Income Tax || Process of Filing Section 8 Company Return

Income Tax Return for Section 8 Company

According to the Companies Act, 2013, a Section 8 company is one that operates with the primary objective of promoting education, arts, sports, commerce, social welfare, charity, research, religion, environment, science, and other similar causes. The income and profits of a Section 8 company are solely used for furthering its objectives, and no member receives any part of the profits or dividends. These companies are established to serve society and carry out charitable activities, rather than to earn profits.

A Section 8 company is registered under Section 25 of the Companies Act, which grants it several tax exemptions and benefits. These exemptions typically relate to the income generated by the company, which is not subject to regular taxation, provided the income is used exclusively for the promotion of its charitable goals.

List of Tax Exemptions for Section 8 Company

As a Non-Profit Organization (NPO), a Section 8 company is exempt from certain provisions of the income tax law. Additionally, it benefits from various tax deductions and exemptions under Section 80G of the Income Tax Act, 1961. Below is a list of the key tax benefits available to Section 8 companies:

1. Lower Stamp Duty: Section 8 companies are required to pay less stamp duty compared to other types of companies.

2. Rebate for Donors: Donors contributing to a Section 8 company can claim a 50% rebate on their donations under Section 80G. The validity of this rebate can range from one to three years.

3. Taxation on Profits: The profits of Section 8 companies are taxed at a rate of 30%, similar to other organizations, subject to applicable exemptions.

4. Tax Exemption Under Section 12AA: If a Section 8 company is registered under Section 12AA of the Income Tax Act, its profits will be fully exempt from tax, and no tax will be levied on the company.

5. Government Compliance Guidelines: The Central Government issues annual compliance requirements, which offer more favorable tax conditions for NPOs, facilitating greater tax exemptions.

Key Points for Filing ITR-7:

1. ITR-7 Form Selection:

The ITR-7 form is applicable to companies, trusts, and other entities engaged in charitable or religious activities.

2. Audit Report (Form 10B):

Filing an audit report (Form 10B) is mandatory if the total income (before exemptions) exceeds the basic exemption limit.

Attach Form 10B, which is an audit report certified by a Chartered Accountant.

3. Financial Information:

Include details of income applied for charitable purposes, donations, grants, and any exemptions claimed.

4. Sections Applicable:

Section 11: Income derived from property held for charitable purposes.

Section 12: Voluntary contributions received by the entity.

How to Process of Filing Section 8 Company Return through Software:

Create a Client Master as an AOP (Association of Persons) Trust in the Software:

Note:- Once the assessee status is created, it cannot be changed. If you wish to modify the status, you will need to create a new client with the updated status in the "Client Master."

Step 1:

Steps to Create a New Client Master:

1. Go to the "Master" section.

2. Select "Client Selection (Add, Edit, Delete)" or press the F8 key.

3. Click on "Add Entry" to start adding a new client.

Step 2:

Enter the Company PAN and Select Status: "AOP (Trust)"

Step 3:

Click on "Yes" Then Create a Client Master.

Step 4:

Go to Transactions >> Prepare ITR-07:

Step 5:

1. Select the "Status" as "Domestic Company Claiming Exemption."
2. Select the "Sub-status".
3. Select the "Return furnished under the section".
4. Select the "Sub Section".
5. Enter the "Details of the projection/institute", and then Click on "Save" Button.

Note:- After entering the registration details, fill in the details under the respective heads, and enter the income and expenditure. Finally, generate the computation and file your return accordingly.

Hope This Helps.

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