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Section 8 Company Compliance

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Section 8 Company Compliance

According to the Companies Act, 2013, it is mandatory for all Section 8 Company Companies to file the Section 8 Company Compliance with the MCA or Ministry of Corporate Affairs. The main aim to start Section 8 Company is to encourage, promote, and nourish the activities related to science, art, sports, charitable activities, commerce, and so on. Section 8 Companies fall under the Non-Governmental Organization category. These companies enjoy being treated as ‘Limited Company’, via, word ‘Limited’ but it is not added at the end of the name of the company. In short, Section 8 companies work with the objective to promote the needy sectors and communities in India. These Companies are not applicable to provide income or dividends to their partners or members.

What are Section 8 Companies?

An  Annual Compliance for Section 8 Company is formed with the objective of promoting commerce, arts, science, sports, education, research, social welfare, and protection of the environment in a country. Though they're authorized to run a business and earn a profit, the profit can only be utilized for meeting company objectives, and can't be shared among the members.

The Advantages of Section 8 Company Compliance

  • Provides the company better credibility or trustworthy
  • Protects the company from all types of legal trouble
  • Help the company in eluding penalties and punishments
  • Work with the objective to form trust among its customers

What are the Tax Compliances for a Section 8 Company?

A Section 8 company is liable to pay corporate tax as prescribed by the Income Tax Act. But, it can claim certain income to be excluded in calculating the entire income which is applicable to tax. The compliances to be fulfilled to claim such an exemption are:

The Section 8 company shall be registered under Section 12A of the tax Act, with the Principal Commissioner using form 10A.

It must suit the conditions specified under Section 11, so on be eligible for the exemption.

The company has got to be approved under Section 80G, through Form 10B.

Penalties for Non-Compliance

  • The Ministry of Corporate Affairs has set up a penalty for section 8 Company not complying with the procedures:
  • The Central Government may revoke the license granted to the corporate if it finds that the corporate is functioning fraudulently or during a manner violative to the thing of the corporate.
  • The companies will be punishable with a fine, which shall not be less than ten lakh rupees and can be extended to one crore rupees.
  • The directors and each officer of the corporate who is in default shall be punishable with imprisonment for a term which can reach twenty-five lakh rupees or with both.
  • If it's found that the affairs of the corporate were conducted fraudulently, every officer in default shall be responsible for action under section 447.
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