Non-profit organizations are entities that are created to address social issues and provide aid to the community. In India, two of the most common types of non-profit organizations are NGOs and Section 8 Companies. While both these entities operate on a not-for-profit basis, they have some distinct differences.
Do you want to know the distinction between an NGO and a Section 8 business? It turns out that due to certain substantial variations, each one is better suited to particular enterprises and company goals, making it challenging to choose between them. When the time comes to take your concept and make it a reality, you can use this guide to compare and contrast the two organisations and make an informed choice about which one to work with.
It might be a little challenging to initially comprehend the distinction between NGOs and Section 8 corporations. They provide housing aid to those in need, but their training and client interactions are different. When deciding which option is best for your family, you should be aware of the differences between an NGO and a Section 8 firm.
What is an NGO?
An NGO, or non-governmental organization, is a non-profit organization that operates independently of the government. NGOs can work in a wide range of areas, including education, healthcare, human rights, and environmental protection. They are typically funded by donations and grants from individuals and organizations, and often rely on volunteers to carry out their work.
NGOs have been defined and their diversity and growth have been acknowledged. Two categories of factors have been explored that can impact the degree of influence NGOs have on environmental policies. The first set of factors are structural constraints and opportunities, such as the specific environmental issue, the targeted organizations and policy networks, and the political structure in which the NGO operates. The second set of factors are the various actions that NGOs take, which can be evaluated for effectiveness based on criteria such as political expertise, scientific and professional knowledge, media usage, political support, and cooperation with other NGOs in coalitions and networks.
Despite the apparent clarity of these factors, assessing the degree of influence NGOs have on environmental policies is not a straightforward process. Objective measures of influence are often absent, and it can be challenging to distinguish correlation from causation. Furthermore, competing theoretical explanations of NGO influence can complicate assessments, and explanations that work in the North may not be applicable to the South. Additionally, the unique characteristics of environmental NGOs, such as time lags, specific features of environmental problems, and transnational links between NGOs, can all affect assessments of their influence. Therefore, making informed judgments based on incomplete evidence is necessary when assessing the influence of NGOs on environmental policies, keeping in mind the complex and unusual nature of the field.
What is a Section 8 Company?
A Section 8 Company, also known as a not-for-profit company, is a type of organization that is created under the Companies Act, 2013 (section 8 of companies act 2013). The primary objective of a Section 8 Company is to promote charitable or social causes, and it is not permitted to distribute its profits to its members. Section 8 Companies are allowed to receive foreign donations and are eligible for tax exemptions.
A Section 8 Company, also known as a non-profit company, is a type of company registered under the Companies Act, 2013 in India. Unlike traditional for-profit companies, Section 8 companies are formed for the purpose of promoting charitable, social, or philanthropic objectives, and are not driven by the goal of making a profit.
The concept of Section 8 companies was introduced in the Companies Act, 2013, replacing the earlier Section 25 of the Companies Act, 1956. The main objective behind the formation of Section 8 companies is to encourage the formation of non-profit entities for the promotion of social welfare activities in India. Section 8 companies can carry out a range of activities such as education, healthcare, environment, art and culture, and poverty alleviation, to name a few.
One of the key features of a Section 8 company is that it is exempt from paying taxes on its income, subject to certain conditions. In addition, donors to Section 8 companies are eligible for tax benefits, which can encourage more contributions to these organizations. However, a Section 8 company cannot distribute dividends to its members, and all profits must be reinvested into the company’s activities or donated to a charitable cause.
In order to register a Section 8 company, there are several requirements that must be met. Firstly, the company must have a minimum of two directors and a minimum of two shareholders, with no upper limit on the number of shareholders. Secondly, the company must have a unique name, which should not be similar to that of any existing company. Thirdly, the company must have a registered office address in India. Finally, the company’s memorandum of association and articles of association must be in compliance with the Companies Act, 2013.
The process of registering a Section 8 company involves several steps. Firstly, the name of the company must be reserved through the Ministry of Corporate Affairs’ (MCA) online portal. Once the name is approved, the company’s memorandum of association and articles of association must be drafted and filed with the Registrar of Companies (ROC). The ROC will then review the documents and issue a certificate of incorporation if all requirements are met
Once a Section 8 company is registered, it is required to file annual returns with the ROC and maintain proper books of accounts. The company is also subject to regular audits to ensure that its operations are in compliance with applicable laws and regulations.
