#section 12ab registration

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Why Is Virtual CFO the Best Choice for Managing Complex Tax Structures?

Managing complex tax structures can be overwhelming for businesses, especially those dealing with multiple tax regulations, compliance requirements, and financial risks. Many organizations struggle to keep up with changing tax laws while ensuring smooth financial operations. This is where Virtual CFO Services comes in as a game-changer. By offering expert financial guidance, tax planning, and compliance management, virtual CFOs help businesses streamline their financial strategies without the need for a full-time, in-house CFO. Read:

https://empireadda.com/virtual-cfo-the-best-choice-for-managing-tax-structures/

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Limited Liability Partnership (LLP) has recently gained popularity as a preferred business structure for entrepreneurs and professionals. Unlike traditional partnership firms, LLPs offer a robust legal framework that protects partners from unlimited liability. Read:

LLP Registration Protect Partners from Unlimited Liability

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The Comprehensive Guide to Section 8 Company

Introduction to Sector 8 Company

A Section 8 Company, as defined under the Companies Act, 2013, is a non-profit organization established with the purpose of promoting activities that benefit society. These activities can range from commerce, art, science, sports, education, and research, to social welfare, religion, charity, and environmental protection. Unlike other companies, Section 8 Companies are prohibited from distributing profits to their members and must use any income or profits solely for promoting their objectives. This article will delve into the key aspects of Section 8 Company, including their criteria, benefits, formation process, compliance requirements, and how they compare to other non-profit entities.

Criteria for Section 8 Companies

Charitable Purpose

Section 8 Companies are established with the objective of advancing various social, cultural, educational, and environmental causes. The fundamental criteria for these companies include:

Promoting Commerce, Art, Science, Sports, Education, Research, Social Welfare, Religion, Charity, and Environmental Protection: These are the primary areas where Section 8 Companies focus their efforts.

Utilization of Profits: All profits and income generated by the company must be used to further its charitable objectives. No portion of the profits can be distributed as dividends or profits to its members.

Licensing Requirements: While the incorporation process mirrors that of other companies, Section 8 Companies must comply with additional requirements to obtain the necessary licenses.

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Benefits of Section 8 Companies

Separate Legal Entity and Limited Liability

Section 8 Companies enjoy the status of a separate legal entity, which means they can own, sell, and transfer property, as well as incur debts independently of their members. Additionally, these companies benefit from limited liability, ensuring that the personal assets of members are not at risk for the company's liabilities.

Tax Benefits

One of the significant advantages of forming a Section 8 Company is the potential for various tax exemptions:

12A Registration: This allows the company to be exempt from paying income tax on surplus income. However, post-October 1, 2020, new registrations for income tax exemptions must be obtained under Section 12AB, granting provisional registration for three years.

80G Certificate: Donations made to Section 8 Companies can be eligible for tax exemptions for the donors, which encourages charitable contributions. The 80G Certificate, effective from October 1, 2020, is granted for five years and requires renewal.

Foreign Contributions

Section 8 Companies can receive foreign contributions, provided they obtain registration under the Foreign Contribution Regulation Act (FCRA). This registration is crucial for attracting international funding to support the company's charitable activities. A Section 8 Company must be in existence for a minimum of three years before applying for FCRA registration.

Credibility and Trust

Due to stringent compliance and transparency requirements, Section 8 Companies are often perceived as more credible and trustworthy compared to other non-profit entities. This credibility can enhance their ability to attract donations, grants, and other forms of support.

Formation of a Section 8 Company

Incorporation Process

The process of incorporating a Section 8 Company involves several key steps:

Obtain Digital Signature Certificate (DSC): Required for the proposed directors and members.

Director Identification Number (DIN): Apply for DIN for the proposed directors.

Name Approval: File Form INC-1 to get the company name approved by the Registrar of Companies.

Drafting of MOA and AOA: Draft the Memorandum of Association (MOA) and Articles of Association (AOA) outlining the company's objectives and governance rules.

License Application: Apply for a Section 8 license by filing Form INC-12 with the necessary documents.

Incorporation Filing: After obtaining the license, file Form SPICe (INC-32) along with MOA, AOA, and other required documents for incorporation.

