When you want to run a non-profit with the credibility of a company, a Section 8 Company is the most robust structure available in India. It is more accountable than a trust or society, which helps with fundraising.
This guide explains what a Section 8 Company is, how it differs from other non-profit forms, and how registration and tax benefits work.
Quick answers
What is a Section 8 company?
A company formed for charitable or non-profit objects under Section 8 of the Companies Act, 2013.
Can it distribute profits?
No. Profits must be applied to its objects; no dividend to members.
Is it automatically tax-free?
No. It must obtain 12A/12AB registration for income tax exemption.
How many directors are needed?
Two for a private and three for a public Section 8 company.
Does it use 'Limited' in its name?
No. It is exempt from using 'Limited' or 'Private Limited'.
What is a Section 8 Company?
A Section 8 Company is a company registered under Section 8 of the Companies Act, 2013 to promote objects such as charity, education, science, art, sports, social welfare or environmental protection. It applies its profits solely to its objects and pays no dividend to members. It is licensed by the Central Government and regulated by the MCA, giving it higher credibility than a trust or society. If you are still comparing structures, our guide to company registration in India covers the wider landscape.
Key terms explained
- 12A / 12AB registration: Income tax registration that exempts the company's income when applied to charitable objects.
- 80G registration: Approval that lets donors claim a deduction for their contributions under the Income Tax Act, 1961.
- Section 8 licence: The Central Government licence permitting the entity to operate as a non-profit company without 'Limited' in its name.
Who should consider a Section 8 Company
- Founders setting up an NGO who want stronger governance and donor confidence than a trust or society offers.
- Organisations expecting CSR funding, since corporates prefer the transparency and MCA oversight of a Section 8 Company.
- Groups seeking income tax benefits through 12A/12AB and 80G registrations under the Income Tax Act, 1961.
Legal framework
- Governing law: Companies Act, 2013 and the Income Tax Act, 1961 (for exemptions).
- Key sections / rules: Section 8 (formation and licence), Sections 12A/12AB and 80G of the Income Tax Act.
- Regulatory authority: Central Government via the MCA for the licence; Income Tax Department for exemptions.
How Section 8 registration works
- Obtain DSC and DIN — Proposed directors obtain a Class 3 DSC; DIN is allotted within SPICe+. See our explainer on the digital signature certificate.
- Reserve the name (SPICe+ Part A) — Propose a name reflecting the charitable objects, without 'Limited' or 'Private Limited'.
- Apply for the Section 8 licence — On the MCA V3 portal, the Section 8 licence application is now integrated into SPICe+ Part B, supported by the draft MoA (INC-13) and declaration (INC-14).
- File incorporation forms — Submit SPICe+ Part B with the MoA, AoA and declarations; the licence is granted in Form INC-16.
- Obtain tax registrations — After incorporation, apply for 12A/12AB and 80G registrations with the Income Tax Department to access exemptions and donor deductions.
Keep the relevant paperwork ready in advance; our checklist of documents required for company registration covers the essentials.
Section 8 Company vs Trust vs Society
| Feature | Section 8 Company | Trust / Society |
|---|---|---|
| Governing law | Companies Act, 2013 | Trust/Society Acts |
| Regulator | MCA (Central Govt) | State authorities |
| Credibility | High | Moderate |
| Compliance | Higher (ROC) | Lower |
A Section 8 Company is subject to full company compliance, including audit and ROC filings, in exchange for greater credibility.
Common mistakes to avoid
- Assuming automatic tax exemption. Incorporation alone does not exempt income. The company must obtain 12A/12AB registration, and donor deductions require 80G.
- Distributing surplus to members. A Section 8 Company cannot pay dividends. All surplus must be applied to its stated objects.
- Amending the MoA without approval. A Section 8 Company cannot alter its MoA or AoA without prior approval of the Central Government.
Penalties and consequences
If a Section 8 Company contravenes the conditions of its licence, the company is punishable with a fine ranging from Rs 10 lakh to Rs 1 crore, and its directors and officers in default can face penalties, under Section 8 of the Companies Act, 2013.
Where the affairs are conducted fraudulently, every officer in default may face action including imprisonment under the fraud provisions of the Companies Act, 2013.
How these provisions connect
The Section 8 licence is granted by the Central Government under the Companies Act, while tax exemption flows separately from 12A/12AB registration under the Income Tax Act, 1961.
80G approval depends on the company first holding 12A/12AB registration, so the two income-tax registrations are usually pursued together.
Section 8 Company at a glance
| Aspect | Position |
|---|---|
| Minimum directors | 2 (private) / 3 (public) |
| Minimum capital | No minimum prescribed |
| Profit distribution | Not allowed |
| Name suffix | No 'Limited' / 'Private Limited' |
| Tax exemption | Via 12A/12AB; 80G for donors |
Key takeaways
- A Section 8 Company is a non-profit company under the Companies Act, 2013, licensed by the Central Government.
- It applies all profits to its objects and cannot pay dividends to members.
- On the MCA V3 portal, the Section 8 licence is integrated into SPICe+ Part B and granted in Form INC-16.
- Tax exemption requires separate 12A/12AB registration, and donor deductions require 80G under the Income Tax Act, 1961.
Frequently asked questions
What is a Section 8 company?
A Section 8 company is a non-profit company under Section 8 of the Companies Act, 2013, formed to promote charity, education, science, art or social welfare, with profits applied only to its objects.
How is a Section 8 company different from a trust?
A Section 8 company is regulated by the MCA under company law, giving it higher credibility and accountability, whereas a trust is governed by state trust law with lighter oversight.
Is a Section 8 company tax exempt?
Not automatically. It must obtain 12A or 12AB registration for its income to be exempt, and 80G registration so donors can claim deductions, under the Income Tax Act, 1961.
How many directors does a Section 8 company need?
A Section 8 company registered as private needs at least two directors, while one registered as public needs at least three.
Can a Section 8 company make a profit?
Yes, it can earn a surplus, but the surplus must be applied to its objects and cannot be distributed as dividend to members.
What is the Section 8 licence?
It is the Central Government licence permitting the entity to operate as a non-profit company and to omit 'Limited' from its name, now granted in Form INC-16.
Can a Section 8 company change its objects?
Only with prior approval of the Central Government. A Section 8 company cannot alter its MoA or AoA freely.
What is the minimum capital for a Section 8 company?
There is no prescribed minimum capital; a Section 8 company can be incorporated with any amount.
Need help with this?
Planning an NGO with the credibility of a company? Regikart's CA & CS team handles Section 8 incorporation and 12A/80G registrations. See our company registration service. You can also call or WhatsApp Regikart on +91 70444 94804 (Mon–Sat, 9 am–7 pm IST), or contact us.
About the author
Deepak
Senior Advisor at Regikart. Want to discuss this in the context of your business?
