Requirement | Details |
|---|---|
| Directors | Minimum 2 (Private) or 3 (Public) |
| Indian Resident Director | At least one |
| Object | Must be charitable or not-for-profit |
| Name | Should not have “Private Limited” or “Limited” |
| Capital | No minimum capital required |
| Profit Sharing | Not allowed |
| Compliance | Annual ROC, tax, and audit filings |
Documents Required
- For Directors: PAN Card, Aadhaar Card, Passport (if NRI), Mobile number & email ID, Passport-size photo, Utility bill/bank statement
- For Registered Office: Rent Agreement (if applicable), NOC from owner, Utility Bill (latest)
Step-by-Step Registration Process for Section 8 Company
- Digital Signature (DSC) of Directors: Used to sign e-forms for incorporation and filings.
- Director Identification Number (DIN): Apply along with incorporation in SPICe+ form.
- Name Approval through SPICe+ Part A:
- The name must reflect the purpose or cause.
- Ends without “Ltd” or “Pvt Ltd”.
- Example: “EduBridge Foundation”, “Aarogya Welfare Association”
- File SPICe+ Part B for Incorporation:
- eMOA (Memorandum of Association)
- eAOA (Articles of Association)
- DIR-2 (consent of directors)
- INC-9 (declaration)
- Declaration in Form INC-14 and INC-15
Form INC-12 is filed separately to get license under Section 8.
- Issue of License & Incorporation Certificate: ROC issues Certificate of Incorporation & Section 8 License Number.
Key Clauses in MOA & AOA
- Main Objects (education, relief, awareness, etc.)
- Application of Income (toward objective only)
- No Distribution Clause (profits not for members)
- Board Governance Rules
- Winding Up Clause (assets transferred to another Section 8 company)
Taxation of Section 8 Company
| Element | Applicability |
|---|---|
| Income Tax | Yes (unless 12A exemption is taken) |
| GST | Applicable for services above threshold |
| TDS | Deducted where applicable |
| FCRA | Required for foreign donations |
| 80G | Optional – allows donors to claim tax deduction |
| 12A | Optional – income tax exemption for the company |
Annual Compliance Checklist
| Form | Purpose | Due Date |
|---|---|---|
| MGT-7 | Annual Return | 60 days from AGM |
| AOC-4 | Financial Statement | 30 days from AGM |
| ITR-7 | Income Tax Return for Charitable Entities | 30 September |
| 12AB | Renewal of 12A status | Every 5 years |
| DIR-3 KYC | Director’s KYC | 30 September |
| CSR-1 | For receiving CSR funds | Before CSR activity |
Benefits of Registering a Section 8 Company
- 🛡 Legal Recognition – Trusted legal structure under MCA
- 🌐 Global Reach – Best suited for international grants
- 🎯 Credibility – Preferred by donors, corporates, and governments
- 🧾 Tax Benefits – Available under 12A/80G
- 💼 Structured Governance – Professional management and decision-making
- 🔁 Perpetual Succession – Entity continues despite changes in members
- 💰 CSR Eligibility – Can receive CSR funds from corporates (post CSR-1 filing)
Limitations of Section 8 Company
- 🚫 No Profit Sharing – No dividends to founders
- 🧾 High Compliance – Similar to companies (ROC, audit, MCA filings)
- 🔍 Regulatory Oversight – Heavy scrutiny from MCA and Income Tax
- 💸 No Capital Raising – No equity or shareholding model allowed
Case Study: Rural Education Startup Becomes Section 8 Company
A team of 3 IIT graduates ran a social project called “Padhna Hai India”, offering low-cost digital learning to rural kids.
Challenges:
