Startup-Section 8 Company

Overview

A Section 8 Company is a special kind of nonprofit organization. It focuses on doing good things like helping charities and supporting art, science, education, and sports. Any money it makes goes back into these activities and isn't given to its members as profits.

What is a Section 8 Company?

A Section 8 company is a type of organization under the Companies Act 2013. Its main purpose is to do good things like help with education, charity, sports, etc. Instead of giving money to its owners, it uses any profits to keep doing these good deeds.

Benefits

Tax Benefits: Section 8 companies are exempt from paying income tax.

Zero Stamp Duty: No stamp duty is required for Section 8 company registration documents.

Minimal Share Capital: These companies have no minimum capital requirement.

Separate Legal Entity: Section 8 companies are distinct legal entities, enabling property ownership, contracts, and legal actions in their name.

Enhanced Credibility: Their non-profit nature enhances trustworthiness and credibility.

Eligible for Grants: They can receive grants from government and international organizations.

Social Impact Focus: Section 8 companies aim to create a positive social impact through their activities.

Tax And Process

• Section 8 Companies pay reduced stamp duty compared to other companies.
• Donors to Section 8 Companies can claim a 50% rebate under the Income Tax Act, 1961, for donations, valid for one to three years under Section 80G.
• Taxation for Section 8 companies is similar to other organizations, with profits taxed at a rate of 30%.
• If a Section 8 company is registered under Section 12AA (tax exemption) of the Income Tax Act, its profits are fully exempt from taxation.
• The Central Government annually introduces compliance measures to facilitate tax exemption and better conditions for Non-Profit Organizations (NPOs).

Documents Required

• PAN Card
• Aadhaar Card
• Latest Bank Statement
• Telephone Bill or Electricity Bill
• Voter ID, Passport, or Driving License
• Passport-size Photograph (for all directors and shareholders)
• Rental Agreement Copy (if the registered office is rented)

Procedure

Step 1: Acquire a Digital Signature Certificate (DSC): Necessary for online document filing.

Step 2: Obtain Director Identification Number (DIN): A unique ID for aspiring directors.

Step 3: Reserve Company Name: Select an exclusive name using Form INC-1.

Step 4: Submit Incorporation Application: File Form INC-32 along with the Memorandum of Association (MOA) and Articles of Association (AOA).

Step 5: Secure Section 8 Company License: Utilize Form INC-12 for this purpose.

Step 6: Receive Certificate of Incorporation: After license approval, Form INC-16 is issued to confirm incorporation.

FAQ's