How to Obtain a Digital Signature for Directors
In India, a Trust is managed by trustees as specified in the Trust Deed, whereas a Section 8 Company is administered by a Board of Directors, similar to a Private Limited Company.
During the incorporation process, Digital Signature Certificates (DSC) are obtained for the proposed directors. To apply for a DSC, the following documents are required:
PAN Card or Aadhaar Card
Driving License / Passport / Voter ID / any Government-issued ID
After submitting these documents, the applicant must complete the OTP-based verification and eKYC process to receive the DSC in their name.
Section 8 Company Name Approval
Alongside the DSC application, a name approval request for the Section 8 Company can be submitted to the Ministry of Corporate Affairs (MCA).
The name of a Section 8 Company should end with terms such as Foundation, Forum, Association, Federation, Chambers, Council, Electoral Trust, etc.
The name approval process usually takes around 24 to 72 hours.
Memorandum of Association (MOA) and Articles of Association (AOA)
Once the name is approved, the MOA and AOA are prepared and submitted along with Form INC-12 to the Registrar of Companies (ROC).
Subscribers must sign the MOA and AOA and clearly mention their name, address, occupation, and description. The presence of at least one witness is mandatory to attest the signatures.
Process of Incorporation
Below is the step-by-step process for incorporating a Section 8 Company:
Obtain DSC for the proposed directors.
After DSC issuance, file Form DIR-3 with the ROC to apply for Director Identification Number (DIN).
Once approved, the ROC allots the DIN to the directors.
File Form INC-1 with the ROC to apply for company name approval.
After name approval, apply for a Section 8 license by filing Form INC-12.
Upon approval, the license under Section 8 is issued in Form INC-16.
File SPICe Form 32 with the ROC for incorporation along with affidavits, declarations, KYC documents, consent letters, and the finalized MOA and AOA after obtaining the license.
If all submitted documents are found satisfactory, the ROC issues the Certificate of Incorporation.
80G Certificate
An 80G Certificate provides tax relief to individuals who donate to charitable trusts or Section 8 Companies, allowing full or partial tax exemption on donated amounts. Organizations registered under Section 12A enable donors to claim deductions under Section 80G.
There is a maximum permissible deduction limit. If the donated amount exceeds 10% of the donor’s gross total income, the excess amount is not eligible for tax benefits.
Who Can Claim Tax Benefits Under Section 80G?
Individuals making eligible donations can claim tax deductions under Section 80G.
Only donations made to approved trusts and institutions qualify for deduction.
Who Cannot Claim Tax Benefits Under Section 80G?
Donations made to foreign trusts are not eligible for tax exemption under Section 80G.
Donations to political parties do not qualify for deductions.
Expenses incurred for printing or publishing brochures, pamphlets, or flyers are not allowed as deductions.
Donations made by NRIs to eligible institutions also qualify for Section 80G benefits.
If donations are deducted from salary and the receipt mentions the employer’s name, employees can still claim deductions under Section 80G.
How to Obtain an 80G Certificate
Registration under Section 80G is granted by the Income Tax Commissioner upon submission of Form 10G. The application must be supported by the following documents:
Registration Certificate
MOA or Trust Deed
No Objection Certificate (NOC) from the owner of the premises where the registered office is located
PAN Card copy of the Trust or Institution
Copy of electricity bill, water bill, or house tax receipt
Evidence of welfare activities carried out
Progress report since inception or for the last three years
Financial statements and balance sheets since inception or for the previous three years
List of donors along with their addresses and PAN details
Details of trustees or governing body members with contact information
Copy of registration under Section 12A or notification issued under Section 10(23), Section 10(23C)
12A Registration
The Income Tax Department provides 12A registration as a one-time approval to trusts and other non-profit organizations. The purpose of 12A registration is to grant exemption from income tax.
Generally, an application for 12A registration is filed immediately after incorporation. Trusts and NGOs that obtain 12A registration are exempt from paying tax on their surplus income. All eligible non-profit entities can apply for 12A registration.
Benefits of 12A Registration
The primary advantage of 12A registration is income tax exemption on income applied toward charitable or religious activities. Any income used by a 12A-registered organization for such purposes is treated as an application of income.
Organizations registered under Section 12A are eligible to receive grants from the Government as well as from various private institutions.
Entities holding 12A registration can also avail benefits under Section 80G. However, NGOs must submit a separate application to obtain 80G registration.
FCRA Registration
FCRA registration refers to registration under the Foreign Contribution Regulation Act, 2010. It is mandatory for charitable trusts, societies, and Section 8 Companies that wish to receive foreign donations or foreign contributions.
Objectives of FCRA 2010
The key objectives of the FCRA Act, 2021 are:
To regulate the acceptance and utilization of foreign contributions by certain individuals or organizations.
To restrict the receipt and use of foreign contributions or foreign hospitality for activities that may be against national interest, including matters connected or incidental to such activities.