Required Documentation

Memorandum of Association (MOA) and Articles of Association (AOA)

Declarations by Directors

Proof of Registered Office Address

Identity and Address Proofs of Directors and Members

Compliance Requirements

Annual Compliance

To maintain their status, Section 8 Companies must adhere to several annual compliance requirements:

MCA Filings: This includes filing annual returns, financial statements, and other necessary documents with the Ministry of Corporate Affairs (MCA).

Board Meetings: At least four board meetings must be held annually, along with one annual general meeting.

Audits: Annual financial audits are mandatory to ensure transparency and accountability.

DIR-3 KYC: Directors must comply with Know Your Customer (KYC) requirements.

Situational Compliance

12A and 80G Registration: These are necessary for availing tax exemptions for the company and its donors.

FCRA Registration: Required for receiving foreign contributions.

Trade License: Depending on the nature of the activities undertaken by the company.

Employee-Related Compliances: Professional tax filing, Employees Provident Fund (EPF) registration, and Employee State Insurance (ESI) registration if applicable.

Comparison with Society and Trust

Society

Regulation: Governed by the Society Registration Act, 1860.

Members: Minimum of seven members required for a state-level society and eight for a national level. Family members cannot be members of the same society.

Foreign Contribution: Possible, but FCRA registration is challenging if there are foreign members.

Jurisdiction: Typically state-level jurisdiction.

Trust

Regulation: Governed by the Trust Act or Bombay Public Trust Act.

Members: Trustees can be family members; minimum of two trustees required.

Foreign Contribution: Possible, but FCRA registration cannot be obtained if there are foreign members.

Funding: Government departments may refuse funding if all trustees are family members.

Section 8 Company

Regulation: Governed by the Companies Act, 2013.

Members: Anybody can be a director or member; minimum of two members for private companies and seven for public companies.

Foreign Contribution: Can receive foreign contributions and obtain FCRA registration, making it the preferred choice for such funding.

Governance: Preferred for FCRA due to its structured governance and compliance requirements.

Conclusion

Section 8 Companies provide an excellent framework for individuals and organizations aiming to create a positive social impact through structured and legally recognized means. The benefits of tax exemptions, credibility, and the ability to receive foreign contributions make Section 8 Companies a compelling choice for charitable endeavors. However, it is crucial to adhere to the stringent compliance requirements and maintain transparency to ensure the continued success and integrity of the organization. By following the right procedures and leveraging the benefits, a Section 8 Company can effectively achieve its mission and contribute significantly to society.

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Social Stock Exchange Registration in India

SSE REGISTRATION OF NPO

SSE registration aim is to enable these organizations to get sustainable funding and expansion for their work of transforming people’s lives positively. Listing/Issuing of ZCZP (Zero Coupon Zero Principle) instruments by NPO after registration on social stock exchange. This is a separate segment of the recognized stock exchange that enables Social Enterprises which are NPOs to raise funds through the issuance and listing of ZCZP instruments.

The first step is for the NPO to register itself with SSE and only eligible NPOs can list their instruments for raising funds. There have been certain minimum requirements prescribed for a not-for-profit organization to register on Social Stock Exchange. There is the mandatory criteria that include the mandatory age of NPO being at least 3 years, valid certificate under U/s 12A/12AA/12AB of the income tax, valid 80G registration, annual spending of at least 50 lakhs and a minimum 10 lakh of funds in the past year. This registration is valid for 1 year and renewable after 1 year. In this case, only registered NPO can list or issue ZCZP within the registration validity period, and listing is not mandatory for registered NPO.

Registering Process Of NPO

The NPO needs to register themselves on the SME platforms of the stock exchanges, BSE SSE and NSE SSE. NPOs seeking to register must apply separately to each platform, adhering to the specific checklists and guidelines specified by both exchanges. Compliance with these distinct registration procedures is essential to ensuring successful registration and listing on both the BSE and NSE. This is valid for one year, and it can be renewed after one year. NPO have to be aware that they cannot be linked with Political or religious organization or activities, Infrastructure Company, housing finance, professional trade association and not cover in ineligible activities also.

Not for profits can get SSE Registration. Registration refers to the act of a social enterprise validated by the SSE as being eligible to raise funds. Listing is the process of making a specific type of security available on the SSE for subscription by investors. Listing refers to the specific security instrument (ZCZP/SIB/DIB etc) through which funding is mobilised on the SSE.

Registration Procedure For SSE On BSE

NPOs seeking registration on the BSE SSE must submit a formal application on their official letterhead to the BSE SSE. This application shall go along with the required documents listed below.

