Annual Compliance Requirements for Section 8 Company in India- Checklist, due dates, penalties

As per the provision of the Companies Act 2013, every company which is registered under the Companies Act 2013 or earlier laws whether it is a private limited company, public limited company, small company, one person company, and section 8 company all are required to file annual returns and the income tax returns every year whether they have worked or not. Section 8 companies are also required to file their financial statements and annual returns and it will also conduct an annual general meeting and comply with all the provisions of the Companies Act 2013 and the provisions of Income Tax Act 1961.

In this article, we will cover the following points-

  • What are section 8 companies and their features?
  • What are the annual compliances of section 8 company?
  • What are the events based annual compliances of section 8 company?
  • What are the documents required for annual compliances of section 8 companies?
  • What are the Income tax compliances of section 8 company?
  • What are the due dates for filing in the case of section 8 companies?
  • What are the benefits to comply with all the annual compliances?
  • What will be the penalties for non-compliance?

What are section 8 companies in India and their features?

Section 8 companies are the company which is incorporated under the Companies Act with the objective to promote commerce, science, arts, sports, research, education, social welfare, and protection of the environment, etc. A section 8 company is registered as Non – Profit Organisation and it falls under the Non – Governmental Organisation. Section 8 companies perform all the business activities and earn the amount of profit but such amount of profit is used by such organization to fulfill the objectives of the companies and such profit, and dividend, is not distributed between the members of the company. Section 8 companies are considered as limited company but it does not use the word Limited in the last of its name.

The features of section 8 companies are as follows-

  1. Charitable objectives: Section 8 companies are those companies that do not have the aim to make profits. Their objectives are totally charitable. They have the objective to promote commerce, science, arts, sports, research, education, social welfare, and protection of the environment, etc.
  2. Profit- These organizations are incorporated not for profit making i.e. any amount of the profit which is earned by these organizations is used for the objectives of the companies and it is not distributed between the members.
  3. No minimum share capital: as per the Companies Act in the case of Section 8 companies, there is a requirement for a prescribed minimum paid-up share capital.
  4. Government license:Such companies can be formed only when they have the license from the Central Government. The Central Government has the power to revoke such license at any time as per requirement.
  5. Limited liability:Liabilities of the members of Section 8 companies area limited liability; in any case liabilities cannot be unlimited.
  6. Privileges:These companies have charitable objectives; the Companies Act provides several benefits and exemptions to them.
  7. It works as a limited company but does not use the limited word in the last of the name.
  8. In the case of section 8 companies individuals and associations of persons,as well as firms are also registered as a member.
What are the annual compliances of section 8 company in India?

Section 8 companies are required to comply with all the compliances which are levied by the Income Tax Authorities and Registrar of Companies. If there is any company fails to comply with any of the requirements of the income tax or companies act then such a company is required to pay the amount of penalties and in some cases, their directors may get disqualification for a certain period.

Now we will discuss the annual compliances of section 8 companies-

  • Appointment of an Auditor (Filing Form ADT-1)-As per section 139 of the Companies Act 2013, every company is mandatory to appoint an auditor. The appointment of an Auditor is mandatory because the auditor will audit the books of accounts and annual returns of the company and express his independent views. The first auditor of the section 8 company is appointed within the period of 30 days from the date of incorporation. The auditor is appointed by the company for the period of 5 years and in such appointment, there is the requirement to file Form ADT-1.
  • Annual General Meeting- Annual general meeting is required to be conducted within the period of 6 months from the end of the financial year.
  • Income Tax Returns: The Income Tax Returnsof the company is required to be filed every year at the end of every assessment year, on or before 30th September.
  • Maintenance of Statutory Registers: Section 8 companies are also required to maintain all the statutory registers which are required to be maintained as per section 8 of the Companies Act 2013 just like the register of members, register of loans obtained, register of charges created, register of directors, etc.
  • Boards’ Report: As per the provision of the Companies Act 2013, the Board of Directors of the company are required to file their board’s report in theproper manner, with the financial statements and other annexures. The company will file the board report Form AOC-4.
  • Board Meeting– As per the provisions of the Companies Act 2013, the company will conduct board meetings twice in the year in the case of small companies and the time gap between 2 board meetings should not be more than 90 days.
  • Preparation of Financial Statement of The Company: As per the provisions of the Companies Act 2013, the company will prepare its financial statements on an annual basis.The financial statement includes the balance sheet, profit, and loss A/C, cash flow statement, and other annexures.
  • Filing of Financial Statements with ROC: As per the provisions of the Companies Act 2013, every company is required to file itsfinancial statement in the appropriate form within 30 days from the date of the annual general meeting of the company.
  • Filing Annual Returns with Registrar: As per the provisions of the Companies Act 2013, the companyis required to file its annual return. The annual return of the company will contain all the information which is related to the management, shareholders and it is required to be filed in Form MGT-7 with the Registrar of Companies (ROC), within the period of 60 days from the date of the annual general meeting.
  • Preparation of Director’s Report– As per section 134 of the Companies Act 2013, the company is required to prepare a director’s report and it is filed in Form AOC-4. On the basis of the directors’ report, the company can explain the exact financial position of the company and the scope of the business to the shareholders of the company.