In addition to the tax benefits and exemptions, there are several other advantages to forming a Section 8 company. Firstly, Section 8 companies can receive foreign donations, subject to approval from the Foreign Contribution Regulation Act (FCRA). Secondly, Section 8 companies can raise funds through grants, loans, and donations, which can be used for their charitable purposes. Thirdly, Section 8 companies can attract skilled professionals and volunteers who are motivated by the social and charitable objectives of the organization.
Overall, the formation of a Section 8 company can be a powerful tool for promoting social welfare and charitable causes in India. With the tax benefits and exemptions, as well as the ability to receive foreign donations and raise funds through grants and donations, Section 8 companies can be an effective way to channel resources towards social and charitable causes. While there are certain requirements that must be met, the process of registering a Section 8 company is relatively straightforward and can be done with the help of a professional service provider or legal advisor.
A Section 8 company is a type of non-profit organization in India that is registered under Section 8 of the Companies Act, 2013. These companies are established for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment or any other such objectives.
Some key features of Section 8 companies in India include:
Non-profit motive: Section 8 companies are established with the sole objective of promoting social welfare, charity, religion, etc. and not for making a profit.
Limited liability: Section 8 companies are incorporated as companies under the Companies Act, which means that the liability of the members is limited to the amount they have invested in the company.
No minimum capital requirement: Unlike other types of companies, there is no minimum capital requirement for registering a Section 8 company in India.
Tax benefits: Section 8 companies are eligible for various tax exemptions and benefits under the Income Tax Act, including exemptions on income and contributions received from donors.
Board composition: Section 8 companies must have a minimum of two directors, and at least one of them must be an Indian resident. Additionally, they must have a minimum of two shareholders.
Restrictions on distribution of profits: Section 8 companies are prohibited from distributing any profits to their members, and all income and profits must be utilized for achieving the stated objectives of the company.
The process of registering a Section 8 company in India involves obtaining a Digital Signature Certificate (DSC) and Director Identification Number (DIN) for the proposed directors, filing the incorporation documents with the Registrar of Companies (RoC), and obtaining the Certificate of Incorporation from the RoC.
Some advantages of setting up a Section 8 company in India include access to tax benefits and exemptions, limited liability for members, and the ability to attract funding and donations from both domestic and international sources.
Overall, Section 8 companies in India provide a viable option for organizations looking to establish a non-profit entity that is recognized under the Companies Act and provides certain legal protections and tax benefits.
How To Get an NGO Certificate?
NGOs, or non-governmental organizations, are typically registered with the government in the country where they operate. Depending on the specific laws and regulations in that country, NGOs may need to obtain a certificate or registration in order to operate legally.
In India, for example, NGOs can be registered as trusts, societies, or non-profit companies. To register as an NGO in India, the organization must submit an application to the relevant government department, along with the required documents and fees. The application will typically require information such as the name and address of the NGO, its objectives and activities, the names and addresses of the governing body or board of trustees, and financial statements for the organization.
Once the application is submitted, the government department will review the application and may conduct an inspection of the NGO’s premises or activities. If the application is approved, the NGO will be issued a certificate of registration. The certificate will typically include information such as the name and address of the NGO, the date of registration, and the registration number.
The NGO certificate serves as proof that the organization is legally registered and authorized to operate as a non-profit entity. This can be important for a variety of reasons, such as:
Receiving funding: Many NGOs rely on donations or grants from individuals, organizations, or governments to support their activities. In order to receive such funding, they may be required to provide proof of their legal status as a non-profit organization.
Engaging in partnerships or collaborations: NGOs may work with other organizations or government agencies to achieve their social or environmental goals. In order to establish such partnerships, they may need to provide evidence of their legal status and compliance with relevant laws and regulations.
Building trust with stakeholders: NGOs often rely on the support of their members, volunteers, and beneficiaries to carry out their activities. By obtaining a certificate of NGO registration, they can demonstrate their commitment to transparency, accountability, and legal compliance, which can help build trust and credibility with stakeholders.
