Section-8 Company is a limited liability company without the addition of words ‘Ltd’ or ‘Pvt Ltd’ at the end of the name, Section-8 company is a company which was licensed or registered under Section 8 of the companies act, 2013 formed mainly for the purpose promoting the Charitable objects.
The Central government’s Ministry of Corporate Affairs of India (MCA) via Registrar of Companies (ROC) shall on application issue a license under section 8 of the companies act,2013 in such a manner and on such conditions as it may deem fit, to register such person or association of persons (AOP) as a company with limited liability without adding the words ‘limited’ or ‘private limited’ to its name, if such proposed company is to be formed for meeting the following mentioned criteria
- Formed with an object to promote the commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
- Formed with an intention to apply its profits,(if any) or any other income in promoting its objects
- Restricts or Prohibits the payment of any dividend to its members.
Procedure For Incorporating Section-8 Company
Documents to be filed with ROC for obtaining License
- An application in Form No.INC-12 accompanied with the fees as prescribed in the Companies (Registration offices and fees) Rules,2014 to the Registrar of Companies.
- Memorandum of Association (MOA) and Articles of Association (AOA) in form INC-13
- Declaration by an advocate, or by a Chartered Accountant or by a Company Secretary in Practice shall be made in Form INC-14.
- Declaration by each of the persons making application shall be made in Form No.INC-15.
- Three Years estimated future annual Income and Expenditure of the company, stating sources for such income and expenditure of the company.
After Obtaining License from Registrar of Companies (ROC), the company shall be incorporated rule 38 of the Companies (incorporation) Rules,2014
As per Companies (Incorporation) Rules,2014, Section-8 Company shall be incorporated in the following manner prescribed below
- An application shall be made on Form INC-32(SPICe) accompanied by the fees as prescribed in the Companies (Registration offices and fees) Rules,2014 to the Registrar of Companies. The application should accompany the following listed documents.
- Memorandum of Association (e-MOA) in Form.No.INC-33.
- Articles of Association (e-AOA) in Form.No.INC-34.
Note: PAN and TAN shall be mandatorily filed for the proposed company along with SPICe form.
Minimum Criteria to be satisfied by the Section-8 company
- No of Shareholders should not be less than 2
- No of Directors Should not be less than 2 (the shareholders and directors can be one and the same)
- Among the directors, there should be at least one Indian Resident.
- No requirement of Minimum Capital
- In case of Indian Nationals PAN is mandatory
- Proof of Identity such as Voter Id, Aadhaar Card, etc..,
- Proof of Resident such as Electricity bill, Telephone bill, Postpaid Bill, Bank Statements, etc..,
- Proof for Registered office Address in case of rented, Rent agreement, No objection certificate.
- Proof for Registered office Address in case of owned, Municipal Tax receipt, Sale deed, etc..,
Privileges or Exceptions provided to section-8 Companies
- Notice for General Meeting can be called by giving a clear 14 days notice rather than giving of 21 days notice.
- Constitution of below committees is not required
- Shareholders relationship committee
- Nomination Committee
- Remuneration Committee
- No requirement of minimum share capital
- No requirement of minimum no of directors and Independent Directors.
- A quorum shall be fixed at 2.
The exemption provided for section-8 companies Income Tax act, 1961
Normally the companies are taxed at the applicable rate as per income tax act, 1961, but, there has been provided a tax exemption for the companies under section 12AA of the Income Tax act.
As per section-12AA of the Income Tax act,1961, an application shall be filed with the commissioner of the Income Tax with required necessary supporting documents.
On satisfaction of the commissioner of the Income-tax, he shall grant a tax exemption to the company.
The person or Donator shall claim a deduction under section 80G in respect of the donation made by the respective person to the section-8 company.
As per section 11 of the income tax act, subject to the provisions of section 60 to 63, certain incomes derived from property held for the charitable or religious purpose has been exempted which has been listed below
- Income derived from the trust property which is held wholly for the purpose of charity or religious purpose, such income to the extent which is used for the said purpose in India shall not form part of the total income. i.e., exempt. And in case of where such income has been accumulated or set apart for the said purposes, the accumulated income shall also be exempted provided such accumulation should not be in excess of 15% of the total income derived from such property.
- Income derived from the property which is partially held by the trust for the purpose of charity or religious purpose, where trust has been created before the commencement of income tax act, such income to the extent which is used for the said purpose in India shall not form part of the total income. i.e., exempt. And in case of where such income has been accumulated or set apart for the said purposes, the accumulated income shall also be exempted provided such accumulation should not be in excess of 15% of the total income derived from such property.
- Income derived from the trust property where the trust was created on or before 1st April 1952, with an intention or with an objective to promote international welfare in which India was interested, such income shall be exempted to the extent of the income used for said purposes outside India. And in case of charitable or religious trusts formed before 1st April 1952, income shall be exempt to the extent it is utilized for said purposes outside India.
- Income received in the nature of voluntary contributions made with a specific direction than those contributions shall form part of a corpus of a trust or institutions and the same shall not form part of total income.