If you wish to start a non-profit company into India, there are many considerations to take into account before business registration in India. In this article, our team at Tetra Consultants has highlighted 7 steps to proceed with non-profit company registration in India once you decide to register company in India.
Overview of a Non-Profit Organization (NPO):
NPO is defined to be a trust, company or other association of persons who are established for a public purpose. In addition, the income and property of which are not distributive to its members or office bearers except as reasonable compensation for services rendered.
Acts governing NGO registration process:
It is important to select a suitable kind of registration procedure. The different types of organization formation are namely Trust Registration, Society Registration and Section 8 Company Registration.
Trust registration is also widely known as a charitable trust. In a charitable trust, there is a minimum of 2 people. Trust is a legal entity created by the “trustor” or “settlor” who transfers the assets to the second party or “trustee” for the benefit of the third party or “beneficiary”. The main purpose of a trust is to help and support the deprived sections of society. Any group of individuals is allowed to register a trust in India without any specific laws governing the public trust. However, there is an exception of some states such as Maharashtra and Tamil Nadu which have their own Public Trust Act.
Society registration requires a minimum of 7 people. It is an entity created by a group of individuals united for the same cause. Such causes include promoting science, arts, literature, social welfare and useful information. Moreover, societies work for creating military orphan funds, and maintaining public museums and libraries. Governed by the Societies Registration Act 1860, societies are required to be registered with the respective state Registrar of Societies in order to enjoy tax exemption.
Section 8 company registration is similar to both trust and society registration. An NPO can be registered under section 8 of the Companies Act with the Registrar Companies. There is no provision to distribute profits earned, unlike a public limited company. NPO uses the profits for furthering its objective. The main objective of Section 8 Companies is to promote arts, science, commerce, sports, social welfare, religion, charity and environmental protection. By registering under section 8 of the companies Act, the companies will be more credible among government bodies, donors and other stakeholders. Income tax exemption is available for all NPOs.
Benefits of section 8 companies registration:
Section 8 companies registration is most preferred by NPOs. Not only are they able to enjoy several tax exemptions, donors who have contributed can also enjoy tax benefits. There is no minimum capital and stamp duties required. Since it is a separate legal entity, shareholders are not liable for any debts and obligations of the company. With section 8 company registration, the NPO will have higher credibility compared to trust or society. This is due to the recognition of the central government of India which boosts its reliability and reputation.
If you have decided with the non profit company registration in India, you may proceed to register new company in india. The steps to register a company in India is as follows:
Step 1: Choosing a suitable corporate entity
- There is a minimum of two directors required for the incorporation of Section 8 company as a private limited company, and a minimum of three directors in case of incorporation as a public limited company.
- For both cases, at least one direction would have to be a resident of India. The maximum number of members is 200 for a private limited company, whilst there is no limit for a public limited company.
Step 2: Obtain Digital signature certificates (DSC)
- Since the registration process can be filed online and the forms should be signed digitally, it is required to obtain digital signatures of the proposed directors of the company. The DSC is issued by government-recognized certified agencies.
- Digital signature certificates (DSC) are issued by government-recognized certifying agencies. The cost of obtaining a DSC varies depending upon the certifying agency. It is required to obtain a Class 3 category DSC.
Step 3: Obtain DIN
- It is required to apply for a DIN for the proposed directors of the company. The application is made via Form DIR-3.
- Necessary documents such as a self-attested copy of PAN, Identity and Address proof of directors must be attached along with the form, submitting it online on the Ministry of Corporate Affairs (MCA) Portal.
- The form must be witnessed by a practising professional who can be either a chartered accountant, a company secretary or a cost accountant.
Step 4: Reserving of the company name
- Reservation of company name with the Registrar of Companies in India through the MCA portal.
Step 5: Registration of the company
- Since Section 8 companies are incorporated with non-profit objectives, the non-profit objectives must be mentioned inside the MOA and AOA.
- Form INC-12 must be filed for the license to operate as a Section 8 company to be granted.
- The SPICe+ form is required for the application of the incorporation of the company.
Step 6: Obtaining Company PAN and TAN
Step 7: Stay compliant
- The annual compliances of section 8 company are just like the other companies where a minimum of two board meetings are conducted in a year.
- Maintenance of book of accounts, preparation of financial statements, mandatory audit report and income tax filing are required.
The non profit company registration in India may seem complex and intimidating. With Tetra Consultants by your side, the registration process of your business in India will be smooth and hassle-free. Our comprehensive service package includes planning and strategizing with our clients to select a suitable business entity, completing the registration process, obtaining required licenses, opening a corporate bank account, and ensuring your compliance with the government regulations.
Contact us to find out more about non profit company registration in India and our dedicated and experienced team will revert within the next 24 hours.