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Which ITR Is Applicable for Section 8 Company?

A Section 8 Company is basically a company formed under the plan of the 2013 Companies Act with the purpose of promoting science, art, research, religion, commerce, environmental protection, charity, education, sports, or any other object, with the condition that the gains be used to advance the objective. 

As a result, in this article, we will look at which ITR is applicable for Section 8 Company. Also, we will take a look at the benefits and exemptions of a company incorporated as a non-profit organisation under the 2013 Companies Act (Section 8), as well as the provisions of the Stamp Act, Income Tax, and others.

ITR Forms Applicable for Section 8 Company

 The ITR-7 Form is used by businesses and individuals who are obliged to file an income tax return under:

  • Section 139.4A
  • Section 139.4B
  • Section 139.4C
  • Section 139.4D
  • Section 139.4E
  • Section 139.4F

As a result, the ITR-7 form must be submitted by Section 8 Companies and other forms of non-profit businesses.

Filing an ITR-7 Form: Eligibility Criteria

Listed below are the eligibility criteria for filing an ITR-7 Form:

  • Every individual who receives income from property adhered to under any legal obligation entirely or partially for religious or charitable purposes is obligated to file an income tax return under Section 139.4A.
  • An income tax return under Section 139.4B must be filed by a political party only if the total income before applying the requirements of Section 139A goes above the maximum amount not subject to income tax.
  • An income tax return under Section 139.4C is needed to be filed by:
  • News agency
  • Scientific research association
  • Institution or association referred to in Section 10.23B
  • Institution or university or fund or any other educational institution
  • Hospitals or medical institutions
  • Every educational institution (college, university) that is not obliged to provide a report of revenue or loss under other plans of this particular section is required to make an income tax return under Section 139.4D.
  • All businesses’ trusts that are not obliged to provide a loss or income return under any other plan of this particular section should make an income tax return under Section 139.4E.
  • Any investment fund stated in Section 115UB shall file an income tax return under Section 139.4F. Under any other plan of this particular section, it’s not obliged to provide a loss or income return.

General Benefits Associated with Section 8 Company Incorporation

  • The goal or mission of the organisation can perform a wide variety of operations and obtain integrity and faithfulness by founding a Section-8 Company since it is an authorised institution by the Central Government. 
  • In comparison to societies, it has a more dependable image in front of internal and external users of information due to its tight operational compliances. 
  • Section 8 Company has more credibility than societies and other forms of charity organisations. 
  • In contrast to Trusts or Societies, Section-8 Companies get significant subsidies and grants from the government and other entities.

Reliefs and Exemptions for Section 8 Companies under Diverse Rules, Regulations, and Acts:

Companies Act of 2013:

  • Directorships in Section 8 Companies shall not be considered for computing the maximum number of directorships stipulated in Section 165 of the Companies Act.
  • A general meeting might be convened by giving 14 days’ notice rather than 21 days. 
  • Instead of four meetings each year, a Section 8 Company may convene a minimum of one meeting every six months.
  • Minute recordings of Board Meeting, General Meeting, and other resolutions are not required for a Section 8 Company. Nevertheless, the time of meetings is recorded no more than 30 days after the meeting’s end if the Company’s articles offer confirmation by the dissemination of minutes.
  • An enterprise may also be a part of a Section 8 Company.
  • Section 149.1 of the Companies Act does not apply to Section 8 Companies; hence they are not required to nominate an Independent Director. Furthermore, for the reasons stated above, a Section 8 Company’s Audit Committee is not required to include Independent Directors on its Board.
  • Section 8 entities aren’t needed to designate a certified corporate secretary.
  • It’s also free from the application of secretarial standards.
  • Section 178 of the Companies Act does not apply to Section 8 Company. As a result, Section 8 Companies are exempt from having a Remuneration Committee and Nominee or a Stakeholders Relationship Committed.

Income Tax Act of 1961:

Section 8 Company is exempted from certain income tax requirements if a company’s major operation has “charitable reasons”, as defined in Section 2.15 of the 1961 Income Tax Act. They also qualify for a variety of additional tax breaks and deductions under the 1961 Income Tax Act (Section 80G).

The following is a list of exemptions or reliefs that each Section 8 Company can obtain:

  • Section 8 entities must pay considerably lower stamp duty than other companies. According to the 1961 Income Tax Act, Section 8 Company contributors are entitled to a 50 percent tax benefit for their contributions.
  • It’s valid for one to three years, as stated in Section 80G. Suppose a Section 8 entity is registered under the Income Tax Act (Section 12AA); in that case, profits are entirely exempt, and no taxes are charged to the company. 
  • Each year, the Central Government introduces various regulations to provide for more advantageous tax exemption circumstances for non-profit organisations.

Regulation Act and Foreign Contribution:

To obtain funding from overseas sources, a Section 8 Company must register with the Foreign Contribution Regulation Act. Furthermore, registration under the Foreign Contribution Regulation Act is necessary when it comes to claiming the Act’s benefits and reliefs.

Indian Stamp Act of 1899:

The stamp duty on MOA (Memorandum of Association and AOA (Articles of Association) of Section 8 Company or any increase in overall share capital is controlled by the 1899 Indian Stamp Act, as implemented by each state or the stamp act of a separate state, as applicable. Most states, including Maharashtra and New Delhi, offer preferential prices for stamp duty on AOA/MOA of Section 8 entities or increases in authorised share capital.

Other State Government/Central Government Plans for Section 8 Companies

The state and central government have programmes in place to promote and establish Section 8 entities for rural products and charity reasons. With the assistance of experts and professionals, the central government intends to establish a Section 8 firm to promote chosen rural products and an enterprise-class value chain for them. 

These are often the products of village organisations, female-led self-help groups, farmer-producers, etc. The government offers several exemptions and reliefs to companies under these schemes or programmes.


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