Introduction
For those committed to driving social change, a Section 8 company NGO provides a credible, transparent and legally robust framework to pursue charitable objectives in India. Registered under Section 8, Companies Act, 2013, these non-profit organizations promote causes such as education, social welfare, environmental protection and healthcare.
Unlike trusts or societies, Section 8 companies offer enhanced credibility, tax exemptions and perpetual succession, making them ideal for charitable organizations. This comprehensive guide explores the Section 8 company NGO registration process, benefits, compliance, funding strategies, difference between Section 8 company and NGO and more, empowering you to establish a sustainable social enterprise.
What is a Section 8 Company NGO?
A Section 8 company NGO is a non-profit entity incorporated under Section 8(1), Companies Act, 2013, dedicated to advancing charitable goals like education, art, science, sports or social welfare. Unlike for-profit companies, it reinvests all income into its mission, prohibiting profit distribution to members or directors.
Regulated by the Ministry of Corporate Affairs (MCA), it enjoys a separate legal entity, perpetual succession and tax benefits, making it a trusted choice for donors, government bodies and international partners.
For instance, an organization focused on women’s empowerment can register as a Section 8 company to formalize its operations and attract funding.
Section 8 Company vs. Other NGOs
Understanding the difference between Section 8 company and NGO (e.g., trusts, societies) is key:
| Aspect | Section 8 Company | Trust/Society |
| Legislation | Companies Act, 2013 (Section 8). | Indian Trusts Act, 1882 / Societies Registration Act, 1860. |
| Governance | Board of Directors, MoA/AoA. | Trustees / Managing Committee. |
| Compliance | Annual filings, audits (Section 134). | Minimal, state-specific. |
| Credibility | High, MCA-regulated. | Moderate, state-regulated. |
| Fundraising | Easier (CSR, grants). | Limited, less formal. |
| Profit Distribution | Prohibited. | Prohibited, but less enforced. |
Example: A Section 8 company NGO secures CSR grants more easily than a trust due to its MCA oversight.
Benefits of a Section 8 Company
- Legal Recognition: Enables contracts, asset ownership and lawsuits as a separate legal entity.
- Tax Exemptions: Qualifies for Section 12AA and 80G under Income Tax Act, 1961, reducing tax liability.
- No Minimum Capital: No mandatory paid-up capital, lowering entry barriers.
- Fundraising Advantage: Attracts donations, CSR funds and grants due to transparency.
- Perpetual Succession: Continues despite changes in directors or members.
- Global Reach: Eligible for foreign donations with FCRA registration.
- Accountability: Strict compliance ensures trust for non-profit governance.
Eligibility for Section 8 Company Registration
To form a Section 8 company:
- Members: Minimum two individuals or HUFs as directors/shareholders.
- Resident Director: At least one director must reside in India.
- Charitable Objectives: Must focus on education, social welfare or similar goals.
- No Profit Distribution: Income cannot be paid as dividends or remuneration to members.
- Compliance: Adhere to Companies Act, 2013 and MCA regulations.
Step-by-Step Registration Process
Registering a Section 8 company NGO involves:
- Obtain DSC: Secure Digital Signature Certificates for directors from MCA-approved agencies (~₹1,500/director).
- Apply for DIN: File Form DIR-3 for Director Identification Numbers (Section 153).
- Name Approval: Reserve a unique name (e.g., “GreenFuture Foundation”) via RUN form, omitting “Limited.”
- Draft MoA/AoA: Prepare Memorandum and Articles of Association, detailing non-profit objectives and governance.
- File Incorporation: Submit SPICe+ form, MoA, AoA, Form INC-12 and declarations (INC-14, INC-15).
- Obtain Section 8 License: Receive Form INC-16 license from ROC.
- Certificate of Incorporation: Issued with Company Identification Number (CIN) in ~7–10 days.
- Apply for PAN/TAN: Secure from Income Tax Department for tax compliance.
- Open Bank Account: Use incorporation certificate, PAN and MoA.
Online Process: MCA’s portal streamlines Section 8 company registration, with state-specific variations (e.g., Maharashtra’s e-filing).
Documents Required
- MoA and AoA (non-profit clauses).
- PAN, Aadhaar, address proof (e.g., voter ID, passport) of directors/shareholders.
- Proof of registered office (e.g., utility bill, rent agreement).
- Form INC-14 (CA declaration), INC-15 (applicant declaration).
- Form DIR-2 (director consent), INC-3 (nominee consent, if applicable).
- Affidavit for unregistered entities (if any).
- Resolution from promoter companies (if applicable).
Costs and Timeline
- Costs: Government fees (₹5,000–₹10,000), DSC (₹1,500/director), professional fees (~₹10,000–₹20,000). Total: ~₹20,000–₹40,000.
- Timeline: DSC/DIN: 1–2 days; name approval: 2–3 days; incorporation: 7–10 days; total: ~10–15 days.
- Tip: Engage a CA for accurate filings on MCA portal.
Tax Exemptions and Compliance
- Section 12AA: Exempts income used for charitable purposes (Income Tax Act, 1961).
- Section 80G: Enables donors to claim tax deductions, boosting fundraising.
- GST: Required only for commercial activities (e.g., training programs for fees).
- Annual Compliance:
- Hold two board meetings annually.
- Maintain books of accounts per Section 128.
