Non-Profit Organization compliance mainly consists of obtaining licenses, conducting audits and filing annual returns. An NPO is registered under Section 8 of the Companies Act, 2013. That is why they are also known as Section 8 companies.
NPOs are registered under the Companies Act, 2013. These organizations can use their profits only for promotion of their objects and cannot distribute any dividend to their members. An NPO can have promotion of any of the following as its main object.
- Social Welfare
- Protection of Environment, or
- Any such other object
Exemptions to NPOs
NPO compliance is similar to compliance for other companies. NPOs also enjoy exemptions from some requirements which are mandatory for other companies. Some such exemptions are below.
- No minimum paid up share capital
- Notice for Annual General Meeting (AGM) can be sent 14 days before the meeting instead of 21 days
- Any number of directors (no minimum or maximum limit)
- Exemption from appointing nomination and remuneration committee
Types of Non-Profit Organization Compliance
An NPO needs to observe the following types of compliance.
1. Holding Board Meetings
An NPO must hold two board meetings every year, i.e. one every six months.
2. Registration of name with MCA
An NPO needs to register its name with the Ministry of Corporate Affairs. This is done after checking name availibility with the MCA.
3. Compulsory audit
It is compulsory for an NPO to conduct an annual audit of its accounts.
4. Obtaining license from the Central government
An NPO needs to obtain license from the Central government for doing business. The Registrar of Companies issues licenses to NPOs.
5. Filing annual return in Form MGT 7
An NPO needs to submit its annual return in along with an extract of annual return in Form MGT 9.
6. Filing income tax return
Every company needs to file an annual income tax return and a section 8 company is no exception to this. It needs to file a return irrespective of profit or loss.
7. Registration under Section 12AA or 80G of the Income Tax Act
An NPO can avail certain exemptions under the income tax act. For availing the exemption, it needs to register under section 12AA or 80G of the Act.
What documents do I need?
For seamless compliance, you need the following documents and details.
- Digital Signature Certificate (DSC) of director/manager/managing director
- Director Identification Number (DIN) for directors
- Forms INC 12
- MoA in form INC 13
- Articles of Association
- Forms INC 14 and 15
- Estimate of future annual income and expenses for next 3 years
- List of objects of the company
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