What is a Section 8 Company & Why It’s the Most Trusted NGO Structure?
A Section 8 Company (Companies Act, 2013) is a government-recognized non-profit entity for charitable, educational, social, environmental or similar objectives. It provides strong governance, international credibility and is often preferred by donors and grant-makers.
- High legal credibility (MCA regulated)
- Limited liability for members
- Eligible for 12A & 80G tax benefits
What is a Section 8 Company?
Registered under Section 8 of the Companies Act, 2013, a Section 8 Company is formed to pursue charitable objectives without profit distribution. It follows the MCA’s corporate governance model — producing audited accounts, board meetings, and statutory filings.
Why Choose Section 8 Company?
| Benefit | Description |
|---|---|
| High Credibility | Regulated under MCA — stronger legal standing versus Trusts/Societies |
| Limited Liability | Members’ liability limited to their shares or guarantee |
| Tax Benefits | Eligible for 12A (tax exemption) and 80G (donor deduction) |
| Foreign Funding | Preferred for FCRA registration and international grants |
| Corporate Governance | Board of directors, audited financials, stricter compliance |
| No Stamp Duty | Registration often enjoys stamp duty exemptions on MOA/AOA |
Section 8 Company vs Trust vs Society
| Feature | Section 8 Company | Trust | Society |
|---|---|---|---|
| Registration Act | Companies Act, 2013 | Indian Trusts Act / Trust deed | Societies Registration Act (State) |
| Regulator | MCA | Charity Commissioner (state) | Registrar of Societies (state) |
| National Validity | Yes | No (often state-specific) | No (state-specific) |
| Audit | Compulsory | Depends | Depends |
| Governance | Board of Directors | Trustees | Governing Council |
| Foreign Funding | Preferred (FCRA eligible) | Moderate | Moderate |
Eligibility to Register
You are eligible if you are an individual or a group (Indian or foreign nationals) intending to pursue non-profit objectives with no intent to distribute profits. Objectives must match charitable purposes such as education, health, environment, social welfare, sports, art, etc.
| Private Limited (Section 8) | Public | |
|---|---|---|
| Members | 2 | 7 |
| Directors | 2 | 3 |
| Shareholders | 2+ | 7+ |
| Director DIN | Mandatory | Mandatory |
| PAN / Aadhaar | Mandatory | Mandatory |
Step-by-Step Registration Process
- DSC (Digital Signature) — Obtain DSC for all proposed directors.
- Name Approval (RUN) — Reserve name via RUN. Use words like Foundation/Institute; avoid “Limited”.
- Draft MOA & AOA — Draft with clear charitable objectives and non-profit clause.
- File SPICe+ — Submit SPICe+ with MOA, AOA, director KYC, professional declaration and consents.
- INC-12 (License) — Apply to ROC for Section 8 license with project report, 3-year income-expenditure estimate, board resolution and undertaking.
- Certificate of Incorporation — On approval MCA issues Section 8 license, Certificate of Incorporation, PAN & TAN.
Documents Required
For Directors
- PAN card
- Aadhaar / Passport
- Passport-size photo & email ID
- DIN (if available)
- Digital Signature (DSC)
For Company
- MOA & AOA
- Registered office proof (electricity bill / lease)
- Proposed activities / project report
- 3-year income & expenditure projection
- NOC from landlord (if rented)
Post-Incorporation Compliances
- Open a company current bank account in company’s name
- Apply for 12A & 80G with Income Tax Department
- Register on NGO Darpan portal
- Apply for FCRA if planning foreign donations
- Maintain statutory registers; hold board meetings & AGM; keep minutes
Tax Benefits — 12A & 80G
12A grants tax exemption for NGO income; 80G provides donors a tax deduction. These are issued by the Income Tax Department and usually require separate applications post-incorporation.
Foreign Funding & FCRA
Section 8 Companies are commonly preferred for FCRA registration due to corporate governance, audited accounts and formal project reporting. FCRA permission is separate and typically applied for after 3 years of operations or via prior permission routes depending on donor and grant conditions.
Annual Compliance Checklist
| Compliance | Timeline |
|---|---|
| Board Meetings | Minimum 2 per year |
| AGM | Once a year |
| Annual Return (MGT-7) | Within 60 days of AGM |
| Financials (AOC-4) | Within 30 days of AGM |
| DIR-3 KYC | Annually for directors |
| Income Tax Return | By 30th September |
| Audit | Mandatory (statutory) |
Late filings attract penalties — follow timelines strictly to avoid fines and legal risk.
Common Mistakes to Avoid
- Using profit-oriented objectives in MOA
- Not preparing a proper 3-year income & expenditure estimate
- Including profit-distribution clauses
- Delaying 12A/80G/FCRA follow-up applications
- Missing annual filings — penalties accumulate