In summary, while the specific requirements for obtaining an NGO certificate may vary depending on the country and legal framework in which the organization operates, the certificate serves as an important document that demonstrates the organization’s legal status and authorization to operate as a non-profit entity.
Similarities Between NGO & Section 8 Company?
Both NGOs and Section 8 Companies operate on a not-for-profit basis and are created to address social issues and provide aid to the community. They both rely on donations and grants for their funding, and their primary objective is to promote social welfare.
NGOs and Section 8 companies are both types of organizations that are formed with a social or charitable purpose, rather than for the purpose of generating profit. While there are some differences between the two, there are also several similarities that are worth exploring.
One of the key similarities between NGOs and Section 8 companies is that they are both formed to promote social welfare and charitable causes. NGOs are typically formed to address specific social, political, or environmental issues, such as poverty, human rights, climate change, or public health. Section 8 companies, on the other hand, are typically formed to promote social or charitable causes more broadly, and can cover a wide range of areas such as education, healthcare, environment, art and culture, and poverty alleviation.
Another similarity between NGOs and Section 8 companies is that they are both non-profit entities, which means that any profits that are generated must be reinvested into the organization’s activities or donated to a charitable cause. This helps to ensure that the resources of the organization are used for their intended purpose, rather than being used to generate personal wealth for the organization’s members or shareholders.
Both NGOs and Section 8 companies can be registered under the Indian Companies Act, and are subject to similar regulatory requirements. For example, they are both required to maintain proper books of accounts and file annual returns with the Registrar of Companies. They are also subject to regular audits to ensure that their operations are in compliance with applicable laws and regulations.
In addition, both NGOs and Section 8 companies can receive tax benefits and exemptions for their activities. NGOs can register under the Income Tax Act to receive tax exemptions for donations that they receive, while Section 8 companies are exempt from paying taxes on their income, subject to certain conditions. Donors to both NGOs and Section 8 companies are also eligible for tax benefits, which can encourage more contributions to these organizations.
Both NGOs and Section 8 companies can also receive foreign donations, subject to approval from the Foreign Contribution Regulation Act (FCRA). This can provide additional resources for these organizations to carry out their charitable activities, and can help to promote social and charitable causes more broadly.
Finally, both NGOs and Section 8 companies can attract skilled professionals and volunteers who are motivated by the social and charitable objectives of the organization. This can help to build a strong team of individuals who are committed to the organization’s mission and can contribute their skills and expertise to help achieve its goals.
While there are some differences between NGOs and Section 8 companies, such as the specific issues that they address and the nature of their activities, there are also several similarities that make them both valuable tools for promoting social and charitable causes in India. Whether through their tax exemptions, ability to receive foreign donations, or ability to attract skilled professionals and volunteers, both NGOs and Section 8 companies can make a significant impact on the lives of those who they seek to serve.
Difference Between NGO & Section 8 Company?
Legal Framework: NGOs are not legally recognized entities in India, but they can register themselves under the Societies Registration Act, 1860 or the Indian Trusts Act, 1882. Section 8 Companies, on the other hand, are legally recognized entities that are created under the Companies Act, 2013.
Formation: NGOs are formed by a group of individuals who share a common objective, whereas Section 8 Companies are formed as limited liability companies with a minimum of two shareholders.
Ownership: NGOs are owned by their members, who elect a governing body to oversee the organization’s activities. Section 8 Companies are owned by their shareholders.
Funding: NGOs rely primarily on donations and grants for their funding, while Section 8 Companies can also generate revenue through commercial activities.
Taxation: NGOs are eligible for tax exemptions under Section 12A and 80G of the Income Tax Act, while Section 8 Companies are eligible for tax exemptions under Section 8 of the Companies Act.
NGOs and Section 8 companies share similarities in their social and charitable purposes and their non-profit nature, but there are also several differences between the two.
One of the key differences between NGOs and Section 8 companies is their legal status. NGOs are typically registered as trusts, societies, or non-profit companies, while Section 8 companies are specifically created under the Companies Act, 2013. This means that while NGOs have more flexibility in their organizational structure and management, Section 8 companies must comply with specific legal requirements and regulations.
