NGO Registration
NGO (Non-Government Organisation) is an organization that works for non-profit/ charitable purposes. An NGO established as Section 8 company under the Companies Act, 2013 (‘Act’) is governed by the Ministry of Corporate Affairs (‘MCA’) whereas the NGO registered as a trust or society is governed by the registrar of state under the State Government.
How to Register as NGO – Section 8 Company in India
NGO (Non-Government Organisation) is an organization that works for non-profit/ charitable purposes. An NGO established as Section 8 company under the Companies Act, 2013 (‘Act’) is governed by the Ministry of Corporate Affairs (‘MCA’) whereas the NGO registered as a trust or society is governed by the registrar of state under the State Government.
Section 8 company registration has more benefits in comparison to trust and society. This type of company has more credibility among government departments, donors, and other stakeholders. In this article, we will explain how to register as an NGO in the form of a section 8 company under the Companies Act, 2013.
Laws in India applicable to an NGO
NGOs can be registered in India under any of the following laws:
- Trust under Indian Trusts Act, 1882
- Society under Societies Registration Act, 1860
- Section 8 of Companies Act, 2013
Purpose of NGO – Section 8 Company Meaning
The main purpose of establishing a company as a Section 8 company is to promote non-profit objectives such as the following:
- Commerce
- Art
- Science
- Sports
- Education
- Research
- Social welfare
- Religion
- Charity
- Protection of environment
- Any such other object related to the above objects
When the Central Government is satisfied that a person or association of persons propose to establish a limited company having the above-mentioned objectives, it shall grant a license to register as a Section 8 company under the Companies Act, 2013 (‘Act’).
The profits/incomes of the Section 8 company, if any, are applied towards promoting the objectives of the company and are not distributed as dividends to its shareholders.
Section 8 Registration Eligibility
- An Individual, HUF is eligible to start a Section 8 company in India.
- Two or more persons who will act as Directors or shareholders should fulfil all the compliances and requirements of the Section 8 company incorporation under the Act.
- There must be at least one director who should be a resident of India in the Section 8 company.
- The objective must be one or more of the following – promotion of sports, social welfare, the advancement of science and art, education and financial assistance to lower-income groups.
- Founders, directors, members directors of the company cannot draw any remuneration in any form of cash or kind.
- No profit should be distributed among the members and directors of the company directly or indirectly.
Section 8 Company Benefits
There are many advantages of registering an NGO under Section 8 of the Companies Act, 2013, which are as follows:
No minimum capital: There is no minimum capital requirement for a Section 8 company incorporation, and the capital structure of Section 8 can be altered at any time as per the growth requirement of the company. Thus, the funds required for carrying the business operations can be brought in later, through donations and subscriptions from members and the general public.
Tax Benefits: The Company Auditor’s Report Order (CARO) does not apply to the Section 8 company. A Section 8 company enjoys tax benefits under 80G of the Income Tax Act, 1961.
No Stamp Duty: There is no stamp duty imposed for Section 8 company incorporation in India. The Section 8 company need not pay the stamp duty imposed on the Memorandum of Association (MOA) or Articles of Association (AOA) of a private or public limited company.
Separate Legal Identity: Section 8 Company registration acquires a distinct legal identity from its members. A registered partnership firm can also become a member in its individual capacity and obtain Directorship of a Section 8 company. It has perpetual existence and thus, the entry or exit of any member will not affect the operation of the Section 8 company.
Limited liability: The members of the Section 8 company have limited liability as per their share subscribed. They are not personally liable for the losses of the company.
Credibility: Section 8 companies are more credible and reliable than any other form of a charitable organisation. It is regulated under the provisions of the Act, thus they need to have mandatory audits every year and the Memorandum of Association cannot be altered relating to the non-profits objectives of the company.
Exemption to the donors: The tax exemption is granted to the donations received by the section 8 company under Section 12A and 80G of the Income Tax Act, 1961.
Purpose of NGO – Section 8 Company for NGO
Here, setting up a non-government organization under Section 8 company promotes their non-profit goals, such as trade, commerce, arts, charity, education, religion, environmental protection, social welfare, sports, research, etc.
The profits or income received through these social welfare works in the company’s establishment will also be applied to promote the company’s objectives. These generated profits are not intended to be shared as dividends among the company’s members established as an NGO.
You must have at least two directors to get an NGO registration online in India. It is a requirement under Section 8 of the Companies Act of 2013 to incorporate a company as a private limited. If it is included as a public limited company, members will have no limit to apply. On top of this, there is also no minimum requirement of paid-up capital, such as when obtaining an NGO registration under Section 8 of the Companies Act of 2013. Now, let us see the prerequisites for the registration process of an NGO.