Certificate Of Constitution Of NPO

MOA, AOA, Trust Deed, Bye Laws Of Or Any Other Governing Document

Copy Of PAN, TAN, GST

ITR Of Last 3 Years

Audited Financial Statements Including Auditors Report For Last 3 Financial Years.

80G Registration Under Income Tax Act

Registration Certificate Under The Income Tax Act, 1961 Under Section 12AB (Along With Previous Registrations Under 12A/12AA, If Applicable) And/Or 10 (23C).

Annexure I To Be Given On The Letter Head Of The Entity Contains The Confirmation By The Entity That The Entity Is Formed And Registered Under Acts Such As Indian Trusts Act, 1882, Societies Registration Act Etc.

Annexure II Is The Certificate Of Chartered Accountant Stating Annual Spending, Past FY Funding, Filled Annual Returns Within Due Dates, And Other Information As Required Of The NPO.

Annexure III Is The Confirmation Of Eligibility Criteria For Being Identified As Social Enterprise.

Annexure IV Is The Document That Contains The Vision Statement, Mission Statement, Address, NGO Darpan Registration* Details, Its Governing Board, Number Of Staff, Details Of Statutory Auditor, Representative Letter, Key Projects Handled, Social Audit Reports/ Impact Assessment Reports For Projects (If Any)

Details Of Fee

The NGO Darpan (NGO-PS) is a portal provided by the NITI Aayog that connects NGOs, voluntary organizations, and key government ministries. It aims to enhance collaboration, efficiency, transparency, and accountability between the government and the voluntary sector. The portal helps NGOs and the government work together more effectively and offers up-to-date information on new and ongoing government projects and programs, fostering better communication and partnership.

Registration Process Of SSE On NSE

NPOs who want to register on the NSE SSE must submit a formal application on their official letterhead to the NSE SSE. This application should be go along with required documents listed below.

Application As Per Annexure I Contains The Information Of NPO Like Name, Address And Other Information. (PDF Of Annexures To Be Attached With This)

Certificate Of Constitution Under The Relevant Act Such As Public Trust Statue Of The Relevant State, Societies Registration Act, 1860, Indian Trusts Act, 1882, Companies Act, 2013

NPO Must Have Been Registered At Least 3 Years Prior To The Date Of Application

MOA, AOA, Trust Deed, Bye Laws Of Or Any Other Governing Document

Registration Certificate Under Section 12A/12AA/12AB Under Income Tax Act, 1961. Please Note That The Registration Certificate Should Be Valid For At Least Next 12 Months From Date Of Application

80G Registration Under Income Tax Act

Attach Last 3 Financial Years Audited Financial Statement Along With The Fund Flow Statement Of The Registered NPO

Annual Reports For Last 3 Financial Years As Well, In Case The Entity Is A Section 8 Company.

Resolution For Registration On Social Stock Exchange Along With The Annexures Given By The NSE For The Registration.

NPO Can Apply For Its Registration Along With The Fee In Annexure I Which Is The Format For Application Of Registration.

Annexure II Is The Undertaking From The NPO On Their Letterhead Stating The Eligibility Of The NPO To Be Identified As Social Enterprise And Information About Its Promoters.

Social Auditor Or Statutory Auditor Give Undertaking In Annexure III From The Stating Compliances Of Regulation 292E Of SEBI (ICDR) Regulations, 2018, Information In Respect Of The Annual Spending And About The Funding Of The Past FY Of The Entity.

Firstly, there is the same registration process for NSE SSE and BSE SSE by NPO. However, on BSE SSE, we can check our eligibility by filling out the Yes or No question and answers. If you are eligible and give the right answers as per the eligibility criteria, then successful word mention on screen and then register your interest, but on NSE SSE, we need to create a login credential, then we can fill out the application form, and fees are very minimal as per the circular, but we have not been notified yet. On BSE SSE, the process is a little bit easier as compared to NSE SSE.

Generally, the Exchange reverts to the Issuer with the queries/approval on the application within T+5 working days from the receipt of the application which is correct and complete in all respects. However, additional days may be required on case-to-case basis.

Satisfactory response to the queries raised by the exchange shall be submitted on immediate basis which in any way shall not be later than one month from the last requirement raised. Exchange reserves the right to return the applications if not responded satisfactorily within one month. The fees for registering on a SSE can vary depending on specific exchange and SEBI has not notified a separate fee structure for Social Stock Exchanges as of yet.

