NGO can be in 3 forms of organizational structure such as Trust(Trusts formed under Indian Trusts Act 1882), Societies(Societies registered under section 20 of the Societies Registration Act 1860) and Section 8 Companies(Section 8 Company as per Companies Act,2013).
Non-profit Company or Section 8 Company is a Company which:
- Has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment or any such other object;
- Intends to apply its profits, if any, or other income in promoting its objects; and
- Intends to prohibit the payment of any dividend to its members.
Benefits of Section 8 Company Registration:
- A Section 8 Company has more credibility as compared to any other Non-profit organization structure like Trust or Society.
- Tax deductions to the donors of the Company u/s. 80G of the Income Tax Act;
- Section 8 Companies can be formed with or without share capital, in case they are formed without capital, the necessary funds for carrying the business are brought in form of donations, subscriptions from members and the general public;
- Section 8 Companies are not required to add the suffix Limited or Private Limited at the end of their name; and
- There must be Minimum of two shareholders;
- There must be Minimum of two Directors (Directors and shareholders can be the same person);
- At least one of the Director shall be the resident in India;
- There is No requirement of Minimum capital
- Need not to appoint Independent director
- There is no restriction on payment remuneration to employees/director.
- Section 8 companies are required to have at least one meeting within every six calendar months
- Section 135 of Corporate Social Responsibility is applicable
- Section 8 Company need to file Financial Statement and other documents if applicable as per rule 3 of the Companies (Filing of documents and forms in XBRL) Rules, 2015.
- FDI in Section 8 Companies can be brought in subject to compliance of FEMA Regulations