Register a Section 8 Company in India from Israel

How to Register a Section 8 Company in India from Israel

Israel and India share a long history of cooperation in development, education, agriculture, and water management, with Israeli expertise in drip irrigation, water desalination, and agricultural technology having transformed farming practices across several Indian states. For Israeli non-profit organisations, foundations, philanthropic entities, and social enterprises seeking to formalise their presence in India, a Section 8 Company under the Companies Act, 2013, provides a robust and recognised legal structure for conducting charitable, educational, scientific, and social welfare activities.

A Section 8 Company is India's equivalent of a non-profit corporation. It is formed for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any other useful objective. The key distinguishing feature is that a Section 8 Company must apply its profits (if any) and other income solely towards promoting its objectives and is prohibited from paying any dividend to its members.

Unlike standard Foreign Direct Investment (FDI), which governs equity investments in for-profit companies, foreign involvement in Section 8 Companies follows a different regulatory pathway. Foreign nationals and entities can be members and directors of a Section 8 Company, but any foreign funding is regulated under the Foreign Contribution (Regulation) Act, 2010 (FCRA) rather than FEMA's FDI regulations. This is a critical distinction that Israeli entities must understand before proceeding.

With bilateral trade between India and Israel valued at approximately USD 3.75 billion in FY 2024-25 and deepening cooperation across technology transfer, agricultural development, and water resource management, Israeli non-profits have significant opportunities to contribute to and benefit from India's development landscape through the Section 8 Company structure.

FDI Route and Regulatory Requirements

The regulatory framework for Section 8 Companies with foreign involvement is fundamentally different from that of for-profit entities. Understanding this distinction is essential for Israeli organisations planning to establish a non-profit presence in India.

Key regulatory considerations:

• FDI vs. FCRA: Section 8 Companies cannot receive foreign equity investment under the FDI route. Any foreign capital contribution is treated as a "foreign contribution" and is regulated under the FCRA, 2010. Israeli entities must obtain FCRA registration or prior permission before accepting foreign funds.
• FCRA registration: To receive foreign contributions on an ongoing basis, the Section 8 Company must obtain FCRA registration from the Ministry of Home Affairs (MHA). However, FCRA registration is available only after the organisation has been in existence for at least three years and has spent a minimum of INR 15 lakh on its stated objectives (excluding administrative expenses) during this period.
• FCRA prior permission: For newly registered Section 8 Companies that have not completed three years, a prior permission route is available under FCRA, which allows the entity to receive foreign contributions for a specific project or purpose for a limited period.
• Foreign directors: An Israeli citizen or entity can serve as a director or member of a Section 8 Company. However, at least one director must be an Indian citizen who is resident in India (having stayed in India for at least 182 days during the financial year).
• Press Note 3 exemption: Since Section 8 Companies do not receive FDI, Press Note 3 of 2020 (which restricts investments from land-border countries) does not apply. Israeli nationals are, in any case, exempt from Press Note 3 as Israel does not share a land border with India.
• Companies Act compliance: Despite being a non-profit, a Section 8 Company is governed by the Companies Act, 2013, and must comply with all applicable provisions including board meetings, annual returns, and financial statement filings with the Registrar of Companies.
• Section 8 license: The Central Government (through the Regional Director of the MCA) issues a license under Section 8(1) of the Companies Act authorising the company to operate as a non-profit. This license can be revoked if the company contravenes its objectives or acts against public interest.

DTAA Benefits for Israeli Investors

The India-Israel Double Taxation Avoidance Agreement (DTAA), in force since 1996, has limited but still relevant applicability for Section 8 Companies with Israeli involvement.

Key DTAA considerations for non-profit structures:

• Income tax exemption: Section 8 Companies in India can apply for exemption under Section 12A of the Income Tax Act, which exempts income applied towards charitable purposes from taxation. If the Section 8 Company obtains 12A registration, its income used for charitable objectives is not taxed, reducing the practical relevance of the DTAA.
• Donor tax benefits (80G): Registration under Section 80G of the Income Tax Act allows Indian donors to the Section 8 Company to claim tax deductions. This is an important fundraising tool for non-profits operating in India.
• Withholding on payments abroad: If the Indian Section 8 Company makes payments to Israeli entities (such as consultancy fees, service fees, or reimbursements), the DTAA withholding tax rates apply: 10% on royalties, 10% on fees for technical services, and 10% on interest.
• Treaty rates: Dividends: 10%, Interest: 10%, Royalties: 10%, FTS: 10% under the India-Israel DTAA. However, since Section 8 Companies cannot distribute dividends, the dividend provision is not applicable.

Israeli non-profits should work with tax advisors familiar with both Indian and Israeli tax law to optimise the tax structure of their Indian operations, particularly regarding the interplay between FCRA regulations, Income Tax exemptions, and DTAA provisions.

Document Requirements and Authentication

Israel is a member of the Hague Apostille Convention, which simplifies document authentication. All documents originating from Israel must be apostilled by the Israeli Ministry of Foreign Affairs before submission to Indian regulatory bodies.

