Introduction:-
Section 8 Microfinance Company Registration is a critical step for organizations aiming to provide microfinance services in India. It allows them to operate legally and avail various benefits. One of the significant advantages is the tax benefits associated with Section 8 microfinance companies. In this article, we'll explore the process of Section 8 microfinance company registration and the tax benefits it entails.
Section 8 Microfinance Company Registration:-
What is a Section 8 Company?
A Section 8 company, as defined by the Companies Act, 2013, is an organization established for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any other useful object. These companies aim to reinvest their profits for achieving their objectives rather than distributing them to shareholders.
Process of Registration
Name Approval: The first step involves obtaining approval for the name of the company from the Registrar of Companies (RoC). The chosen name should reflect the objectives of the microfinance company.
Memorandum and Articles of Association: Drafting the Memorandum and Articles of Association is the next step. These documents outline the objectives, rules, and regulations of the company.
Application Submission: After preparing the necessary documents, the application for Section 8 microfinance company registration is submitted to the RoC.
Review by RoC: The RoC will review the application, ensuring that it complies with all legal requirements. If any modifications are necessary, they will be communicated to the applicant.
Certificate of Incorporation: Once the RoC is satisfied with the application, a Certificate of Incorporation will be issued, indicating the legal existence of the microfinance company.
Tax Benefits
1. Exemption from Income Tax
Section 8 microfinance companies enjoy exemption from income tax, provided they meet certain conditions and operate within the parameters defined by the Income Tax Act. This exemption encourages organizations to reinvest profits for furthering their social objectives.
2. Donation Benefits
Donations made to Section 8 microfinance companies are eligible for tax deductions under Section 80G of the Income Tax Act. This encourages individuals and corporations to contribute to the social welfare initiatives of these organizations.
3. Capital Gains Tax Exemption
If a Section 8 microfinance company sells a capital asset, any gains arising from the sale may be exempted from capital gains tax. This provides additional financial flexibility for the organization to carry out its charitable activities.
Conclusion:-
Section 8 Microfinance Company Registration not only provides legal standing to organizations but also offers substantial tax benefits. This encourages the growth of microfinance companies, enabling them to make a positive impact on society. However, it's crucial to engage legal professionals with expertise in company registration to ensure compliance with all regulatory requirements. By doing so, microfinance organizations can leverage these benefits effectively to further their social objectives.