Annual Compliance for Section 8 Companies- Checklist, Deadlines, and Penalties

Any business incorporated under the Companies Act 2013 or previous regulations, whether it is a private limited company, public limited company, small company, one person company, or section 8 company, is obliged to submit annual reports and income tax returns every year, whether they have operated or not. Section 8 Company must also produce financial statements and annual reports, as well as have an annual general meeting and comply with the terms of the Companies Act 2013 and the Income Tax Act 1961.

The following topics will be discussed in this article:

  • What are section 8 corporations and what characteristics do they have?
  • What are the section 8 company’s yearly compliances?
  • What are the section 8 company’s yearly compliances depending on events?
  • What documentation are necessary for section 8 firms’ yearly compliances?
  • What are the income tax obligations of a section 8 company?
  • What are the filing deadlines for section 8 corporations?
  • What are the advantages of adhering to all yearly compliances?
  • What are the consequences of noncompliance?

 

What is section 8 firms in India and what are their characteristics?

Section 8 businesses are corporations formed under the Companies Act with the goal of promoting trade, science, arts, sports, research, education, social welfare, and environmental protection, among other things. A section 8 company is a non-profit organisation that is registered as a non-governmental organisation. Section 8 company carry out all commercial operations and produce a profit, but that profit is utilised by the organisation to achieve the firm’s goals, and the profit and dividend are not paid to the members of the company. Section 8 company are limited companies; however, they do not have the term Limited in their name.

Section 8 corporations have the following characteristics:

  1. Charity objectives: Section 8 firms are those that do not want to generate a profit. Their goals are entirely philanthropic. They aim to promote trade, science, the arts, sports, research, education, social welfare, and environmental protection, among other things.
  2. Profit- These organisations are not formed to make a profit, hence any profit made by these organisations is utilised to further the goals of the company and is not paid to the members.
  3. There is no need for a predetermined minimum paid-up share capital in the case of Section 8 corporations, according to the Companies Act.
  4. Government licence: These firms may only be founded if they get a licence from the Central Government. The Central Government has the authority to cancel such a licence at any moment.
  5. Limited liability: The members of Section 8 businesses have limited responsibility; liabilities cannot be infinite in any situation.
  6. In the context of section 8, individuals, associations of people, and enterprises are all enrolled as members.

 

What are the yearly compliances of an Indian section 8 company?

Section 8 firms must comply with all compliances imposed by the Income Tax Authorities and the Registrar of Companies. If a business fails to comply with any of the provisions of the Income Tax Act or the Companies Act, it must pay fines and, in certain situations, its directors may be disqualified for a period of time.

We will now go through the yearly compliances of section 8 companies-

  • Appointment of an Auditor (Filing Form ADT-1)-Section 139 of the Companies Act 2013 requires every business to appoint an auditor. The employment of an auditor is required because the auditor will examine the company’s books of accounts and yearly reports and give his independent opinions. The initial auditor of a section 8 company is appointed within 30 days of the company’s establishment. The auditor is appointed by the company for a term of five years, and as part of that appointment, Form ADT-1 must be filed.
  • Annual General Meeting– An annual general meeting is required to be held within 6 months after the conclusion of the fiscal year.
  • Income Tax Returns: The company’s Income Tax Returns must be submitted every year at the conclusion of each assessment year, on or before September 30th.
  • Statutory Registers: Section 8 firms must also keep all of the statutory registers required by Section 8 of the Companies Act 2013, such as the register of members, record of loans received, register of charges generated, register of directors, and so on.
  • Boards’ Report: According to the Companies Act 2013, the company’s Board of Directors is expected to submit their board’s report in the right way, together with the financial statements and other annexures. The board report Form AOC-4 will be filed by the corporation.
  • Board Meeting- According to the rules of the Companies Act 2013, the firm will have board meetings twice a year in the case of small enterprises, with no more than 90 days between meetings.
  • Annual Financial Statement Preparation: In accordance with the requirements of the Companies Act 2013, the firm will prepare its financial statements on an annual basis.

The balance sheet, profit and loss statement, cash flow statement, and various annexures are all part of the financial statement.

  • Submission of Financial Statements with ROC: Under the Companies Act 2013, every business is expected to submit its financial statements in the proper form within 30 days of the date of the company’s annual general meeting.
  • Submitting Yearly Returns with Registrar: According to the Companies Act 2013, the firm is obliged to file its annual return. The annual return of the company will include all information on the management and shareholders and must be submitted in Form MGT-7 with the (ROC) Registrar of Companies within 60 days of the date of the annual general meeting.
  • Director’s Report Preparation- According to Section 134 of the Companies Act 2013, the company is obliged to create a director’s report, which is submitted in Form AOC-4. The firm may explain the actual financial status of the company and the scope of the business to the shareholders of the company based on the directors’ report.