Documents required from Israeli promoters (individuals):

• Passport copy: Valid passport with all relevant pages, apostilled in Israel
• Address proof: Recent utility bill, bank statement, or government-issued document (not older than one year), apostilled
• Photograph: Passport-size photographs of each proposed director
• Digital Signature Certificate (DSC): Each director must obtain a Class 3 DSC from an Indian certifying authority
• Director Identification Number (DIN): Applied through the SPICe+ form at incorporation
• Declaration of intent: A statement confirming the non-commercial, charitable objectives of the proposed Section 8 Company

Documents required from Israeli promoters (organisations):

• Board resolution authorising the establishment of the Indian Section 8 Company, apostilled
• Certificate of incorporation or registration of the Israeli non-profit entity, apostilled
• Apostilled constitutional documents (bylaws, charter, or equivalent)
• Latest audited financial statements of the Israeli entity
• Power of attorney in favour of the authorised representative, apostilled
• Brief history and track record of the Israeli organisation's charitable activities

Documents in Hebrew must be accompanied by certified English translations, notarised in Israel before apostille.

Additional documents specific to Section 8 license application:

• Draft Memorandum of Association clearly stating the non-profit objectives
• Draft Articles of Association
• Estimated future annual income and expenditure for the next three years
• Declaration by each subscriber that the income shall be applied towards promoting the company's objects

Step-by-Step Registration Process

The registration of a Section 8 Company involves an additional step compared to standard company incorporation — obtaining a license from the Central Government (Regional Director). This makes the process slightly longer.

Step 1: Obtain Digital Signature Certificates (DSC)

Every proposed director needs a Class 3 DSC. Israeli nationals can apply through Indian certifying authorities online. Processing typically takes 2-3 business days.

Step 2: Apply for Director Identification Number (DIN)

Each proposed director must obtain a DIN. This can be done through the SPICe+ form during incorporation or separately in advance using Form DIR-3.

Step 3: Reserve the Company Name

File Part A of the SPICe+ form (RUN — Reserve Unique Name) on the MCA portal. For Section 8 Companies, the name need not include "Private Limited" or "Limited" — instead, words like "Foundation," "Forum," "Association," "Federation," "Council," or "Chamber" may be used. The CRC typically responds within 1-2 working days.

Step 4: Apply for Section 8 License

File Form INC-12 with the Regional Director of the MCA to obtain the Section 8 license. The application must include the draft MOA and AOA, estimated income and expenditure statement for three years, and declarations from each subscriber. The Regional Director reviews the application and may seek additional information. The license is typically issued within 7-15 working days.

Step 5: File SPICe+ Part B for Incorporation

After receiving the Section 8 license, submit SPICe+ Part B (INC-32) along with e-MOA (INC-33), e-AOA (INC-34), and the Section 8 license number. All apostilled documents from Israeli promoters must be attached. The MCA processes the application and issues the Certificate of Incorporation along with PAN and TAN.

Step 6: Apply for Tax Exemptions

Apply for registration under Section 12A of the Income Tax Act for income tax exemption and under Section 80G for donor tax benefits. These applications are filed online with the Income Tax department and are typically processed within 1-3 months.

Step 7: Apply for FCRA Registration or Prior Permission

If the Section 8 Company plans to receive foreign contributions from Israeli or other foreign donors, apply for FCRA registration (after 3 years of operation) or FCRA prior permission (for new entities) with the Ministry of Home Affairs. FCRA registration requires opening a designated FCRA bank account at the State Bank of India, Main Branch, New Delhi.

Step 8: Open Bank Accounts

Open a current account for domestic operations and, if applicable, a designated FCRA account at SBI New Delhi for receiving foreign contributions. All foreign contributions must be received only through the designated FCRA account.

Timeline and Costs

The typical timeline for registering a Section 8 Company in India from Israel is 4-8 weeks end-to-end.

Total government fees for Section 8 Company registration typically range from INR 5,000 to INR 15,000. Professional service fees for the entire process range from INR 15,000 to INR 40,000. Stamp duty is minimal as Section 8 Companies are generally exempt from stamp duty in most states.

The FCRA registration process, while separate from incorporation, is essential for receiving foreign funding and should be planned for from the outset. For assistance with the complete process, refer to our company registration service page.

Post-Registration Compliance

Section 8 Companies must comply with both Companies Act and FCRA requirements, making compliance more extensive than standard for-profit companies:

• Annual Return (Form MGT-7): Must be filed with the Registrar within 60 days of the AGM. See annual compliance services.
• Financial Statements (Form AOC-4): Audited financial statements must be filed within 30 days of the AGM.
• Board Meetings: Minimum 2 board meetings per year (relaxed from 4 for Section 8 Companies), with at least 90 days between consecutive meetings.
• AGM: Must be held within 6 months of the financial year-end.
• Income Tax Returns: Even if income is exempt under Section 12A, the company must file annual income tax returns. Audit under Section 12A(1)(b) is mandatory if total income exceeds the basic exemption limit.
• FCRA compliance: Annual FCRA returns (FC-4) must be filed by 31 December each year, reporting all foreign contributions received and utilised. At least 80% of foreign contributions must be spent on the stated purpose. A maximum of 20% can be used for administrative expenses.
• FCRA account maintenance: All foreign contributions must be received only through the designated FCRA account at SBI New Delhi. Funds can be transferred to a utilisation account at another bank for operational use.
• CSR reporting: If the Section 8 Company receives funds under the Corporate Social Responsibility (CSR) provisions of the Companies Act, it must file Form CSR-1 and comply with CSR utilisation requirements.
• GST compliance: If the Section 8 Company provides taxable services or goods, GST registration and filing may be required, though many non-profit activities are exempt.