Note: The documents to be submitted for registration of an NPO are required to be submitted by CEO/Managing Trustee/Statutory Auditor/any authorized signatories from governing body.

There are the different kinds of instruments through which funds can be raised by an NPO on an SSE:

Zero Coupon Zero Principal Instruments

Donation Through Mutual Funds Schemes

Development Impact Bonds

There are the different types of the investors who might invest through SSE.

Only institutional and NPOs from India can invest in not for profit entities. Non institutional investors Companies, family run foundations/trusts and HNIs are qualified to invest in the SSE as non-institutional investors. This means that all philanthropic donors such as Tata Trust, Azim Premji Foundation, Wipro Foundation, Individuals (who will invest more than INR 2 lakhs) and Corporates with CSR obligations would be allowed to make social investments through the SSE.

Conclusion: If NPO want to access the market and explore more for funding, then register on SSE, which can be BSE or NSE. Both have the same registration process, but BSE is a more easy and valuable process that can be easily understood by giving the questions and answers to the eligibility criteria. There is the mandatory registration process for NPOs and providing accurate documents as per above.

DISCLAIMER: The information provided in this article is intended for general informational purposes only and is based on the latest guidelines and regulations. While we strive to ensure the accuracy and completeness of the information, it may not reflect the most current legal or regulatory changes. Taxpayers are advised to consult with a qualified tax professional or you may contact to our tax advisor team through call +91-9871990888 or info@semantictaxgen.in.

[indilegalonline]

Section 12AB of Income Tax Act 1961

Section 12AB of Income Tax Act 1961-Procedure for fresh registration (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,—  (a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years;  (b) where the…

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12A & 80G Registration Online

The income of an organization is exempted from Income Tax if an NGO has 12AB registration. If an organization has obtained certification under section 80G of the Income Tax Act, then donors of that NGO can claim exemption from Income Tax. Application for registration under sections 12AB and 80G can be applied just after the registration of NGO. 

Application for registration under 80G and 12AB can be applied together or it can be applied separately. If an organization wants to apply for both registrations separately, then an application for registration u/s 12AB would be applied first. Getting 12AB registration is mandatory for application of registration u/s 80G of the Income Tax Act, 1961.

Requirements of registration u/s 12AB & 80G

The organization must be a registered NGO

Registration u/s 80G can be applied only after Section 12AB registration

NGO should not have any income generated from a business

The organisation must maintain a regular book of accounts in favor of their receipts and expenses

READ MORE about 12A & 80G Registration Online

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Tax Exemptions for Income of Charitable and Religious Trusts under Section 11 of Income Tax Act

Section 11 of  Income Tax Act

Section 11 offers exemptions for income earned from property held by charitable trusts or societies, provided that the income is used for charitable or religious purposes and certain conditions are met. The definition of ‘charitable and religious purpose’ is provided in Section 2(15) of the same Act and includes activities such as providing relief to the poor, education, preserving monuments, protecting the environment, safeguarding places of historical and artistic significance, providing medical relief, promoting yoga, sports, and games, and advancing any other objective of general public utility. 

Trusts engaged in all activities defined under Section 2(15) of the Act, except for ‘advancement of any other object of general public utility,’ are eligible for tax exemption under Sections 11, 12, and 13 of the Income Tax Act of 1961, subject to applicable rules.

Who can claim the exemption?

Earlier, any trust or institution registered under section 12AA of the Income Tax Act, 1961, was eligible for income exemption. However, as of October 1, 2020, all trusts registered under section 12AA must reapply for exemption under section 12AB of the Income Tax Act using Form 10A online. Once approved, the trust can then claim income exemption under section 11 of  Income Tax Act. This registration is valid for 5 years, after which renewal is required. Trusts not previously registered under Section 12AA must undergo a new process and be granted provisional registration for 3 years.

Exemptions for Income of Charitable and Religious Trusts

The exemptions under section 11 of  Income Tax Act include the following:

Income received or derived from property held by charitable trusts or societies for charitable purposes can be claimed as an exemption from taxation, subject to certain conditions.

Voluntary contributions received by a trust with a specific direction that they form part of the trust or institution's corpus are exempt from tax. Such contributions cannot be considered income of the trust and must be treated as a capital receipt.