What are the events based annual compliances of section 8 company in India?

There are some event based annual compliances that are required to comply with the occurrence of a certain event. These events are-

  1. Appointment of Key Managerial Person (KMP).
  2. Appointment, re-appointment, and the Removal of Auditors of the company.
  3. Change in the name of the Company.
  4. When there is a change of Registered Address.
  5. When there is any amendment in the Memorandum of Association.
  6. Receipt of Share Application Money.
  7. Allotment of Shares.
  8. Executing the agreement with the related party of the company.
  9. When there is the transfer of shares.
  10. When there is any change in the name of the bank signatory.
  11. When there is any change in statutory auditor.
  12. When there is any additional compliance for the registration for 80G and section 12AA.
  13. Appointment, re-appointment, and the Removal of Directors (Whole Time Director, Managerial Director) of the company.
  14. Any other changes in the policies and the structure of the company.

What are the documents required for annual compliances of section 8 companies?

There is the list of the required documents which are required for annual compliances of section 8 companies-

  1. Memorandum of Association (MOA)
  2. Article of Association (AOA)
  3. Digital Signature Certificate (DSC)
  4. Certificate of Incorporation

What are the Income tax compliances of section 8 company?

Section 8 companies are also required to comply with Income tax related compliances. In section 8 companies the provision of corporate taxation is applicable but there are certain exemptions are provided under the income tax act. To take the benefits of these exemptions Section 8 Company is required to fulfill the following compliances:

  1. A section 8 company is required to be registered under section 12AA of the Income Tax Act 1961 by filling the Form 10A with the Principal Commissioner
  2. It must also comply with all the conditions of section 11 of the Income Tax Act 1961.
  3. Section 8 company will make an application for section 80 G.
  4. Section 8 company will file its Income tax return annually on or before the due dates.
  5. Section 8 company will comply with all other relevant and applicable provisions of the Income Tax Act 1961.

What are the due dates for filing in the case of section 8 companies in India?

Section 8 companies will follow all the required compliances within the following dates-

Form No Compliance Due Date
MGT-15 Annual General Meeting (AGM) 30th September  
AOC-4 Directors Report Within 30 days from the date of the Annual General Meeting
MGT-7 Annual Returns Within 60 days from the date of the Annual General Meeting  
Form ITR -6 Income Tax Returns 30th September  

What are the benefits to comply with all the annual compliances for Section 8 Companies in India?

All the companies which are registered under the Companies Act 2013 are required to comply with all the compliances. If any of the compliance is not fulfilled by the company then the company is required to pay the amount of penalties. To avoid the amount of penalties and for the following benefits, the companies are required to comply with all the annual compliances-

  • Better Credibility of the company– The companies which are complying with all the compliances within the applicable period are eligible to create better credibility. On the basis of better credibility the companies can avail the financial help from the banks, financial institutions, and other authorities.
  • Build the Trust among the investors, customers, and vendors– when the company is complying with all the compliances within the applicable period and provides fair financial information to the user of the financial statement then it can be built trust among the vendors, investors, creditors, etc.
  • Avoid Legal Complications– If there is any company that is required to comply with any requirement and such compliance is not comply by the company then such company will face some legal issues and legal complications. In the case of such legal complications, it may get a notice from the authority. To avoid these legal complications there is the requirement to comply with all the compliances.
  • Transparency in the operations of the Company-The financial statement, the annual return of the company explains the financial performance and financial position of the company and when the company files all these required statements and details within the specified period then it maintains the transparency of the company.
  • Avoid making the payment of Penalties– When the company complies with all the compliances within the period then there will not be any chance of penalties so the company can avoid the amount of penalty.

What will be the penalties for non-compliance for Section 8 Companies in India?

As per the Companies Act 2013 and Income Tax Act 1961, In the case of section 8 companies there are certain compliances that are required to comply by the companies. If the companies fail to comply with any of the required compliance then the penalties will be imposed on the company and the company will require paying such amount of penalties. These penalties are-

  • If the CG finds any fraudulent activity or any violation of the provision then the CG has the power to cancel the license which is granted to the company for availing the benefits of exemptions.
  • If the companies fail to comply any of the required compliance then the amount of penalties will be not less than 10 lakhs but it can be extended to 1 crore.
  • If the directors and the offices of the company are involved in any default then they are also liable for the punishment. The punishment will be –
  • Imprisonment or
  • The penalty of 25 lakhs or
  • Both
  • If the affairs of the company contain any fraud then every officer who is involved in default shall be liable for actions which are specified under section 447.

FAQs on Annual Compliance for Section 8 Companies in India

 

1-What is section 8 company?

Answer- Section 8 companies are those companies that are incorporated under the Companies Act with the objective to promote commerce, science, arts, sports, research, education, social welfare, and protection of the environment, etc. A section 8 company is registered as Non – Profit Organisation and it falls under the Non – Governmental Organisation.

