A Section 8 Company is simply a non-profit organization registered under Section 8 of the Indian Companies Act, 2013. It is a structure licensed by the Central Government's Ministry of Corporate Affairs (MCA) to promote charitable, social, or public-benefit causes.
The legal framework of a Section 8 Company is based on the following two rules:
The Profit Reinvestment Rule: Can a Section 8 Company make a profit? Yes — under the Profit Reinvestment Rule, a Section 8 Company is fully permitted to earn income, generate profits, and run sustainable social projects. However, every single rupee of surplus or profit must be reinvested directly into promoting the company's social objectives.
The Dividend Ban: No portion of the company's profits, surplus, or accumulated funds may be distributed to the company's members, promoters, or directors in the form of dividends, bonuses, or other financial returns.
This is exactly why corporate donors, government departments, and institutional funders trust Section 8 companies above all else.
Section 8 Company vs. Trust vs. Society: Choosing the Best Structure in Delhi
While all three routes promote social welfare, they operate under entirely different laws and compliance systems. To help you choose the best structure, here is a comparison of the three legal structures in Delhi:
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| Governing Statute | Indian Trusts Act, 1882 (with local sub-registrar rules) | Societies Registration Act, 1860 (as applied in Delhi) | Companies Act, 2013 (under the Central Government) |
| Registering Authority in Delhi | Local Sub-Registrar Office of your revenue district | Office of the Registrar of Societies, Government of NCT of Delhi | Ministry of Corporate Affairs (MCA) via RoC Delhi |
| Minimum Promoters | 2 Trustees | 7 Governing Members | 2 Directors & Members (for a private setup) |
| Delhi State Stamp Duty | ₹500 plus 1.5% of your declared corpus fund | ₹50 flat registration fee plus standard physical stamp filings | Fully Exempt (₹0) under Delhi stamp schedules |
| Personal Liability of Founders | Trustees often face unlimited personal liability | Governing body members face personal liability | Limited Liability (promoters' personal assets are safe) |
| Credibility & Donor Trust | Moderate (often viewed as traditional or family-led) | Moderate (prone to internal democratic disputes) | Highest (highly preferred by CSR and institutional funders) |
| Annual Compliance Burden | Low (minimal state-level disclosures) | Moderate (annual general body lists) | High (mandatory statutory audits and public transparency) |
If your goals are CSR funding, institutional grants, structured governance, and long-term credibility, a Section 8 Company is usually better suited.
Need help deciding which entity structure fits your NGO goals? Schedule a 15-minute structure evaluation call with our advisors.