- File Form AOC-4 (financial statements) within 30 days of AGM.
- File Form MGT-7 (annual return) within 60 days of AGM.
- Conduct statutory audit by a CA.
- File income tax returns by September 30.
- FCRA Compliance: Mandatory for foreign donations, with annual returns.
- Penalty for Non-Compliance: Fines of ₹10 lakh–₹1 crore; directors face ₹25,000–₹25 lakh (Section 8(11)).
Funding Strategies for Section 8 Companies
Securing funds is critical for Section 8 company NGOs:
- Domestic Donations: Accept public contributions; implement anti-money laundering checks.
- Foreign Donations: Obtain FCRA registration for foreign funds; prior permission needed for early receipts.
- CSR Grants: Partner with corporates under Section 135, Companies Act, 2013 (e.g., TCS, Reliance).
- Crowdfunding: Use platforms like Milaap or Ketto for grassroots support.
- Grants: Apply for government/international grants (e.g., Ministry of Social Justice).
- Equity Funding: Issue non-profit shares at a premium, reinvesting proceeds.
- Sponsorships: Collaborate with NGOs or corporates for event-based funding.
Example: A Section 8 company raised ₹75 lakhs via CSR grants and crowdfunding for a healthcare initiative.
Post-Registration Steps
After incorporation, complete these steps:
- FCRA Registration: Apply within 3–5 years for foreign donations or seek prior permission.
- Bank Account: Open a dedicated account with incorporation certificate, PAN and MoA.
- 12AA/80G Registration: Apply to Income Tax Department for tax exemptions.
- Trademark: Protect the NGO’s name/logo for branding.
- Website: Create a website to showcase mission and attract donors.
- Compliance Calendar: Schedule board meetings, filings (AOC-4, MGT-7) and audits.
Dissolution or Conversion
- Dissolution: Transfer assets to a similar non-profit after settling liabilities; requires Central Government approval (Section 8(7)).
- Conversion: Convert to a private/public limited company with MCA approval if objectives shift (Section 8(4)).
- Example: A Section 8 company dissolved after 12 years, transferring ₹2 crore in assets to an educational trust.
Case Study: Section 8 Company Success
In 2020, Priya and Sanjay launched “BrightPath Foundation,” a Section 8 company NGO in Delhi, to provide vocational training for underprivileged youth.
Registered for ₹30,000, they secured Section 12AA and 80G exemptions, attracting ₹1.5 crore in CSR funds from a tech firm. Compliance (AOC-4, MGT-7, audits) ensured transparency.
FCRA registration enabled $100,000 in foreign grants. Despite Sanjay’s exit, perpetual succession sustained operations, training 10,000 youth by 2025.
Funding Case Study: CSR Success
“EcoGreen Foundation,” a Section 8 company, partnered with a PSU for a ₹2 crore CSR grant to plant 50,000 trees in Rajasthan. Registered in 2022, it leveraged 80G status to secure ₹50 lakhs in public donations via Milaap.
Annual audits and FCRA compliance attracted a $200,000 international grant, scaling the project to 100,000 trees by 2025.
Frequently Asked Questions on How to Start a Section 8 Company (NGO) in India
Q1. What is a Section 8 company NGO?
Ans1. A Section 8 company NGO is a non-profit registered under Section 8, Companies Act, 2013, for charitable purposes like education or social welfare.
Q2. What is the difference between Section 8 company and NGO?
Ans2. A Section 8 company is MCA-regulated with strict compliance, while NGOs (trusts/societies) follow state laws with simpler governance.
Q3. How to start a Section 8 company NGO?
Ans3. Obtain DSC, DIN, reserve a name, draft MoA/AoA, file SPICe+ and INC-12 and secure a Section 8 license.
Q4. What are the benefits of a Section 8 company NGO?
Ans4. Tax exemptions (Section 12AA, 80G), credibility, no minimum capital, perpetual succession.
Q5. Is GST applicable to Section 8 company NGOs?
Ans5. GST applies only for commercial activities (e.g., fee-based services).
Q6. Can a Section 8 company NGO receive foreign donations?
Ans6. Yes, with FCRA registration or prior permission.
Q7. How many directors are required for a Section 8 company NGO?
Ans7. Minimum two for private limited, three for public limited Section 8 company.
Q8. Can a Section 8 company NGO distribute profits?
Ans8. No, income must be reinvested into charitable objectives.
Q9. What are the compliance requirements for a Section 8 company NGO?
Ans9. File AOC-4, MGT-7, conduct audits, hold two board meetings, comply with tax laws.
Q10. Can a single person start a Section 8 company NGO?
Ans10. No, at least two directors/shareholders are required.
Q11. What is Section 8 company vs NGO in governance?
Ans11. Section 8 company vs NGO: Section 8 has a board under MCA; NGOs use trustees/committees under state laws.
Q12. Can a Section 8 company NGO be dissolved or converted?
Ans12. Yes, dissolve with asset transfer or convert to a private limited company with MCA approval (Section 8(4)).
Q13. How to secure CSR funding for a Section 8 company NGO?
Ans13. Leverage 80G status, partner with corporates and showcase impact reports.
Q14. What is the validity of a Section 8 company registration?
Ans14. A Section 8 company remains valid until dissolved or converted, subject to compliance.