The maximum amount of income that can be set aside or reserved for charitable or religious purposes in India is 15% of the total income received in the previous year. Form 10 can be used to indicate the intended purpose and duration (not exceeding five years) for which the income will be accumulated. It implies that a minimum of 85% of the income generated from the trust property should be utilised for charitable causes.

Furthermore, any contributions specified in section 12 will be included in the computation of income under section 11 of  Income Tax Act. Section 12 pertains to voluntary donations that are not intended to be part of the corpus of the trust or institution.

Conclusion

Section 11 of  Income Tax Act provides tax exemptions for charitable and religious trusts in India, subject to certain conditions and limitations. By complying with the provisions of this section, such trusts can effectively allocate their resources towards their respective causes while also availing the benefits of tax exemptions. However, these trusts must ensure that their activities and financial transactions align with the rules and regulations set forth by the Income Tax Department to maintain their eligibility for tax exemptions.

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CBDT amends various forms applicable for registration/approval/statement under Sec. 10(23C), 12AB, 35 and 80G

CBDT amends various forms applicable for registration/approval/statement under Sec. 10(23C), 12AB, 35 and 80G

The Central Board of Direct Taxes (CBDT) has amended various forms applicable for applicants seeking registration/approval under Section 10(23C), 12AB, 35, 80G and filing of statements of donations amp; issuing the certificate to donors under Section 35 and 80G. The board has amended Forms 3CF, 10A, 10AB, 10BD, and 10BE.The Central Board of Direct Taxes (CBDT) has amended various forms applicable…

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Obtaining 12AB registration is crucial for NGOs in India, offering significant benefits that enhance their operational efficiency and credibility. Primarily, it provides income tax exemptions under Sections 11 and 12 of the Income Tax Act, allowing NGOs to allocate more resources towards their charitable activities. Additionally, 12AB registration facilitates the receipt of government and private sector grants, as many funding bodies require this certification for eligibility. This registration also enhances the organisation's credibility among donors, beneficiaries, and the public, promoting financial transparency and accountability. Furthermore, it mandates the maintenance of proper books of accounts, ensuring compliance with regulatory standards and fostering trust among stakeholders.​

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12AB Registration offers significant advantages for NGOs by providing eligibility for income tax exemption. This allows organizations to allocate more funds toward their charitable initiatives without the burden of heavy taxation.

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The 12A and 80G renewal documents required are not much, neither is the 12A and 80 renewal  fee. Contact our registration experts for assistance.12A & 80G Renewal postponed September 19, 2020 admin Income tax, Legal news The renewal of charitable trust and institutions already registered u/s 12AA to the new section 12AB as also renewal of 80G certificate is very likely to be postponed and now planned to be made applicable from 1st April, 2021.

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No ease in Charity : New Compliances for the Charitable Trust & Institutions

No ease in Charity : New Compliances for the Charitable Trust & Institutions For tax exemption, charitable trusts & other institutions are required to get income tax registration or approval  u/s 12AA or u/s 10(23C). One of the sectors where substantial changes by the Finance Act - 2020 was with regard to re-recognition of charitable trust, NGO & other institutions claiming tax exemptions. The provision for registration and renewal is all set to make a drastic change with effect from 01.06.2020. Let us know about the key changes proposed in this regard to this: For tax exemption, charitable trusts & other institutions are required to get income tax registration or approval  u/s 12AA or u/s 10(23C). Registration & Approval: Present Regime vs. Proposed Regime a) Presently, the procedure for registration of Charitable Trusts for tax exemption is provided u/s Section 12AA (U/s 12A for trusts registered prior to 1996). Now, it is proposed to be governed by new section 12AB. b) As of now, registration once granted u/s 12AA continues to be valid unless and otherwise it is cancelled by the authority. c) Further, the Charitable Trusts are eligible for approval u/s 80G which enables its donors to get tax benefit on donation done by them. Approval u/s 80G is also valid until cancelled by the authority. d) University, Educational Institution, Hospital or other Medical Institution can claim tax exemption u/s 10(23C) if they are approved by the authority. Read the full article

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Legal Structure For Carrying Out Charitable Activities

Charity begins at home, and home for some people is not just the family, but their society, their state, their country and the world in which they live. It is said that, the person should not be judged by, what he achieves for himself, but by what he achieves for society at large. In the words of Mr Azim Premji, who is one of the world’s top philanthropists, “You cannot mandate philanthropy. It has to come from within, and when it does, it is deeply satisfying”. Even though Mr Azim Premji was not in favour of mandating philanthropy by way of law, we never the less have one under, The Companies Act, 2013. So, we can do philanthropic activities either when we feel like doing it or when we are mandated by law to do it. In this brief note, we shall guide you as to how one can move forward for carrying out charitable activities, in the best possible structure.