 

What are the yearly compliances of a section 8 firm in India dependent on events?

Certain yearly compliances are event-based and must be met upon the occurrence of a specific event. These are the occasions:

  1. Appointment of a Key Management Personnel (KMP).
  2. Appointment, re-appointment, and removal of the company’s auditors.
  3. Name change for the company.
  4. When the Registered Address changes.
  5. Whenever the Memorandum of Association is amended.
  6. Payment for Sharing Application.
  7. Share Allocation.
  8. Carrying out the agreement with the company’s linked party.
  9. When there is a share transfer.
  10. If the name of the bank signatory changes.
  11. Whenever the statutory auditor changes.
  12. Where there is any further compliance for 80G and section 12AA registration.
  13. Appointment, re-appointment, and the Removal of Directors (Whole Time Director, Managerial Director) of the organisation.
  14. Any additional modifications to the company’s rules and structure.

 

What documentation are necessary for section 8 firms’ yearly compliances?

Below is a list of the needed documentation for yearly compliances of section 8 companies-

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

What are the income tax obligations of a section 8 corporation?

Section 8 corporations must also comply with income tax regulations. The requirement of corporate taxes applies to section 8 corporations; however, some exclusions are given by the Income Tax Act. To take advantage of these exclusions Section 8 The following requirements must be met by the company:

  1. A section 8 company must register under section 12AA of the Income Tax Act of 1961 by submitting Form 10A to the Principal Commissioner.
  2. It must also meet all of the requirements of Section 11 of the Income Tax Act of 1961.
  3. The Section 8 corporation will apply for Section 80 G.
  4. The Section 8 corporation will submit its yearly income tax return on or before the due date.
  5. The Section 8 corporation would follow all other relevant and appropriate Income Tax Act 1961 regulations.

 

What is the due dates for form filing 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 advantages of adhering to all yearly compliances for Section 8 companies in India?

All firms registered under the Companies Act 2013 are expected to comply with all regulations. If the firm fails to comply with any of the requirements, the company must pay the applicable penalty. Companies must comply with all yearly compliances in order to avoid fines and to get the following benefits:

  • Increased Company Credibility- Companies who comply with all compliances within the necessary time frame are eligible for increased credibility. Companies with more reputation may get financial assistance from banks, financial institutions, and other authorities.
  • Increase Trust Among Investors, Customers, and Vendors- When a firm complies with all compliances during the appropriate time and delivers honest financial information to the user of the financial statement, confidence among vendors, investors, creditors, and others may be developed.
  • Prevent Legal Complications- If a firm is obligated to comply with a requirement and fails to do so, the company will face legal concerns and legal complexities. In the event of such legal issues, the authorities may issue a notice. There is a duty to comply with all compliances in order to prevent these legal issues.
  • Transparency in the Company’s Operations-The financial statement and annual return of the company explain the company’s financial performance and financial position, and when the company files all of these required statements and details within the specified period, the company maintains its transparency.
  • Avoid paying Penalties- When the firm complies with all of the compliances during the time, there is no danger of penalties, thus the company may avoid paying the amount of penalty.

 

What are the consequences for failure to comply for Section 8 companies in India?

According to the Companies Act of 2013 and the Income Tax Act of 1961, section 8 firms are needed to comply with specific compliances. If a firm fails to comply with any of the mandatory compliances, fines will be imposed on the company, and the company will be compelled to pay such penalties. 

  • If the CG discovers any fraudulent conduct or a breach of the provision, the CG has the authority to revoke the licence issued to the firm in order for it to profit from the exemptions.
  • If a company fails to comply with any of the mandatory compliance, the penalty will be at least 10 lakhs, but it may be increased to 1 crore.
  • If the company’s directors and offices are engaged in any wrongdoing, they will face the same penalties. The punishment will be either imprisonment or a fine of Rs. 25 lakhs, or both.
  • If the company’s affairs include any deception, then every officer who is in default is accountable for the actions described in Section 447.

 

Yearly Compliance Questions for Section 8 Businesses in India

1-What exactly is a section 8 company?

Answer: Section 8 businesses are those that are formed under the Companies Act with the goal of promoting trade, science, arts, sports, research, education, social welfare, and environmental protection, among other things. A section 8 corporation is a non-profit organisation that is registered as a non-governmental organisation.

2- Is it possible to establish a private limited company as a section 8 corporation?

Answer: Yes, a private limited company may be formed as a section 8 corporation.

