By Dev Rao | Updated March 2026
What Is a Section 8 Company?
A Section 8 Company is a non-profit company incorporated under Section 8 of the Companies Act, 2013 (formerly Section 25 of the Companies Act, 1956). It is established for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any other useful object. The defining characteristic is that all profits and income must be applied solely towards advancing the company's stated objectives — no dividends or profits can be distributed to members. The Central Government grants a special licence for its formation.
Legal Basis
Section 8 companies are governed by multiple legal frameworks:
- Section 8(1) of the Companies Act, 2013 — Permits the Central Government to grant a licence for incorporation of a company for charitable or non-profit purposes. The company may be limited by shares or guarantee.
- Section 8(2) — The licence allows the company to be registered with the word "Foundation," "Forum," "Association," "Federation," "Chambers," "Confederation," "Council," or "Electoral Trust" without the word "Limited" or "Private Limited."
- Section 8(9) — Empowers the Central Government to revoke the licence if the company contravenes any of the conditions or requirements.
- Companies (Incorporation) Rules, 2014, Rule 19-22 — Prescribe Form INC-12 (licence application), INC-13 (MOA format), INC-14 (chartered accountant declaration), and INC-16 (licence grant).
- Section 12A of the Income Tax Act, 1961 — Registration under 12A exempts the company's income from tax, provided at least 85% of income is applied to charitable purposes.
- Section 80G of the Income Tax Act — Registration under 80G allows donors to claim tax deductions on contributions to the Section 8 company.
- FCRA, 2010 (Foreign Contribution Regulation Act) — If the company wishes to receive foreign donations, it must obtain FCRA registration from the Ministry of Home Affairs. This is distinct from FDI — Section 8 companies receive foreign contributions (donations), not foreign investment.
Section 8 Company Registration Process
Incorporating a Section 8 company involves additional steps compared to a regular private limited company:
- Obtain DSC and DIN — For all proposed directors. At least one director must be an Indian resident.
- Reserve the Name — File RUN (Reserve Unique Name) or include name reservation in SPICe+ Part A. The name must reflect the non-profit object (e.g., "XYZ Foundation" or "ABC Welfare Association").
- Apply for Licence (Form INC-12) — File with the Regional Director (RD) of MCA. Attach the draft MOA (INC-13) and AOA, a declaration by a Chartered Accountant or Company Secretary (Form INC-14), and an estimate of future annual income and expenditure for three years.
- Licence Grant (Form INC-16) — The Regional Director may issue the licence within 20-45 days after verification. The licence is a prerequisite to incorporation.
- File SPICe+ (INC-32) — After receiving the licence, file the SPICe+ form for incorporation with the ROC, attaching the licence, MOA, AOA, and director consent forms.
- Certificate of Incorporation — Issued by the ROC upon approval.
Registration Costs
| Component | Approximate Cost (INR) |
|---|---|
| DSC (per director) | 1,000 - 2,500 |
| DIN Application | 500 (included in SPICe+) |
| Name Reservation (RUN) | 1,000 |
| MCA Filing Fee (INC-12 + SPICe+) | 2,000 - 5,000 |
| Stamp Duty (MOA + AOA) | Varies by state (1,000 - 5,000) |
| Professional Fees (CA/CS) | 10,000 - 25,000 |
| Total Estimated Cost | 15,000 - 40,000 |
Minimum Requirements
| Requirement | Private Section 8 Company | Public Section 8 Company |
|---|---|---|
| Minimum Directors | 2 | 3 |
| Minimum Members | 2 | 7 |
| Resident Director | At least 1 | At least 1 |
| Minimum Paid-up Capital | No minimum | No minimum |
| Registered Office | Required in India | Required in India |
| Company Secretary | Not mandatory (unless paid-up capital exceeds INR 5 crore) | Mandatory |
Tax Exemptions: 12A and 80G
Tax exemptions are the primary fiscal advantage of a Section 8 company:
Section 12A Registration
Under Section 12A/12AB of the Income Tax Act, a Section 8 company can apply for income tax exemption. If registered, the company's income is exempt from tax provided at least 85% of the total income is applied towards its charitable objects during the financial year. The remaining 15% can be accumulated for future use.
Key conditions:
- Income not applied must be invested in prescribed modes (government securities, fixed deposits, etc.)
- Voluntary contributions with a specific direction that they form part of the corpus are not treated as income
- For trusts with total income not exceeding INR 5 crore in the preceding two years, 12A registration validity has been extended to 10 years for applications filed after March 31, 2025
Section 80G Registration
80G registration allows donors (individuals and companies) to claim tax deductions on donations made to the Section 8 company. Depending on the category, donors can claim 50% or 100% deduction, with or without limits (typically 10% of adjusted gross total income).
From July 14, 2025, companies can only engage NGOs registered under both 12A and 80G for implementing their CSR activities.
Form CSR-1
Section 8 companies seeking to receive Corporate Social Responsibility (CSR) funds from companies must register on the MCA portal by filing Form CSR-1. This is mandatory since April 1, 2021, and links the NGO's registration with NITI Aayog's Darpan portal.
