Section 8 Company Compliance in India

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Section 8 Company Compliance

A Section 8 company, under the Companies Act 2013, is a non-profit entity dedicated to promoting fields such as trade, art, science, sports, education, social welfare, and more. These organizations operate with the primary goal of serving society rather than generating profits for their members. Although Section 8 companies can engage in business activities and raise funds, they are prohibited from distributing profits among their members.

The Companies Act mandates specific annual compliance requirements for Section 8 companies, including holding an Annual General Meeting (AGM), maintaining financial records, filing income tax returns, and submitting an annual return. Adhering to these compliance standards is essential for maintaining the legal standing and credibility of Section 8 companies, ensuring they operate within the legal framework and avoid penalties for non-compliance.

By fulfilling these obligations, Section 8 companies demonstrate transparency, accountability, and commitment to their philanthropic goals. This adherence fosters trust among stakeholders and the public, enabling them to continue their charitable endeavors effectively.

Annual Compliance of Section 8 Company

Appointment of Auditor

The company must appoint an auditor within 30 days of its incorporation, and subsequently at each AGM, to hold office from the conclusion of that meeting until the conclusion of the sixth AGM.

Maintain Statutory Register

The company must appoint an auditor within 30 days of its incorporation, and subsequently at each AGM, to hold office from the conclusion of that meeting until the conclusion of the sixth AGM.

Meeting of Directors & Shareholders

The company must appoint an auditor within 30 days of its incorporation, and subsequently at each AGM, to hold office from the conclusion of that meeting until the conclusion of the sixth AGM.

Filing of Income Tax Return

The company must appoint an auditor within 30 days of its incorporation, and subsequently at each AGM, to hold office from the conclusion of that meeting until the conclusion of the sixth AGM.

Maintain Books of Accounts

The company must appoint an auditor within 30 days of its incorporation, and subsequently at each AGM, to hold office from the conclusion of that meeting until the conclusion of the sixth AGM.

Filing of Financial Statements and Annual Return

The company must appoint an auditor within 30 days of its incorporation, and subsequently at each AGM, to hold office from the conclusion of that meeting until the conclusion of the sixth AGM.

Form 10G of Income Tax

Form 10G is an application form that entities use to apply for approval under section 80G of the Income Tax Act, 1961 in India. Section 80G provides tax deductions to donors for contributions made to certain funds, charitable institutions, etc

Purpose of Form 10G

Form 10G is used by non-profit organizations to obtain a certificate under section 80G, which allows donors to claim tax deductions for their donations. This certificate enhances the credibility of the organization and encourages more donations.

Documents Required:

  • Copy of PAN card of the organization.
  • Certificate of Registration under the Societies Registration Act, 1860, or Trust deed, or any other document evidencing creation of the entity.
  • Financial statements of the organization (Balance Sheet, Income & Expenditure Statement, etc.) for the last 3 years.
  • Copy of the existing 12A registration certificate.
  • Details of the activities carried out by the organization.
  • List of donors and their details.
  • Copies of the audit reports.

Section-8 Annual Compliance

Annual General Meeting (AGM):

A Section 8 Company must hold an AGM within six months after the financial year ends. During this meeting, the company's financial statements and reports are approved by the members.

Filing of Financial Statements (Form AOC-4):

The company’s balance sheet, profit and loss account, and auditor’s report must be filed with the Registrar of Companies (RoC) within 30 days after the AGM.

Filing of Annual Return (Form MGT-7):

The Annual Return, detailing the directors, shareholders, and any changes in directorship, must be filed with the RoC within 60 days after the AGM.

Director’s Report:

A Director’s Report, outlining the company’s activities, future plans, financial summary, and changes in the board, must be prepared and presented at the AGM.

Income Tax Return Filing:

Section 8 Companies must file an income tax return each year, even if they have no income, to stay compliant.

Audit of Accounts:

The company’s accounts must be audited annually by a Chartered Accountant. The audit report should be submitted to the RoC along with the financial statements.

Compliance with CSR Provisions:

If applicable, Section 8 Companies must follow CSR regulations, which involve forming a CSR committee and spending a portion of profits on social activities.

Maintenance of Statutory Registers:

Section 8 Companies must keep statutory registers for members, directors, charges, and loans.

Compliance Certificate:

A compliance certificate from a practicing Company Secretary is required if the company has a paid-up share capital of Rs. 10 crore or more, or a turnover of Rs. 50 crore or more.

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