Income Tax Return for Section 8 Company

Income Tax Return for Section 8 Company

According to the Companies Act 2013, Section 8 is a company that has the sole objective of promoting education, Art, Sports, Commerce, Social Welfare, Charity, Research, Religion, Environment, Science, and many other similar objects. The income and profits of a Section 8 Company get utilized for the promotion of its objective only, wherein; no member receives any part of profit or dividend. Such Companies got incorporated to serve society by doing charity and not to earn a profit. Section 8 Company was registered under Section 25 of the Companies Act, which provides it with several tax exemptions and benefits.

Individuals and businesses can file an Income Tax Return through the ITR 7 Form under:

  1. Section 139.4A

  1. Section 139.4B

  1. Section 139.4C

  1. Section 139.4D

  1. Section 139.4E

  1. Section 139.4F

Hence, Form ITR 7 needs to be submitted under Section 8 Companies & other Forms of non-profit businesses.

Tax Exemption

Tax exemption refers to the financial dispensation of property, persons, income, transactions, or people from taxes that otherwise would be levied on them. Once an organization acquires tax exemption, it provides a sense of relief from reduced rates, taxes, or tax on a portion of any item. Usually, the organizations that are running a non-profit business leverage tax exemption from income taxes, property taxes, and multi-jurisdictional or cross-border scenarios.

Why does Section 8 Company get Tax Exemption?

The Central Government imparts many exemptions to Section 8 Company vide Ministry of Corporate Affairs Notification No. G.S.R.466 (E) dated 5th June 2015, along with amendments to the notification vide Notification No. G.S.R. 584 (E) dated 13th June 2017. The biggest reason why Section 8 Companies get exempted from specific tax is that it exclusively works for the welfare of the public. No personal gains are involved in the operations of a Section 8 Company; therefore, it deserves to receive some added benefits in return. 

Like any other company, Section 8 Company also has members and directors, but unlike others, they function more like volunteers and promoters of the social cause. The directors of such companies are mere service providers who indulge in the activities of spreading awareness about different aspects and helping the general public. In contrast to public and private companies that require capital to establish the business, the Section 8 Company depends upon donations and not on loans.

List of Tax Exemptions to Section 8 Company 

Being a Non-Profit Organisation (N.P.O.), Section 8 Company is immune from some provisions of the income tax. Besides, they avail of various other deductions and tax benefits under Section 80G of the Income Tax Act, 1961. Let’s look at the list of benefits that every Section 8 Company procures:

  1. Section 8 Company needs to pay less stamp duty as compared to other companies.
  1. Under the Income Tax Act, 1961, the donors of Section 8 Company may claim a 50% rebate against the donations they made. Under Section 80G, it shall be valid for a period of one to three years.
  1. The taxation over section 8 companies is on par with other organizations. The profits got taxed by @30%.
  1. If a Section 8 company got registered under section 12AA (tax exemption) of the Income Tax Act, then its profits shall be entirely exempted, and no tax will be levied on the company.
  1. Every year the Central Government issues some compliance to enable more favorable conditions for N.P.O.’s in terms of tax exemption.

Besides the above perks, there is an array of benefits associated with Section 8 Company.

 

 

Created & Posted by Pooja

Income Tax Expert at TAXAJ

 

TAXAJ is a consortium of CA, CS, Advocates & Professionals from specific fields to provide you a One Stop Solution for all your Business, Financial, Taxation & Legal Matters under One Roof. Some of them are: Launch Your Start-Up Company/Business, Trademark & Brand Registration, Digital Marketing, E-Stamp Paper Online, Closure of Business, Legal Services, Payroll Services, etc. For any further queries related to this or anything else visit TAXAJ

 

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