Section 8 of the Companies Act, 2013 allows the formation of non-profit organizations for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment or any other such objective. Section 8 Compliance refers to the legal and regulatory requirements that a Section 8 Company must fulfill to maintain compliance with the Companies Act, 2013.
Advantages of Section 8 Compliance:
- Tax Exemption: A Section 8 Company is eligible for tax exemptions and benefits under the Income Tax Act, 1961.
- Limited Liability: Members of a Section 8 Company have limited liability, which means they are not personally liable for any debts or losses incurred by the company.
- Perpetual Existence: Section 8 Companies have perpetual existence, which means they continue to exist even if the members change or the organization undergoes restructuring.
Disadvantages of Section 8 Compliance:
- Complex Compliance Requirements: Section 8 Companies are subject to various legal and regulatory compliance requirements, such as filing annual reports, conducting regular audits, and maintaining accurate financial records.
- Restriction on Activities: Section 8 Companies are established for a specific purpose, and any activity outside the scope of the company’s objectives is not permitted.
Procedure for Section 8 Compliance:
- Board Meeting: The Board of Directors must hold a meeting to approve the annual accounts, appoint auditors, and authorize the filing of annual returns.
- Filing of Annual Returns: The Section 8 Company must file its annual returns with the Registrar of Companies within 60 days from the date of the Annual General Meeting.
- Audit: The Section 8 Company must get its accounts audited by a Chartered Accountant and file the audit report with the Registrar of Companies.
- Compliance with Income Tax: The Section 8 Company must file its income tax returns and comply with the provisions of the Income Tax Act, 1961.
In summary, Section 8 Compliance refers to the legal and regulatory requirements that a Section 8 Company must fulfill to maintain compliance with the Companies Act, 2013. The advantages of Section 8 Compliance include tax exemption, limited liability, and perpetual existence, while the disadvantages include complex compliance requirements and a restriction on activities. The procedure for Section 8 Compliance includes holding a board meeting, filing of annual returns, audit, and compliance with the Income Tax Act, 1961.