FCRA and Foreign Funding
This section is critical for Beacon Filing's international clients who want to fund or establish non-profit entities in India:
FCRA Registration (Foreign Contribution Regulation Act, 2010)
A Section 8 company that wishes to receive foreign donations or contributions must obtain FCRA registration from the Ministry of Home Affairs (MHA). Key requirements:
- Eligibility: The company must have been in existence for at least three years and must have spent at least INR 15 lakh on its core activities in the preceding three years
- Prior Permission Route: Companies less than three years old can apply for prior permission for a specific project from a specific foreign donor
- Designated FCRA Bank Account: A mandatory account must be opened at the State Bank of India, Main Branch, New Delhi (Account No. 11 Sansad Marg). All foreign contributions must first be received in this account before being transferred to a utilization account
- Annual Returns: FCRA-registered entities must file annual returns in Form FC-6 by December 31 of each year, detailing all foreign contributions received and utilized
- Cap on Administrative Expenses: Not more than 20% of foreign contributions received can be used for administrative expenses
FCRA vs. FDI
It is essential to distinguish between foreign contributions (FCRA) and foreign investment (FDI):
- Section 8 companies cannot receive FDI (equity investment from foreign sources)
- They can receive foreign donations/contributions, but only with FCRA registration
- Foreign nationals can be directors or members of a Section 8 company, but this does not constitute FDI
How This Affects Foreign Investors
Foreign individuals and entities interact with Section 8 companies primarily through philanthropy, not investment:
- Foreign Nationals as Directors: A foreign national can serve as a director of a Section 8 company, subject to obtaining a DIN and meeting KYC requirements. At least one director must be an Indian resident (resident director requirement).
- Foreign Donations: Donations from foreign individuals, companies, foundations, or governments are classified as "foreign contribution" under FCRA and require the company to have FCRA registration.
- Foreign CSR: Indian subsidiaries of foreign companies (e.g., a wholly-owned subsidiary) that spend CSR funds through a Section 8 company must ensure the Section 8 entity has both 80G registration and CSR-1 registration.
- No Equity Participation: There is no concept of shareholding with return expectations. Members of a Section 8 company have voting rights but no right to dividends or capital appreciation.
- FEMA Compliance: Foreign contributions received under FCRA are exempt from FEMA reporting requirements (FEMA explicitly excludes FCRA-regulated transactions). However, if a foreign entity makes a payment that is not a "contribution" (e.g., payment for services), it falls under FEMA, not FCRA.
Section 8 Company Annual Compliance
Section 8 companies must comply with most requirements applicable to private limited companies, with some exemptions:
- Board Meetings — Minimum 2 per year (exemption from 4 per year for private companies, if turnover is below INR 100 crore)
- AGM — At least 1 per year within 6 months of financial year end
- Financial Statements (AOC-4) — File within 30 days of AGM
- Annual Return (MGT-7A) — File within 60 days of AGM
- Statutory Audit — Mandatory regardless of turnover
- Income Tax Return (ITR-7) — Due by October 31 (if audit required)
- FCRA Return (Form FC-6) — Due by December 31 (if FCRA registered)
- CSR-1 Renewal — As required by MCA notifications
Common Mistakes
- Confusing FCRA registration with FDI permission. Section 8 companies cannot receive foreign equity investment. FCRA covers only donations and contributions. Attempting to structure foreign investment as a "donation" violates both FCRA and FEMA.
- Failing to apply the 85% income utilization rule. If a Section 8 company with 12A registration does not spend at least 85% of its income on charitable objects, the unspent amount becomes taxable at 30%. Accumulation beyond 15% requires specific filing under Section 11(2).
- Not opening the designated SBI New Delhi FCRA account. All foreign contributions must first land in the designated account at SBI Main Branch, New Delhi. Many organizations mistakenly receive funds directly into their local bank account, which is an FCRA violation attracting suspension or cancellation of registration.
- Distributing profits or providing benefits to members. Any distribution of profits, disguised as salaries, perks, or loans to members, violates the licence conditions. The Central Government can revoke the Section 8 licence under Section 8(9), and the Income Tax Department can cancel 12A/80G registrations.
- Ignoring the 2025 CSR-80G linkage requirement. From July 2025, companies can only channel CSR funds to NGOs with valid 12A and 80G registrations. Section 8 companies without these registrations will lose access to corporate CSR funding.
Practical Example
Elena, a German national, wants to establish a non-profit foundation in India focused on clean water access in rural Maharashtra. She incorporates a Section 8 company called "AquaLife Foundation" with herself and two Indian residents as directors.
Incorporation cost: approximately INR 25,000 (DSC, DIN, INC-12 filing, SPICe+, stamp duty). No minimum capital is required, but Elena contributes INR 5 lakh as initial corpus.
After three years of operations (spending INR 18 lakh on charitable activities), AquaLife Foundation applies for FCRA registration with the MHA, opens the mandatory designated account at SBI New Delhi, and begins receiving donations from Elena's German family foundation (EUR 50,000 per year).
The foundation also obtains 12A and 80G registrations and files Form CSR-1, which qualifies it to receive CSR funds from Indian companies. A wholly-owned subsidiary of a German auto manufacturer allocates INR 30 lakh from its CSR budget to AquaLife Foundation for a water purification project.
Elena ensures that at least 85% of total income (foreign contributions + CSR funds + interest income) is applied to charitable objects each year, maintaining tax-exempt status.
Key Takeaways
- Section 8 companies are non-profit entities incorporated under the Companies Act, 2013, with a special licence from the Central Government
- All profits must be applied towards the company's charitable objects; no dividends or profit distribution is permitted
- 12A registration provides income tax exemption (85% income application rule), and 80G registration gives donors tax deductions
- Foreign donations require FCRA registration from the Ministry of Home Affairs, with a mandatory designated account at SBI New Delhi
- Foreign nationals can be directors but Section 8 companies cannot receive FDI (equity investment)
- From July 2025, only NGOs with valid 12A and 80G registrations can receive CSR funds from companies
- No minimum paid-up capital is required; registration costs approximately INR 15,000 to INR 40,000
Want to establish a non-profit in India or channel foreign donations to an Indian cause? Beacon Filing handles Section 8 incorporation, FCRA registration, 12A/80G applications, and ongoing compliance for international philanthropists and foundations.