2- Can I create a private limited company as a section 8 company?

Answer- Yes, a private limited company can be incorporated as a section 8 company.

3- Can I create a public limited company as a section 8 company?

Answer- Yes, a public limited company can be incorporated as a section 8 company.

4- Can section 8 companies claim full tax exemption?

Answer- Yes, the section 8 companies can claim full tax exemption after complying with all the conditions which are specified by the relevant provisions of the Income Tax Act 1961, and for taking full exemption the company will get the registration under section 80G and section 12AA of the  Income Tax Act 1961.

5- Can a foreign company be registered as a section 8 company?

Answer- Yes, a foreign company can be registered as a section 8 company.

6- What will be the amount of penalty for failure to appoint an auditor within the prescribed time?

Answer- If there is the requirement to appoint an auditor and the company fails to appoint an auditor within the prescribed time then the company will be liable to pay the amount of penalty of Rs.25000 and it may be extended to 5 lakhs.

7- What will be the amount of penalty for the non-filing of a director’s consent form with the RoC?

Answer- If there is the requirement to submit the director consent with the ROC and the company fails to submit within the prescribed time with the ROC then the company will be liable to pay the amount of penalty up to Rs.50000 or imprisonment up to the period of six months.

8- What will happen if I don’t file annual returns?

Answer- If there is the requirement to file the annual return the company fails to file it within the prescribed time then the company will be liable to pay the amount of penalty of Rs.50000 and it may be extended to 5 lakhs.

9- Can section 8 companies accumulate the amount of profit without paying the amount of tax?

Answer- Yes, Section 8 companies are allowed to accumulate the amount of profit up to 15% of their total income without paying tax.

10- Does the CSR requirement apply to Section 8 companies?

Answer- Yes, the provisions of CSR are applicable to Section 8 companies.

11-What are the features of section 8 companies?

Answer- There arethe following features of section 8 companies-

a- Charitable objectives

b- Not Profit making

c- No minimum share capital

d- Government license

e- Limited liability of the members

f- Privileges

12- What are the benefits to comply with all the annual compliances?

Answer- The benefits to comply with all the annual compliances are as follows-

a- Better Credibility of the company

b- Build Trust among the investors, customers, and vendors

c- Avoid Legal Complications

d- Transparency in the operations of the Company

e- Avoid making the payment of Penalties

13- Whether the provisions of GST are applicable to section 8 companies?

Answer- Yes, the provisions of GST are applicable to section 8 companies.

14- Can I appoint a woman director in the section 8 companies?

Answer- Yes, we can appoint a woman director in the section 8 companies.

15- What is the due date of filing ITR of section 8 companies?

Answer- The due date for filing ITR by section 8 company is 30 September.

16- What are the documents required for annual compliances of section 8 companies?

Answer- There is the list of the required documents which are required for annual compliances of section 8 companies-

  1. Memorandum of Association (MOA)
  2. Article of Association (AOA)
  3. Digital Signature Certificate (DSC)
  4. Certificate of Incorporation

17- What are the annual compliances of section 8 company?

Answer- The list of annual compliances of section 8 company is-

  1. Appointment of an Auditor (Filing Form ADT-1)
  2. Conduct Annual General Meeting
  3. Filing of Income Tax Returns
  4. Maintenance of Statutory Registers
  5. Preparation and submit Boards’ Report
  6. Conduct Board Meeting
  7. Preparation of Financial Statement of the Company
  8. Filing of Financial Statements with ROC
  9. Filing Annual Returns with Registrar
  10. Preparation of Director’s Report

18- Whether the provision of the cost audit is applicable to section 8 companies?

Answer- Yes, the provision of the cost audit is applicable to section 8 companies.

19- Whether the provision of the secretarial audit is applicable to section 8 companies?

Answer- Yes, the provision of the secretarial audit is applicable to section 8 companies.

20- Can section 8 companies carry out advisory and consulting business?

Answer- Yes, section 8 companies can carry out an advisory and consulting business.

21- Whether the provision of the internal audit is applicable to section 8 companies?

Answer- Yes, the provision of the internal audit is applicable to section 8 companies.

22- What are the events based annual compliances of section 8 companies?

Answer- There are some events based annual compliances that are required to comply with the occurrence of a certain event. These events are-

  1. Appointment of Key Managerial Person (KMP).
  2. Appointment, re-appointment, and the Removal of Auditors of the company.
  3. Change in the name of the Company.
  4. When there is a change of Registered Address.
  5. When there is any amendment in the Memorandum of Association.
  6. Receipt of Share Application Money.
  7. Allotment of Shares.
  8. Executing the agreement with the related party of the company.
  9. When there is the transfer of shares.
  10. When there is any change in the name of the bank signatory.
  11. When there is any change in statutory auditor.
  12. When there is any additional compliance for the registration for 80G and section 12AA.
  13. Appointment, re-appointment, and the Removal of Directors (Whole Time Director, Managerial Director) of the company.
  14. Any other changes in the policies and the structure of the company.
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