Post incorporation compliance Section-8 Company
In India, incorporating a Section 8 company (non-profit company) under the Companies Act of 2013 is a process that includes certain post-incorporation compliance requirements. These corporations are formed to promote social causes, welfare, charity, education, art, science, and so on, and they benefit from tax breaks and limited liability. To keep these benefits and legal standing, a Section 8 firm must follow continuous compliance requirements after incorporation. Here is a detailed look at the post-incorporation compliance responsibilities.
1 Obtain PAN and TAN
PAN (Permanent Account Number): Every Section 8 firm must obtain a PAN for tax purposes. This is a mandatory requirement for all financial transactions.
TAN (Tax Deduction Account Number): If the company is required to deduct tax at the source (TDS), it must get a TAN from the Department of Income Tax.
2 Register for Goods and Services Tax (GST)
A Section 8 corporation may be required to register for GST based on the nature of its activity (for example, goods and services given for a fee). GST If your annual turnover exceeds the GST law & level, you must register.
3 Maintain Books of Account
Section 8 companies must keep proper books of accounts according to the Accounting Standards published by the Institute of Chartered Accountants of India. Books of account should be kept at the registered office or a location specified by the Firm.
4 Filing Of Annual Return
Form MGT-7: Every Section 8 company must file an Annual Return in Form MGT-7 with the Registrar of Companies (ROC) on a yearly basis. Registration must be completed within 60 days of the date of the Annual General Meeting. Form AOC-4: The company additionally has to submit its financial statements in Form AOC-4 with the ROC after 30 days following the AGM.
5 Hold Annual General Meeting
A Section 8 company must gather its first AGM within nine months of the conclusion of its first year of business. Following the initial AGM, subsequent AGMs must be held annually, within 15 months of the last AGM. AGM notice must be provided to all members, directors, and auditors at least 21 days before the meeting.
6 Compliance with Corporate Governance Norms
A Section 8 business must conform to corporate governance rules, particularly if it has a high number of members or receives significant public support. It must maintain clarity in its processes, and qualified administration, and ensure that all activities are carried out for nonprofit objectives rather than profit.
7 Tax Compliance
Section 8 corporations are eligible for tax breaks under Sections 11 and 12A of the Income Tax Act of 1961, but they must have the required documentation and records. To keep its tax-exempt status, the corporation must file an Income Tax Return (ITR) each year, even if no tax is payable. To take advantage of tax breaks, the corporation may need to file an application with the Income Tax Department under Section 12A
8 Complying with FCRA
If a Section 8 firm receives foreign contributions, it must follow the FCRA guidelines. To receive foreign contributions, the company must first get FCRA registration or prior clearance from the Ministry of Home Affairs (MHA). It is necessary to file an FCRA every year in return with the MHA.
9 Director Report
A Directors Report must be written, outlining the company’s financial situation, activities, donations received, and other relevant information. This report must be submitted along with the yearly financial statements and presented at the AGM.
10 Adherence to Object Clause
The company’s actions must precisely adhere to the objectives indicated in its Memorandum of Association (MOA). Any divergence from this may result in the company losing its Section 8 status and being reclassified as a regular corporation.
11. Appointment of Statutory Auditor
A statutory auditor must be appointed at the first AGM and each achievement AGM. The auditor's function is to evaluate the financial records and write an audit report, which is then included in the company's annual reports.