1. Mandatory PAN and Income Tax Return Filing
- Yes, all Section 8 companies are mandatorily required to obtain a PAN (Permanent Account Number) under the Income Tax Act, 1961.
- They must file an income tax return (ITR-7) annually, regardless of income level.
- This applies even if the company has no taxable income or operates entirely on donations.
- Non-filing may result in penalties or cancellation of registration.
- Filing ensures transparency and legal compliance.
2. Registration under Section 12AB for Tax Exemption
- To avail of income tax exemption, Section 8 companies must register under Section 12AB of the Income Tax Act.
- This registration recognizes the entity as a charitable or religious institution.
- Without it, any surplus income will be treated as taxable income.
- Registration must be obtained within 12 months of incorporation or before seeking exemption.
- It requires application in Form 10A or Form 10AB through the income tax portal.
3. 80G Registration for Donor Tax Benefits
- For donors to claim tax deductions, the company must obtain 80G registration from the Income Tax Department.
- This allows donors to claim 50% or 100% deductions on the donation amount.
- A separate application must be made along with documentation of charitable activities.
- The benefit enhances the credibility and fundraising capacity of the company.
- Companies must issue valid 80G receipts to donors for them to claim deductions.
4. Timely Compliance to Retain Tax Benefits
- Registrations under 12AB and 80G are now valid for a limited period and must be renewed periodically.
- Renewal is required every 5 years to maintain tax-exempt status.
- Companies must submit activity reports, audited financials, and utilization records.
- Any deviation from objectives or fund misuse can lead to cancellation.
- The Income Tax Department reserves the right to review or revoke approvals.
5. Other Tax-related Responsibilities
- If a Section 8 company earns business income, it must maintain separate books and segregate charitable and commercial revenue.
- They must deduct and deposit TDS (Tax Deducted at Source) where applicable.
- GST registration may also be required based on the nature and scale of activities.
- They must comply with Form 10B audit requirements if total income exceeds the prescribed limits.
- Proper tax registration and compliance safeguard the legal and financial standing of the company.
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