1. Which are the major types of charity?

Charity can be done, either when it is mandated by the law or when one feels like doing it i.e. Suo-moto. Each of the types can be understood as under:

Charity – Suo Moto – We get a lot of things from society and there comes a time, when we feel that we should take a step forward and do something for the society, i.e. people at large. People with similar interest can come together and be a part of the organization and achieve the objective that it sets for oneself.

Charity – Mandated by Law (Corporate Social Responsibility CSR) – As per provisions of Section 135 of the Companies Act, it prescribes 3 conditions and on satisfying any one of the criteria, company is bound to carry out CSR activities:

The company has a net worth of rupees five hundred crores or more, or

turnover of rupees one thousand crores or more or

a net profit of rupees five crores or more during any financial year

The Board of every company that satisfies any of the above conditions shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.

2. What structure can be used for carrying out Charitable Activities?

Whether one decides Suo-moto or is mandated by law to do some charity, he can do so by one of the two ways:

Each of the two options mentioned herein can be understood as under:

CSR ACTIVITIES CONDUCTED THROUGH SECTION 8 COMPANY Section 8 of the Companies Act 2013, permits a company to register itself as a not- for- profit company with limited liability to its members. Following are the conditions that it must satisfy —

has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;

intends to apply its profits, if any, or other income in promoting its objects;

intends to prohibit the payment of any dividend to its members

CSR ACTIVITIES THROUGH CHARITABLE TRUST A trust can be formed by a founder along with other trustees. A trust deed is to be drafted and duly registered with the registrar of trusts. Since the power to regulate trusts are covered in List – III of Seventh Schedule of the constitution of India, state and centre can both enact laws. In the state of Maharashtra, Maharashtra Public Trust Act, 1950 (Formerly known as Bombay Public Trust Act) applies to public trusts.

To form a charitable trust, it is very important that the objects of the trust must be for the greater good of the public at large. Charitable purpose includes:

Education

Medical relief

Relief of power by or distress

the advancement of any other object of general public utility

Governance of a trust is the responsibility of the trustees. Legal ownership of trust property vests in the trustees.

3. What is the process of formation of the above entities?

INCORPORATION OF SECTION 8 COMPANY

The Company has to first decide the Charitable Object that it intends to achieve; it can either be one or more.

The Company has to decide on the Share Capital with which it will start the Company and the subscribers to such share capital.

The no. of Directors that will be appointed in the said Company.

Application is required to be filed to Central Government for grant of License.

Other formalities with respect to incorporation are similar to that of any other company which would be incorporated under Companies Act, 2013.

INCORPORATION OF CHARITABLE TRUST

Trust Deed is the charter document, through which Trust communicates its objects.

Identifying the author of the Trust and Trustees who shall run the Trust along with their consent letter.

Registration with the Charity Commissioner.

4. What are the advantages with respect to the structure mentioned above?

ADVANTAGES OF SECTION 8 COMPANY ARE AS UNDER

No requirement of minimum paid-up share capital.

Section 149(1) relates to the minimum and a maximum number of directors. A minimum of three directors in the case of the public company and two directors in case of the private company. This section shall not apply to section 8 Company.

No Specific compliance with respect to the appointment of Independent Directors.

It shall hold at least one meeting within every six calendar months.

The bar on taking up the directorship in more than twenty companies has been relaxed in the case of section 8 companies. Therefore, an individual, if he is eligible, can be a director in more than 20 section 8 companies. This restriction, however, continues to stay for other categories of companies.

There is also relaxation with respect to Quorum required for the conduct of the meeting. Wherein a minimum of two members is required.

ADVANTAGES OF CHARITABLE TRUST

Registration of trust as compared to section 8 company requires less time for incorporation and is easier as regards to compliance.

Trustees have complete control over the trust.

There is no statutory requirement to hold the specified number of meetings.

Documentation, filing of returns and other statutory compliances in comparison to that of section 8 company are less.

