SECTION 8 COMPLIANCE
A Section 8 company is created with the objective to promote the fine arts, commerce, sports, scientific pursuits, education activities, research activities, social welfare schemes and activities, environment protection and preservation activities in India. Though a Section 8 Company is allowed to run a business and earn a profit, the profit must be utilized to meet company objectives. This profit cannot be shared by the members of the Section 8 Company.
ADVANTAGES OF A SECTION 8 COMPANY
REQUIREMENTS FOR ANNUAL COMPLIANCE OF A SECTION 8 COMPANY
- Under section 139 of the Companies Act 2013, it is compulsory for a company to appoint an auditor. The book of accounts and annual returns of the company have to always be maintained and kept in order
- The company has to maintain a statutory register of all the loans obtained, all the charges created, list of all its members, etc as per the provisions of Section 8 of the Companies Act 2013
- The annual general body meeting and other statutory meetings have to be conducted as per the schedule laid down in the provisions of Section 8 of the Companies Act 2013
- The directors of a Section 8 company have to file their annual report in the appropriate manner. This annual report must contain all the fiscal data and corporate social responsibility. The board directors are responsible for this annual report
- The balance sheet, profit and loss A/C, cash flow statement and other financial statements have be filed by the Section 8 company for the previous financial year.
- At the end of every assessment year, before 30th September, tax returns have to be filed for a Section 8 Company
- The financial statement of a Section 8 Company has to filed in the correct form which is the E-FORM AOC-4). This has to be done within 30 days from the last general body meeting of the company
- A limited company must file the Form MGT-7 with the Registrar of Companies (ROC), within 60 days of the annual general meeting of company
COMPLIANCES OF A SECTION 8 COMPANY
All the advantages of a Section 8 company, which are its ability to raise funds in the form of donations and contributions has to be done through disciplined compliance. A Section 8 company is a form of NGO that is registered under the Companies Act, 2013. A Section 8 company must adhere to the compliance levied by Registrar of Companies (ROC) and Income tax authorities. Any failure to fulfil these compliance requirements, can result in paying heavy penalties which can go up to INR 1 lakh a year. There is also a strong possibility that such a Section 8 company and its directors may get blacklisted by the Registrar of Companies for a certain period of time. To avoid such a situation the below mentioned compliances must be followed:
- A notice of the appointment of an Auditor within 15 days of this appointment has to be filed in Form ADT-1
- The director’s consent form has to be filed in Form DIR 2 to occupy the company office within 30 days of a director’s appointment
- The returns form has to be filed in Form MR-1, within 60 days of the appointment of Managing Director, manager or any key managerial person in the Company
- A Section 8 company must appoint the first Auditor, within a period of 30 days from the date of its incorporation, to handle all the annual financial filings of the company
- The first meeting of the Board of Directors has to be conducted within 30 days from the date of incorporation of the Section 8 Company. Thereafter, the Board of Directors must hold at least one meeting every six months
- A Section 8 company has to hold its first Annual General Meeting (AGM) within nine months from the end of the first financial year of the company
TAX COMPLIANCES FOR A SECTION 8 COMPANY
A Section 8 company must pay corporate tax as prescribed by the Income Tax Act. However, it can claim certain income to be exempted, when the total income tax for a financial year has being calculated. The compliances to be fulfilled to claim an exemption are mentioned below
- The Section 8 company has to be registered under Section 12A of the Income Tax Act, with the Principal Commissioner using form 10A
- The Section 8 Company must comply with the conditions as specified under Section 11, to be eligible for the exemption
- The Section 8 Company has to be approved under Section 80G, through Form 10B
PENALTIES FOR NON-COMPLIANCE
The Non-compliance by a Section 8 Company can lead to penalties ranging from Rs.25,000/- to Rs.5,00,000/- and/or imprisonment.
Our team of tax and legal experts at ACE ALLIANCE will help you address all your issues and queries in regards to your Section 8 company compliance needs.