In India a Non-Profit Organization can be registered in three ways particularly:-
> Trust: By executing Trust Deed and get it registered with the Registrar of Trust,
> Society: with Registrar of Societies
> Section 8 Company: By executed MOA and AOA and get it registered pursuant to Companies Act, 2013.
| S. NO. | PARTICULARS | TRUST | SOCIETY | SECTION 8 COMPANY |
| 1. | Management | By Trustees | By a Committee or the Managing Council | By Board of Directors |
| 2. | Minimum Requirement | 2 Trustees | 7 (in case of a state-level society) and 8 (in case of a national level society) committee members | 2 members for a Private limited company and 7 members for a Public limited company |
| 3. | Governed by | Registrar of Trusts | Registrar of Societies | Registrar of Companies |
| 4 | Time Period involved in registration | 25-30 days | 30-45 days | 7-10 days |
| 5 | Registration Complexity | Complex because entire process is offline | Complex because entire process is offline | Simpler than Trust/Society because everything is online |
| 6 | Change in registered office | Complex because entire process is offline | Complex because entire process is offline | Simple than Trust/Society |
| 7 | Transparency of working | Low | Low | Working is highly transparent as everything is into public domain. |
| 8 | From the point of view of Foreign Contribution Regulation Act, (FCRA) registration | Less preferred | Less preferred | More preferred |
Pre-Requisites for Incorporating The Section 8 Company
Section 8 Company can be registered as Private limited or Public limited
Benefits of Section 8 Company
> Charitable objectives: Section 8 companies do not aim to make profits. Their objectives are purely charitable in nature. They aim to further causes like promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment etc.
> Privileges/Exemptions:Several benefits such as receiving donations or contributions and tax exemptions are allowed to them.
Documents Required for Incorporation
Scanned Copy of the following documents has to be provided by the Promoters of the Company:-
> PAN card copy of all directors/shareholders,
> Voter Id/Aadhaar Card/Driving License/Passport of directors/shareholders
> Electricity Bill/Mobile Bill/Gas Bill, Bank Statement (not older than 2 months) in the name of director/shareholder
> Electricity bill/Water Tax/Gas/Mobile Bill (not older than 2 months) for registered office address proof
> Pass-port size photo of all directors/shareholders.
Procedure for Company Formation In India
(As per Companies Act, 2013)
STEP-1
Name – Apply for the name availability of the proposed Sec 8 company with the Central Registration Center (“CRC”) by filing Web Form SPICE + (Part A) with requisite fee of Rs.1,000/-and Once Name is approved, it remains valid for 20 days from the date of approvals.
DSC – All the subscribers and Directors must have Digital Signature Certificate (DSC).
After completing the aforesaid formalities one can go for Spice+ (part B) for incorporation and License of Section 8 Company.
STEP-2
| Prepared following set of documents: |
| Declaration by the Promoter, Directors and shareholders for non-deposit taking and to not to carry out the money circulation scheme. |
| Consent by the Directors in Form DIR 2 |
| NOC from the Owner of the premises for the address which shall be used as registered office address by the Company |
| Statement of Assets and Liabilities |
| Projected Income and Expenditure statement for the proceeding 3 years |
| INC 14 |
| Declaration in INC-15 |
| Articles of Association: The articles of association of a company are its bye-laws or rules and regulations that govern the management of its internal affairs and the conduct of its business |
| Memorandum of Association (INC-13): The Memorandum of Association is the charter of a company. It is a document, which amongst other things, defines the area within which the company can operate and consists the main business activity of the Company. |
STEP-3
Processing of Company Registration Application
After attaching the signed documents along with the ID and Address proofs of all the promoters and proof of Registered Office Address, Submit the form SPICE + (Part B) online using Digital Signatures for Company Incorporation and the documents shall be processed by the ROC in approximately 3-5 working Days.
| NOTE: Section 8 Companies are allowed to use the word Foundation, Federation, Association, Electoral Trust with its name.
Also the word ‘Electoral Trust’ may be allowed for registration of companies to be formed under section 8 of the Act, in accordance with the Electoral Trusts Scheme, 2013 notified by the Central Board of Direct Taxes (CBDT). Provided that name application is accompanied with an affidavit to the effect that the name to be obtained shall be only for the purpose of registration of companies under the said Electoral Trust Scheme as notified by the Central Board of Direct Taxes. |
Once ROC is satisfied and scrutiny is completed he will issue certificate of Incorporation along with the Section 8 License. The company would come into existence from the date of Certificate of incorporation.
80G and 12A Registration
(As per Income Tax Act)
80G Registration comes under Section 80G of Income Tax Act and provides benefits to the donor of an NGO, whereas Section 12A Registration will assist an NGO to get an organization income exempted from Tax. Both 80G Registration and 12A Registration applies only to NGO’s and charitable organizations.
| Section 80 G | Section 12A | |
| Eligibility | > The institution should be either constituted as a Public Charitable Trust, a registered society or a company registered u/s 8 of the Companies Act, 2013
> The Institution should not be working for the benefit of any particular caste or religion |
> The institution should be either constituted as a Public Charitable Trust, a registered society or a company registered u/s 8 of the Companies Act, 2013
> The Institution should not be working for the benefit of any particular caste or religion |
| Benefits | > Donation and Grants from the government and others. (By taking the exemption certificate available under 12A an entity such as an NGO or Society can avail all forms of schemes and grants provided by the government) > Tax Exemption |
> Government Funding
> More Donor > Donor can save tax availing deduction under Income Tax Act. |
| Difference | > 80G Registration comes under section 80G of the Income Tax Act and provides benefit to the donor of an NGO | > Section 12A Registration will assist an NGO to get an organization income exempted from tax. |
| Time Limit of Passing the Order by the Authority after applying for registration | > The order granting approval under section 80G(5) or rejecting the application shall be passed within the period of six months from the end of the month in which such application was received. | > The order granting approval under section 12A or rejecting the application shall be passed within the period of six months from the end of the month in which such application was received. |
| Validity | > 1 to 3 years | > Lifetime validity |
About the Author
Author is Divya Goel, ACS working as Assistant Manager- Company Secretary with Neeraj Bhagat & Co. Chartered Accountants, a Chartered Accountancy firm helping foreign companies in setting up business in India and complying with various tax laws applicable to foreign companies while establishing their business in India.
Author Bio