Common Challenges for Israeli Organisations

Israeli non-profits and foundations commonly encounter specific challenges when establishing Section 8 Companies in India:

• FCRA registration timeline: FCRA registration is only available after 3 years of operation and spending INR 15 lakh on charitable objectives. This means newly established Section 8 Companies must either operate without foreign funding for three years or obtain FCRA prior permission for specific projects, which is granted for limited periods and purposes.
• FCRA prior permission limitations: The prior permission route allows foreign contributions for a specific project for a limited period (typically 1-5 years). Israeli organisations must carefully plan their initial projects to align with this constraint and reapply if the project timeline extends.
• Designated FCRA bank account: All foreign contributions must be received at the State Bank of India, Main Branch, New Delhi, regardless of where the Section 8 Company is located. This creates operational inconvenience for organisations based in other cities. Funds can be transferred to a utilisation account at a local bank, but the SBI Delhi account remains mandatory.
• Resident director requirement: At least one director must be an Indian citizen who has resided in India for at least 182 days during the financial year. Israeli organisations often address this by appointing a trusted Indian professional or partner organisation's representative. Consider using a resident director service.
• Prohibition on dividend distribution: Section 8 Companies cannot distribute profits or dividends to members, including Israeli founders. All income must be applied towards the company's charitable objectives. This is fundamentally different from for-profit structures and must be understood clearly by Israeli promoters.
• License revocation risk: The Section 8 license can be revoked by the Central Government if the company acts against its stated objects, misapplies its funds, or operates in a manner prejudicial to public interest. Maintaining clear documentation of all activities and expenditures aligned with stated objectives is essential.
• Document translation: Israeli documents in Hebrew require professional translation into English and notarisation before apostille, adding time and cost to the documentation process.
• Dual compliance burden: Section 8 Companies with FCRA registration must comply with both the Companies Act and FCRA simultaneously, creating a higher compliance burden. Regular FCRA audits and the 80:20 spending ratio (80% on programmes, 20% on administration) require careful financial planning.

Frequently Asked Questions

Can an Israeli citizen serve as a director of an Indian Section 8 Company?

Yes. Israeli citizens and foreign nationals can serve as directors of a Section 8 Company in India. However, at least one director must be an Indian citizen who has resided in India for at least 182 days during the financial year. Israeli directors must obtain a DIN and DSC, and their identity documents must be apostilled in Israel.

Can a Section 8 Company receive donations from Israel?

Yes, but only after obtaining FCRA registration (available after 3 years of operation) or FCRA prior permission from the Ministry of Home Affairs. All foreign contributions must be received through the designated FCRA account at State Bank of India, Main Branch, New Delhi. Without FCRA registration or prior permission, receiving any foreign contribution is illegal.

Is a Section 8 Company tax-exempt in India?

A Section 8 Company can obtain tax exemption by registering under Section 12A of the Income Tax Act. Once registered, income applied towards charitable purposes is exempt from income tax. However, income not applied towards charitable purposes or accumulated beyond prescribed limits is taxable. Registration under Section 80G additionally enables Indian donors to claim tax deductions.

What is the minimum capital required for a Section 8 Company?

There is no minimum capital requirement for a Section 8 Company under the Companies Act, 2013. Companies can be incorporated with an authorised capital as low as INR 1,000. However, for practical purposes, a minimum of INR 50,000 to INR 1,00,000 is recommended to cover initial operational expenses before external funding is received.

Can a Section 8 Company engage in commercial activities?

A Section 8 Company can earn revenue through activities aligned with its non-profit objectives, such as training programmes, publications, consulting for development projects, or social enterprise activities. However, profits must be applied towards the company's charitable objects and cannot be distributed to members. The company cannot engage in purely commercial activities unrelated to its stated objectives.

What is the difference between FCRA registration and prior permission?

FCRA registration is a permanent registration available to organisations that have been in existence for at least 3 years and have spent INR 15 lakh on charitable activities. Prior permission is a temporary authorisation for new organisations to receive foreign contributions for a specific project and limited period. Prior permission must be renewed if the project continues beyond the approved period.

How long does it take to register a Section 8 Company from Israel?

The incorporation process takes 4-8 weeks, including document apostille in Israel (5-7 days), DSC procurement (2-3 days), name reservation (1-2 days), Section 8 license from the Regional Director (7-15 days), and SPICe+ filing and approval (3-7 days). FCRA registration is a separate process that takes 3-6 months and requires 3 years of prior operation.