Another difference between NGOs and Section 8 companies is the scope of their activities. NGOs are often more focused on specific issues, such as human rights, environmental conservation, or disaster relief, and may have a smaller geographic area of operation. Section 8 companies, on the other hand, are typically formed to address broader social or charitable causes, such as education, healthcare, or poverty alleviation, and may have a wider geographic area of operation.
In addition, the governance and management structure of NGOs and Section 8 companies can differ. NGOs may be managed by a board of trustees or governing body, while Section 8 companies must have a board of directors. Section 8 companies may also have shareholders, although these shareholders do not receive any dividends or profits from the company’s operations.
Another key difference between NGOs and Section 8 companies is their sources of funding. NGOs often rely on donations from individuals or organizations to support their operations, while Section 8 companies may also generate revenue through their social or charitable activities. Section 8 companies may also receive funding from government or international development agencies, whereas NGOs may have limited access to such funding sources.
NGO registration process: Finally, there may be differences in the tax benefits and exemptions that are available to NGOs and Section 8 companies. NGOs can register under the Income Tax Act to receive tax exemptions for donations that they receive, while Section 8 companies are exempt from paying taxes on their income, subject to certain conditions. However, the specific tax benefits and exemptions available to each organization will depend on their NGO registration and compliance with applicable laws and regulations.
NGO vs Trust vs Section 8 Company
NGOs, trusts, and Section 8 companies are all types of non-profit organizations that have social and charitable purposes. However, there are some key differences between these three types of organizations.
NGOs, or non-governmental organizations, are usually registered as trusts, societies, or non-profit companies. They are typically formed by a group of individuals or organizations with a common interest in addressing a particular social or environmental issue. NGOs may have a narrow or broad focus, and they often rely on donations from individuals or organizations to support their operations. NGOs are known for their flexibility and adaptability in responding to social or environmental challenges, and they often work with other NGOs, governments, or international organizations to achieve their goals.
Trusts, on the other hand, are a form of legal entity that is created to hold and manage property or assets for the benefit of one or more beneficiaries. Trusts can be used for a variety of purposes, such as charitable, educational, or religious purposes. Unlike NGOs, trusts are usually created by a founder or settlor, and they may have a smaller scope of activities. Trusts are often managed by a board of trustees, who have a fiduciary duty to act in the best interests of the beneficiaries.
Section 8 companies, also known as non-profit companies, are a special type of company that is formed under the Companies Act, 2013. Like NGOs and trusts, Section 8 companies have a non-profit objective, but they are also governed by specific legal requirements and regulations. Section 8 companies are typically formed to address broader social or charitable causes, and they may have a wider geographic area of operation. Unlike trusts, Section 8 companies have a board of directors and may also have shareholders, although these shareholders do not receive any dividends or profits from the company’s operations. Section 8 companies may generate revenue through their social or charitable activities, and they are exempt from paying taxes on their income, subject to certain conditions.
In summary, while NGOs, trusts, and Section 8 companies share some similarities in their non-profit nature and social or charitable objectives, there are also some important differences in their legal structure, governance, and scope of activities. The specific type of organization that is best suited for a particular social or charitable cause will depend on factors such as the goals of the organization, the sources of funding available, and the legal and regulatory framework in the country where the organization operates.
Conclusion:
In summary, both NGOs and Section 8 Companies are important entities that work towards promoting social welfare in India. While they share some similarities in their objectives and funding, they differ in their legal framework, ownership, and taxation. Depending on the specific objectives of an organization, one may choose to form either an NGO or a Section 8 Company. While NGOs and Section 8 companies share similarities in their social and charitable purposes and non-profit nature, there are also several differences in their legal status, scope of activities, governance and management structure, sources of funding, and tax benefits and exemptions. These differences may impact the way that these organizations operate and are perceived by donors, volunteers, and the public. The incorporation of section 8 company in India requires the filing of the necessary incorporation documents with the Registrar of Companies, obtaining a Digital Signature Certificate (DSC) and Director Identification Number (DIN) for the proposed directors, and obtaining the Certificate of Incorporation from the RoC.