5. How Income Tax Law applies to Structure chosen for carrying out Charitable Activities?

Under the Income Tax Act, 1961 there is no difference how trust and section 8 Company is taxed. The taxation of the charitable entity is governed by Chapter III of the income tax which includes section 11, 12, 12A, 12AA/12AB and 13. The Government of India has given various exemptions to charitable and religious trust keeping in view the services they render to the nation. Section 11 deals with the taxation of the income from the property held for charitable purposes. As per the said section, if the charitable entity spends more than or equal to 85% of its total receipts towards its object in India, then there is no tax on balance 15%. It is worthwhile to note that, the amount spend even for the fixed asset of the trust is also eligible to include in 85%.

For registering the Trust or Company first time as Charitable Organization under Income Tax Act, an application has to be before Commissioner of Income Tax (Exemptions) under Form 10A. Commissioner of Income Tax (Exemption), should be satisfied that objects of the trust are charitable in nature, they are not for personal benefits of trustees or directors, an entity has the vision and the same should be coming out from the report reflecting activities which entity will carry out. It can also apply for Certificate under 80-G, wherein donations made to such entity will be Tax deductible.

The exemption is now granted under the Income Tax Act for a period of 5 Years and the certificate has to be renewed every 5 years, by making an application before Commissioner of Income Tax – (Exemption).

COMPARATIVE ANALYSIS BETWEEN SECTION 8 COMPANY AND CHARITABLE TRUST

HEADSECTION 8 COMPANYCHARITABLE TRUST

1. Applicable LawCompanies Act 2013Maharashtra Public Trust, Act 1950

2. Time Required for Incorporation15-20 days8-15 days

3. Registering AuthorityRegistrar of CompanySub-registrar of Registration/Charity Commissioner

4. Name ApprovalApplication has to be made to ROCNo such requirement of approval

5. Minimum members/directorsAt least 2 MembersAt least 2 Trustees

5. Minimum members/directorsAt least 2 MembersAt least 2 Trustees

6. Governing StructureGeneral Body of Directors/ Board of DirectorsGeneral Body/ Board of Trustees

7. Voting RightsVoting Rights vary on the basis of the shareholding.All trustees have equal voting rights.

8. FilingCompany has to submit Annual Audited Accounts and Returns filed by it to the ROC.No documents are required to be submitted to any Registering Authority. Except for submission of Accounts.

9. Meetings4 Board meetings and 1 Annual General Meeting have to be carried out in a year.There is no such provision.

10. Transfer of directorship/membershipDirectorship or membership can be transferred.Trusteeship cannot be transferred.

11. Payment to directors/trusteesGeneral Body of the company can approve to get payment.Trustees cannot receive payment. But if the provision is there in the trust deed than trustees can receive professional fees.

12. Investment by promoters/trusteesNo requirement of minimum capital.No requirement of minimum capital.

13. Liabilities of Directors/trusteesDirectors can be held liable for the acts done by them or for their negligence and the onus is on directors to prove that they are innocent.Trustees can be held liable for the acts done by them or for their negligence and the onus is on charity commissioner to prove that the trustees are guilty.

How can InCorp help you?

Our team at InCorp can not only help you choose the correct legal structure for carrying out charitable activities, but also assist you in complying with all the applicable laws and framework thereafter. We further ensure that while doing charity, organizations are not stuck in the clutches of various legal hurdles and we make it our responsibility to keep charitable organizations compliant of all laws at all points in time.

[yourlegalconsultant]

​12AB registration is crucial for trusts and NGOs, offering multiple benefits that enhance their financial and operational efficiency. It provides tax exemptions under the Income Tax Act, allowing organizations to utilize funds for charitable activities without tax burdens. This registration also strengthens credibility, making attracting donors easier and securing government or foreign funding. Additionally, it ensures compliance with regulatory requirements, improving financial transparency and accountability. NGOs with section 12AB registration can also apply for benefits under FCRA, facilitating foreign contributions. Overall, it helps organizations sustain their operations while maintaining legal and financial integrity.

[yourlegalconsultant]

Simplify the LLP Registration Process Without Legal Hassles

The Limited Liability Partnership (LLP) model combines the operational flexibility of a partnership with the limited liability benefits of a company. For entrepreneurs and startups, LLPs are an attractive choice, thanks to their straightforward structure and reduced compliance burden. However, navigating the legal formalities can feel overwhelming. Read:

Simplify the LLP Registration Process Without Legal Hassles