3- Is it possible to establish a public limited company as a section 8 corporation?

Answer: Yes, a public limited company may be formed as a section 8 corporation.

4- Can section 8 corporations seek complete tax exemption?

Answer- Yes, section 8 company may claim complete tax exemption after meeting all of the requirements provided by the relevant provisions of the Income Tax Act 1961, and in order to do so, the company must register under sections 80G and 12AA of the Income Tax Act 1961.

5- Can a foreign corporation become a section 8 company?

Answer: Absolutely, a foreign corporation may be registered as a section 8 company.

6- What is the penalty for failing to appoint an auditor within the time frame specified?

Answer– If appointing an auditor is required and the firm fails to do so within the statutory time frame, the company would be obliged to pay a penalty of Rs.25000, which may be increased to 5 lakhs.

7- What is the punishment for failing to file a director’s consent form with the RoC?

Answer– If the necessity to submit the director consent with the ROC exists and the firm fails to do so within the stipulated time frame, the company would be liable to pay a penalty of up to Rs.50000 or imprisonment for up to six months.

8- What happens if I fail to submit yearly returns?

Answer– If a firm is required to submit an annual return and fails to do so within the statutory time frame, the company will be responsible to pay a penalty of Rs.50000, which may be increased to 5 lakhs.

9- Can section 8 company make a profit without paying taxes?

Answer– Yes, Section 8 company are permitted to accrue profits of up to 15% of their entire revenue without paying taxes.

 

10- Does the CSR mandate apply to Section 8 businesses?

Answer: Certainly, the requirements of CSR apply to Section 8 company.

 

11-What distinguishes section 8 businesses?

Answer– Section 8 corporations have the following characteristics: 

  1. Charity aims 
  2. b- Non-profit making 
  3. No minimum share capital 
  4. Government licence 
  5. Limited responsibility of the members 
  6. Privileges

 

12- What are the advantages of adhering to all yearly compliances?

Answer– The advantages of complying with all yearly compliances are as follows: 

  1. Improved firm credibility; 
  2. Increased trust among investors, consumers, and suppliers; 
  3. Prevent Legal Issues; 
  4. Transparency in the Company’s Operations; and 
  5. Avoidance of Penalties.

 

13- Are the GST regulations apply to section 8 companies?

Answer: Indeed, the laws of GST apply to section 8 Company.

 

14- Can I nominate a woman to the board of directors of section 8 companies?

Answer: Sure, we may nominate a woman to the board of directors of section 8 company.

15- When is the deadline for section 8 firms to file their ITR?

Answer– The deadline for submitting an ITR by a section 8 corporation is September 30.

16- What are the section 8 company’s yearly compliances?

Answer The following are the yearly compliances of a section 8 company: 1. Appointment of an Auditor (Filing Form ADT-1)

  1. Hold the Annual General Meeting
  2. Submission of Income Tax Returns
  3. Upkeep of Statutory Registers
  4. Prepare and submit the Boards’ Report
  5. Have a Board Meeting
  6. Compilation of the Company’s Financial Statements
  7. Submission of Financial Statements to ROC
  8. Yearly Reports with the Registrar
  9. Creation of the Director’s Report

 

17- Is the expense audit provision relevant to section 8 companies?

Answer– Absolutely, the expense audit clause applies to section 8 corporations.

 

18- Does the provision for secretarial audit apply to section 8 companies?

Answer: Absolutely, section 8 corporations are subject to the provision of secretarial audit.

  1. May section 8 corporations provide advice and consultancy services?

Answer: section 8 corporations may do advice and consultancy activity.

20- Is the internal audit requirement applicable to section 8 companies?

Answer– Absolutely, the internal audit obligation applies to section 8 corporations.

 

21- What are the yearly compliances of section 8 firms dependent on events?

Answer– There are certain yearly compliances that are necessary due to the occurrence of a specific event. These are the occasions:

  1. Appointment of a Key Management Personnel (KMP).
  2. Appointment, re-appointment, and removal of the company’s auditors.
  3. Name change for the company.
  4. When the Registered Address changes.
  5. Whenever the Memorandum of Association is amended.
  6. Payment for Sharing Application.
  7. Share Allocation.
  8. Carrying out the agreement with the company’s linked party.
  9. When there is a share transfer.
  10. If the name of the bank signatory changes.
  11. Whenever the statutory auditor changes.
  12. Where there is any further compliance for 80G and section 12AA registration.
  13. Appointment, re-appointment, and removal of the company’s directors (Whole Time Director, Managerial Director).
  14. Any additional modifications to the company’s rules and structure.

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