Registration of Section 8 Company for undertaking Corporate Social Responsibility (CSR) Activities

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Registration of Section 8 Company for undertaking CSR Activities

A company can be called as a Section 8 company that has gotten itself registered as NGO or charitable association and has gotten a Certificate of permit from Central Government. Not-for-profit associations give a platform where there can be immediate connections between the general public and its well being for its turn of events. Its primary objective is to advance non-benefit destinations, for example, commerce, trade, art, charity, religion, climate security, social welfare, education and so forth.

Table of Contents

What are Section 8 Companies?

The Companies Act defines a Section 8 company as one whose “objectives is to promote fields of arts, commerce, scienceresearcheducationsports, charity, social welfare, religion, environment protection, or other similar objectives.” These organizations additionally apply their benefits towards the encouragement of their goal and don’t deliver any profit to their individuals.

These companies were recently characterized under Section 25 of the Companies Act, 1956 with similar provisions. The new Act has, notwithstanding, recommended more objectives that Section 8 companies can have.

Features of Section 8 Companies

A Section 8 company contains the accompanying features that most different sorts of organizations don’t have:

  • Charitable Objective: Section 8 companies don’t plan to create profit. Their goals are absolutely beneficent in nature. They plan to further causes like science, culture, research, sports, religion, and so forth
  • No minimum share capital: Section 8 companies, in contrast to other companies, don’t need a recommended minimum paid up share capital.
  • Restricted risk: Members of these companies can have limited liability. Their liabilities can’t be limitless regardless.
  • Government license: Such companies can work provided that they have the Central Government’s license. The Government can revoke this license too.
  • Honours: Since these companies have charitable objectives, the Companies Act has agreed a few benefits and exemptions to them.
  • Firms as members: Apart from people and association of individuals, Section 8 additionally permits firms to be members of these companies.

Role of Section 8 companies in Implementing CSR

 Ministry of Corporate Affairs Companies Act, 2013 has presented the idea and provisions of required Corporate Social Responsibility (CSR) for specific companies. CSR is introduced as a device with accomplishing sustainable objectives and rewarding the general public from companies that use different resources.

Section135 of the Companies Act contains provisions for CSR for recommended companies.

The CSR spending can now be met by the actual Company or through-

  • Any non-profit entities either incorporated by the corporate (separately or together with others) or independently established entities registered under Section 12A and Section 80G of the Income Tax Act.
  • Apart from Section 8 Companies, registered trust or a registered society set up by the local government or state government.
  • A Section 8 Company, a registered public trust or a registered society registered under Section 12A and 80G of the Income Tax Act, 1961 and that doesn’t fall inside the above classifications yet such entity should have an established track record for around three years in similar projects.

Benefits of Section 8 Company

For joining a Section 8 Company there is no base necessity of authorized or paid up share capital.

  • Such companies are exempted from stamp duty registration.
  • A partnership firm can be a member in its capacity.
  • Such companies are qualified for tax deduction to the investors of the company u/s 80G of the Income Tax Act.
  • Eligibility for CSR.

Process for Registration under Section 12A of Income Tax Act, 1961

The pay of an association is absolved in the event that an NGO has 12-A registration. This is one-time registration and has Lifetime legitimacy. 

Filing of FORM 10-A 

The cycle for applying for 12A registration and Form 10A filing has been made online just with the digital signature of the signatory. To get 12 A registration, an application in Form 10 A for registration of a charitable or religious trust or organization should be made online to the Commissioner of Income Tax alongside the following Documents.

Documents Required for FORM 10-A 

  • Self-ensured duplicate of registration with Registrar of Companies
  • Self-affirmed duplicate of the documents proving modification or change of the articles, if any: 
  • Registration Certificate and MOA/Trust Deed (two duplicates – self bore witness to by NGO head);
  • NOC from Landlord (where the registered office is arranged); 
  • Duplicate of PAN card of NGO/Trust/Institution. 
  • Electricity Bill/House Tax Receipt Water Bill (copy) 
  • Where the trust or foundation has been in presence during any year or years before the monetary year in which the application for registration is made, self-certified copies of the yearly records of the trust or establishment connecting with such earlier year or years (not being over three years immediately preceding the year wherein the said application is made) for which such records have been made up: 
  • Note on the activities of the trust or establishment; 
  • Self-confirmed copy of the request of dismissal of utilization for grant of registration under Section 12A or section 12AA, by and large, if any.

Process for Registration under Section 80G of Income Tax Act, 1961

The earlier prerequisite for getting registration under Section 80G is to acquire registration under Section 12A.

The applicant or recipient of the 80G registration should agree with the prerequisites determined underneath: 

  • The application must be made by a public beneficent trust, registered society, renowned education institution or a company supported by the Government. 
  • The trust/organization applying for the certificate should be properly registered under the Societies Registration Act, 1860 or then again Section 8 of the Companies Act; or some other pertinent Acts. 
  • Applicants of the certificate should not address any religion-based or rank and doctrines based movement. 
  • The individual trust/organization ought to use the funds for charitable purposes. 
  • The registered trust establishment should not hold on to any payment which isn’t exempted.
  •  Entity’s seeking after some other business are needed to keep a different account, so the gifts got are not mistaken for reserve funds of some other kind. 
  • The applicant ought to have kept up with the proper yearly returns, bookkeeping and accounting prior to applying for the Certificate.
  •  The recipient of the Certificate should guarantee the timely renewal of certificates, to get the qualified tax benefits.

 Registration under section 80G will be handled by the Commissioner of Income Tax only after getting an application from the application in Form 10G.

Process of Undertaking CSR Activities by Section 8 Companies

  • Registration with the Central Government by filing of Form CSR-1 digitally with the Registrar, w.e.f. 01.04.2021.
  • Form CSR-1 will be signed and submitted electronically by the entity and will be checked carefully by a Chartered Accountant by and by or Company Secretary by and by or a Cost Accountant practically speaking.
  • On the submission of the Form CSR-1 on the entry, a unique CSR Registration Number will be produced by the system consequently. 

Documents for filing Form CSR-1

 Following documents are needed for filing the FORM CSR-1 :

  • Is the Company set up by any company or group of companies? 
    •  If Yes give Name of the Company. 
    •  If No, regardless of whether the entity has an established track record of three years in similar activities?
  • Duplicate of PAN Card of the NGO 
  • Email ID
  •  Mobile Number 
  • Address of the Entity 
  • Subtleties of Governing Body Members (Trustees or Member of Societies) 
  • Duplicate of Registration Certificate 
  •  Digital Signature of (Trustee/CEO/Chairperson/Secretary) with his PAN Number

Final Words

As expressed above Section 8 companies needs to get itself Pre-registered under Section 12 A and 80 G of Income Tax Act, 1961 to get qualified under rule 4 of CSR strategy rules 2014 for undertaking CSR exercises. Then, at that point, each registered Trust registered Society or Section 8 Company who wish to direct activities through CSR funding should be registered with MCA through Form CSR-1.

CS Urvashi Jain is an associate member of the Institute of Company Secretaries of India. Her expertise, inter-alia, is in regulatory approvals, licenses, registrations for any organization set up in India. She posse’s good exposure to compliance management system, legal due diligence, drafting and vetting of various legal agreements. She has good command in drafting manuals, blogs, guides, interpretations and providing opinions on the different core areas of companies act, intellectual properties and taxation.

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