In India, a non-profit organisation can be registered as Trust by executing a Trust deed or as a Society under the Registrar of Societies, or as a non-profit company under Section 8 Company of the Companies Act, 2013. A Section 8 Company is the same as Section 25 company under the old Companies Act, 1956. Under the new Companies Act 2013, Section 25 (as per the old Act) has now become Section 8.
As per Section 8(1a, 1b, 1c) of the Companies Act, 2013, a Section 8 company can be established for the “promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object”. The Act further states that a Section 8 company can purse the above objects subject to the condition that it “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.”. In simple terms, a Section 8 company must promote a public cause and the proceeds generated by the entity must solely be used to support the stated public cause(s) only.
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Tax benefits: Section 8 Company is a non-profit organization that is why they are exempted from some provisions of the income tax. They are also given numerous other deductions and other tax benefits. They avail benefits under section 80G of the Income Tax Act, 1961. They also are required to pay less stamp duty as compared to other organizations.
Minimized Share Capital: Unlike the other limited companies like private, public, or one person, the companies registered under section 8 doesn’t require much share capital. They can be directly funded from subscriptions or donations made to them.
Use of title: Unlike the other companies, who have to use the title as ‘limited company’, section 8 of the IT Act exempts them from the use of any suffix or title, they can still exercise their functions without informing the public of their limited liability status.