Non-Governmental Organisations (NGOs) play a pivotal role in driving positive change and social impact. Among the various methods available for NGO registration in India, Section 8 organisation or Section 8 company stands out for its unique advantages. In this comprehensive guide, we delve into what Section 8 registration entails, its eligibility criteria, benefits, advantages, disadvantages, required documents, and considerations related to income tax.
Understanding Section 8 Registration:
A Section 8 organisation, often referred to as a Section 8 company, derives its name from Section 8 of the Companies Act, 2013. This special provision is designed for organisations that operate with a primary objective of promoting charitable causes, social welfare, or other non-profit activities.
Eligibility Criteria:
To qualify for Section 8 registration, an organisation must meet certain criteria:
- Charitable Objectives: The primary purpose of the organisation must be the promotion of charitable or not-for-profit activities.
- No Profit Distribution: The organisation should not distribute profits among its members. Any income generated must be reinvested in its objectives.
Benefits and Advantages:
- Legal Recognition: Section 8 companies are recognised legal entities, which enhances credibility and trust among donors and stakeholders.
- Limited Liability: Members' liability is limited to their contributions, protecting personal assets.
- Access to Grants: Section 8 organisations often enjoy easier access to government and private grants and funding due to their recognised charitable status.
- Perpetual Existence: The organisation continues to exist even if its members change.
Disadvantages:
1. Stringent Compliance: Section 8 organisations must comply with various legal and regulatory requirements, which can be complex and time-consuming.
2. Limited Profit: As per regulations, any profits generated cannot be distributed to members but must be reinvested in the organisation’s objectives.
Documents Required for Section 8 Registration:
- Memorandum of Association (MOA) and Articles of Association (AOA) specifying the organisation’s objectives and rules.
- Declaration by Promoters and Directors confirming compliance with Section 8 requirements.
- A statement of assets and liabilities of the organisation.
- Proof of registered office address.
- PAN card and identity proof of promoters and directors.
- Consent letters from directors.
Income Tax Considerations:
Section 8 organisation’s enjoy tax benefits under Section 12A and Section 80G of the Income Tax Act, 1961. They are exempt from paying income tax on their surplus income, and donors can claim deductions on donations made to these organisations.
In conclusion, NGO registration under Section 8 offers a powerful platform for those driven by a sense of purpose to make a meaningful impact on society. While it comes with regulatory obligations, the benefits far outweigh the disadvantages, making it an attractive choice for organizations committed to philanthropy and social welfare.
For expert guidance on Section 8 registration, compliance, and related legal services, consider Vakilkaro, India's premier legal services provider. Contact us at +919828123489 or via email at help@vakilkaro.co.in. Our dedicated team is available 24/7 to assist you on your journey towards creating positive change through your NGO.