Difference between NGO & Section 8 Company
Introduction
Navigating the world of non-profit organizations and charitable entities in India can be a bit overwhelming, especially when terms like NGO (Non-Governmental Organization) and Section 8 Company are often used interchangeably. While both are dedicated to charitable objectives, there are distinct differences between an NGO and a Section 8 Company in terms of legal structure, governance, and operational framework. This blog post aims to shed light on these differences to help you understand which entity might be more suitable for your philanthropic endeavors.
What is an NGO?
An NGO, or Non-Governmental Organization, is a broad term used to describe non-profit entities that operate independently of the government and aim to address social, cultural, environmental, or humanitarian issues. NGOs can take various forms, including trusts, societies, and associations, and are primarily governed by the laws and regulations governing their specific type of structure.
What is a Section 8 Company?
A Section 8 Company, previously known as a Section 25 Company under the Companies Act, 2013, is a specific legal structure established for non-profit organizations in India. The primary objective of a Section 8 Company is to promote arts, commerce, science, research, education, and other charitable activities. Unlike NGOs, a Section 8 Company Registration Online is registered under the Companies Act and operates as a company limited by guarantee or shares, with its governance and operations regulated by the Ministry of Corporate Affairs (MCA).
Key Differences Between NGO and Section 8 Company
Legal Structure
•NGO: NGOs can be structured as trusts, societies, or associations, each governed by specific laws and regulations applicable to their respective type of organization.
•Section 8 Company: A Section 8 Company is registered under the Companies Act, 2013, and operates as a company limited by guarantee or shares, with its governance and operations regulated by the MCA.
Registration Process
•NGO: The registration process for an NGO varies depending on its structure (trust, society, or association) and is generally governed by state-specific laws and regulations.
•Section 8 Company: The registration process for a Section 8 Company involves obtaining a Digital Signature Certificate (DSC), Director Identification Number (DIN), name reservation, and filing incorporation documents online through the MCA21 portal.
Governance and Compliance
•NGO: NGOs are governed by a board of trustees or governing body and are required to comply with the laws and regulations applicable to their specific type of organization, such as the Indian Trusts Act, Societies Registration Act, or respective state-specific laws.
• Section 8 Company: A Section 8 Company is governed by its board of directors and is required to comply with the provisions of the Companies Act, 2013, including conducting annual general meetings, maintaining statutory registers and records, and filing annual financial statements and returns with the MCA.
Tax Benefits
• NGO: Registered NGOs may be eligible for tax exemptions under Section 12A and Section 80G of the Income Tax Act, 1961, subject to compliance with the prescribed conditions and guidelines.
• Section 8 Company: Section 8 Companies are also eligible for tax exemptions under Section 12A and Section 80G of the Income Tax Act, 1961, provided they meet the specified criteria and comply with the applicable laws and regulations.
Read Also:- Definition of NGO And its Role in Civil Society
Conclusion
In summary, while both NGOs and Section 8 Companies are dedicated to charitable objectives and aim to make a positive impact on society, they differ significantly in terms of legal structure, registration process, governance, compliance, and tax benefits Understanding these differences can help you make an informed decision when choosing the appropriate legal structure for your philanthropic endeavors in India.
Whether you opt for an NGO or a Section 8 Company, it is crucial to consult with legal and financial professionals to ensure compliance with the applicable laws and regulations and to maximize the benefits and impact of your charitable initiatives. Both entities offer unique advantages and opportunities to contribute to social welfare and development, and selecting the right structure can pave the way for a successful and rewarding journey in the non-profit sector.
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