Mostly, the entrepreneurs build the company to gain profit that is further divisible among the members; however, in the case of a non-profit entity, it is established to promote social, charitable, or educational causes. Imagine establishing a non-profit entity that changes lives and makes a huge difference in the education field. Interestingly, this can all be done while enjoying tax advantages. This is where the Online Section 8 Company Registration plays the critical role. 

The government of India established the Section 8 Company Registration for a non-profit company. The people are concerned for social welfare, but dealing with cost and walking alone on this route, the Section 8 company can prove profitable for you. Initially, several NGOs suffer multiple challenges, but accurate advice and support can transform their vision. In this blog, we will support you in explaining why a non-profit company needs Section 8 registration, including the benefits, fees, and pitfalls of their solutions.  

What does it mean by a Section 8 Company Registration?

Section 8 Company registration in India is a procedure to register a non-profit company for social welfare and education. Talking about the Section 8 Company, it acts as a non-profit organization that registers under the Companies Act, 2013. This non-profit company was established to encourage people to pursue charitable objectives as well as education, the arts, and science. Well, a Section 8 company creates a unique image compared to traditional companies. It is because the profit of a company, Section 8, is never distributed to members. The profit is used for further objectives, like charity, education, or social objectives. This framework is the signal of trust that connects to social issues and offers tax relaxation. Whether you are thinking of establishing a microfinance institution or an NGO, a Section 8 company registration in India can prove to be a golden tool.

Why Choose a Section 8 Company Over Trusts or Societies? 

Improves Credibility: Unlike traditional companies, the Section 8 companies are tagged as more trustworthy. The Ministry of Corporate Affairs (MCA), which regulates the activities of this framework, also mentioned that the Section 8 companies are strong. 

Tax advantages: The biggest flex for the non-profit companies to utilize the advantages of tax. An organization that registers for a Section 8 Company under Section 12AA and 80G gets 100% tax exemptions. These 100% exemptions are for the non-profit companies. The donor also gets the advantages with tax deductions. 

No Minimum Capital: The other companies that register as LLP, Pvt Ltd, or partnership, need no minimum capital requirement. But, in the case of non-profit companies, there is no need for capital requirements. Through this, the NGOs in India get the flexibility benefit.

Perpetual Existence: In India, a non-profit company that registers under Section 8 acts as a separate legal entity like a private limited company. In this situation, the legacy of NGOs or social institutions continues even if founders or directors change. The uncertainty in organizational ownership does not affect its existence, which continues for a long period. 

Global recognition: Unlike trusts or societies, a non-profit organization under Section 8 is eligible to operate the company anywhere in India. There are no restrictions from the state officials. 

The challenges arise during NGO registration in India

In India, NGOs basically work to focus on a specific environmental or social issue. Several NGOs offer support to a group of communities to grow and also provide a fee-free education for children’s bright future. However, the startups that are seeking to establish an NGO in India can face multiple challenges due to a lack of guidance. Here is a breakdown of challenges with their solutions. 

Challenge 1: The Complete Documentation Requirement

The first step for the Section 8 registration to build an NGO is to gather the necessary documents. For the application, preparing and filing legal documents like Articles of Association (AOA) and Memorandum of Association (MoA) can be overwhelming.

Solution:  For the Section 8 company registration approach, expert consultation is provided that guides on MoA and AoA drafting. For a smooth and error-free fee, the applicants apply for Section 8 company registration online in India. Necessary to comply with the Indian regulatory framework, the Companies Act 2013. 

Challenge 2: The fear of High Costs

Due to the lack of knowledge and expert guidance, the startups fear the hefty registration fee. In addition, non-compliance with governing law leads to penalties. 

Solution: Unlike the other companies’ registrations, the Section 8 company registration online in India charges a fee at a very low cost. In several states of India, the application fee is Rs 4,999. 

Challenge 3: The time-consuming process

Several NGOs get frustrated due to the application rejection as well as the delay in approval. In many cases, the founders registered to restart the procedure due to rejection. 

Solution: Approach the Section 8 experts for consultation or use the digital tool like SPICe+. Through this, the founders can complete the registration procedure within 10-20 days.

Challenge 4: Lack of Credibility

A less-established or unregistered NGO always faces funding issues. The donors hesitate to fund the unregistered companies. 

Solution: Registering the company as a Section 8, overseeing the activities, the MCA manages the audits to enhance the trust of donors. This is helpful to make a Section 8 registered company for funding and donations.

Also Read This: Section 8 Registration in Pune

Section 8 Microfinance Company: Enabling the Disadvantaged

A Section 8 microfinance company acts as a separate legal entity that works on social issues. The framework of Section 8 Microfinance Company allows for support to those households whose annual income is up to Rs 300,000. 

In this procedure, the low-income households get the loan for free without the RBI approval requirement. But such microfinance companies charge a 26% interest annually and are eligible to provide a loan up to Rs 240,000. 

Why choose a Section 8 Microfinance Company?

  • Eliminates the need for an RBI license
  • Offer the benefits of loans, insurance, and savings products
  • Provides the loan card highlights, terms, and conditions
  • The compliance obligations are akin to those of Section 8 companies.
  • Need for minor additional filings

What is the fee for a Section 8 Microfinance Company Registration?

For every company registration, whether it is profitable or non-profitable, the governing authority charges for the application. Similarly, for the Section 8 microfinance company registration, the applicant needs to pay a fee. 

  1. Government fees: The government fee that is charged for application submission depends on the state. If you are a Delhi resident, you need to pay Rs 4,999, but in Uttar Pradesh, the government fee is Rs 5,999. 
  1. Consultant’s fee: To make the registration procedure error-free, the founders required a professional who supports and guides from gathering documents to DSC and DIN 
  1. No Stamp Duty: Unlike the other registered or unregistered companies, a Section 8 microfinance company is beneficial in saving significant costs. 

Conclusion | Section 8 Company Registration online in India

In essence, a Section 8 registered company serves as a golden gateway to establishing a strong non-profit in India. The benefits of these companies are unmatched compared to those of other organizations. For NGOs and microfinance companies, a Section 8 registration online is important to solve financial issues. To make the registration procedure easy, partner with the Company Registration Online experts. Our experts help to navigate the Section 8 company registration in India procedure seamlessly. 

FAQ| Section 8 Company Registration

1. Is a Section 8 company in India allowed to receive donations?

Ans. Yes, in India, a registered Section 8 company is allowed to accept donations as these companies are registered under the Companies Act 2013. 

2. Can I register my non-profit organization as a company?

Ans. Yes, a person is allowed to register their non-profit organization as a company. The Companies Act 2013 allows organizations to serve as a Section 8 company. 

3. Under which act can an NGO be registered?

Ans. An NGO can register under multiple acts that include the Companies Act, 2013, the Societies Registration Act 1860, and the Indian Trusts Act 1882. 

4. Is Section 8 Company a trust?

Ans. No, both act as a non-profit entity. However, a Section 8 company is distinct from a trust, which sets it apart from legal frameworks.

5. What is the motive of a Section 8 company registration online in India?

Ans. It is built as a non-profit organization that focuses on encouraging charitable activities.