Difference Between Section 8 Company & NGO

Section 8 Company is the right choice, this guide will explain the differences between an NGO and a Section 8 Company, their legal structures, registration processes, benefits, and compliance requirements, including NITI Aayog Registration, 12A and 80G Reg

Non-Governmental Organizations (NGOs) play a vital role in social welfare, education, healthcare, and environmental sustainability. However, when it comes to legal structure, an NGO can be registered in different forms, such as a Trust, Society, or Section 8 Company. Among these, a Section 8 Company is considered the most structured and legally compliant entity.

If you are planning to register an NGO but are unsure whether a Section 8 Company is the right choice, this guide will explain the differences between an NGO and a Section 8 Company, their legal structures, registration processes, benefits, and compliance requirements, including NITI Aayog Registration, 12A and 80G Registration, CSR-1 Registration, and FCRA Registration.

What is an NGO?

NGO Meaning & Definition

NGO Full Form: Non-Governmental Organization

NGO Definition: An NGO is a voluntary, non-profit organization that works for social, environmental, or humanitarian causes.

NGOs can be registered in India under three structures:

•Trust – Governed by the Indian Trusts Act, 1882

•Society – Registered under the Societies Registration Act, 1860

•Section 8 Company – Incorporated under the Companies Act, 2013

What is a Section 8 Company?

A Section 8 Company is a non-profit entity registered under Section 8 of the Companies Act, 2013, with the objective of promoting charitable activities such as education, healthcare, environment, arts, and social welfare. Unlike other companies, a Section 8 company cannot distribute profits to its members but must reinvest them to achieve its objectives.

Key Features of a Section 8 Company

•Registered under the Companies Act, 2013

•Profits cannot be distributed among members

•Better legal structure and governance than Trusts & Societies

•Eligible for tax exemptions under 12A and 80G Registration

•Can receive CSR Funds from corporate companies under CSR-1 Registration

Key Differences Between Section 8 Company & NGO

Aspect	Section 8 Company	Other NGOs (Trusts & Societies)
Governing Law	Companies Act, 2013	Indian Trusts Act, 1882 (Trusts), Societies Registration Act, 1860 (Societies)
Legal Structure	Corporate Entity	Informal and less structured
Profit Distribution	Profits must be reinvested	Profits may be reinvested but governance is less strict
Tax Exemptions	Eligible for 12A and 80G Registration	Eligible if registered under Income Tax Act
CSR Fund Eligibility	Can receive CSR Fund after CSR-1 Registration	Trusts & Societies may not always be eligible
FCRA Registration	Eligible for FCRA Registration to receive foreign funds	Eligible, but compliance is less structured
Governance & Transparency	Higher due to MCA regulations	Lower governance standards
Public Perception	Highly credible and recognized	Limited recognition for fundraising

Section 8 Company Registration Process

Step 1: Obtain Digital Signature Certificate (DSC)

All directors must obtain a DSC to file documents online.

Step 2: Apply for Director Identification Number (DIN)

File Form DIR-3 on the MCA portal to obtain a DIN for company directors.

Step 3: Name Approval via RUN Form

• Apply for Section 8 company name approval using the Reserve Unique Name (RUN) Form.

• The name must reflect charitable objectives.

Step 4: Draft Memorandum & Articles of Association

Prepare MOA & AOA defining the company’s purpose and governance rules.

Step 5: File Incorporation Application (SPICe+ Form)

Submit SPICe+ (INC-32) Form with necessary documents, including:

•MOA & AOA

•PAN & Aadhaar of Directors

•Office Address Proof

•INC-9 Declaration by Directors

Step 6: Obtain Section 8 License (INC-12 Form)

•File INC-12 with an income-expenditure estimate for 3 years.

•Upon approval, the MCA issues a Section 8 Company License.

Step 7: Certificate of Incorporation

After MCA approval, the company receives its Certificate of Incorporation, making it a legally recognized Section 8 company.

Mandatory Registrations After Section 8 Company Incorporation

1. NITI Aayog Registration

•Required for government grants and schemes.

•Apply through NGO Darpan Portal and get a Unique Identification Number (UIN).

2. 12A and 80G Registration

•12A Registration provides income tax exemption for NGOs.

•80G Registration allows donors to claim tax deductions.

•The 12A and 80G Registration Process Online includes:

- Filing Form 10A (for 12A) and Form 10G (for 80G) on the Income Tax portal.

-Submitting MOA, AOA, PAN, and financial documents.

•12A and 80G Registration Fees are nominal, but legal consultation fees may apply.

3. CSR-1 Registration

•Mandatory to receive CSR Funds from corporate donors.

•File CSR-1 Form on the MCA portal.

4. FCRA Registration for Foreign Donations

•NGOs seeking foreign contributions must apply for FCRA Registration under the FCRA Act 2010.

•The FCRA Renewal Status must be checked every five years.

•Applications are submitted via FCRA Online Services.

CSR & Section 8 Companies

What is CSR?

CSR Full Form: Corporate Social Responsibility

CSR Meaning: CSR refers to businesses investing in social causes.

How Section 8 Companies Benefit from CSR Funds

•CSR Applicability mandates businesses earning ₹5 crore+ profits to spend 2% of profits on CSR Activities.

•Section 8 Companies can apply for CSR-1 Registration to receive CSR Funds.

Conclusion

While NGOs can be registered as Trusts, Societies, or Section 8 Companies, a Section 8 Company Registration offers better legal recognition, structured governance, and tax benefits. It is the preferred choice for organizations seeking CSR Funds, government grants, and foreign donations through FCRA Registration. Completing NITI Aayog Registration, 12A and 80G Registration, and CSR-1 Registration ensures compliance and funding eligibility. If your NGO aims for long-term sustainability, transparency, and credibility, registering as a Section 8 Company is the best option. 

Frequently Asked Questions (FAQs)

1. What is the main difference between a Section 8 Company and an NGO?

Ans. An NGO is a broad term for non-profit organizations, whereas a Section 8 Company is a legally registered corporate entity under the Companies Act, 2013 with structured governance, tax exemptions, and eligibility for CSR and foreign funding.

2. Can a Section 8 Company apply for government grants?

Ans. Yes, a Section 8 Company can apply for government grants after completing NITI Aayog Registration, making it eligible for various funding schemes.

3. Is 12A and 80G Registration necessary for a Section 8 Company?

Ans. It is not mandatory, but 12A and 80G Registration help Section 8 Companies secure tax exemptions and attract more donations by offering tax benefits to donors.

4. Can a Section 8 Company receive foreign donations?

Ans. Yes, but it must first obtain FCRA Registration under the FCRA Act 2010. It is also necessary to check FCRA Renewal Status every five years for compliance.

5. Can a Trust or Society receive CSR Funds like a Section 8 Company?

Ans. Trusts and Societies may not always qualify for CSR funding, whereas a Section 8 Company can receive CSR Funds after CSR-1 Registration, making it the preferred choice for corporate donors.