Introduction

In India, charitable and non-profit activities can be carried out through different legal structures — the most common being a Section 8 Company and an NGO Trust. Although both operate for social welfare, education, healthcare, and community development, they differ significantly in registration, governance, tax benefits, documentation, and compliance requirements.

This guide by Bisways Consulting Group clearly explains the differences between Section 8 companies and charitable trusts, helping organisations and donors choose the right structure for their social initiatives.

What Is a Section 8 Company?

A Section 8 Company is a non-profit organisation incorporated under the Companies

Act, 2013, with the objective of:

• Promoting education

• Social welfare

• Art, culture, environment

• Science, sports, charity

Key features:

• Registered with MCA (Ministry of Corporate Affairs)

• Operates as a limited company without profit distribution

• Surplus must be reinvested in company objectives

• High credibility due to strict compliance and audit standards

What Is an NGO Trust?

A Trust is formed under the Indian Trusts Act, 1882 (public charitable trusts), created by:

• A settlor (founder)

• Trustees

• Beneficiaries (public or specific group)

Key features:

• Registered at the local sub-registrar office

• Governed by the Trust Deed

• Simple formation with minimal compliance

• Best suited for local welfare activities, charity projects, and religious or community-based initiatives

Major Differences Between Section 8 Company and Trust

1. Registration Process

• Section 8 Company: MCA registration, digital documents, company name approval, and licence application.

• Trust: Executed via a Trust Deed and registered at Sub-Registrar Office.

2. Governing Law

• Section 8 Company: Companies Act, 2013.

• Trust: Indian Trusts Act, 1882.

3. Compliance Requirements

• Section 8 Company: High compliance (ROC filings, audits, AGM, financial statements).

• Trust: Low to moderate compliance depending on state rules.

4. Management Structure

• Section 8 Company: Board of Directors.

• Trust: Board of Trustees.

5. Public Credibility

• Section 8 Company: Highest transparency and recognition.

• Trust: Accepted but documentation standards vary.

6. Tax Exemptions

Both can apply for:

• 12AB Registration

• 80G Exemption

However, Section 8 companies often receive quicker approvals due to better governance.

7. Ability to Receive CSR Funding

• Section 8 Company: Highly preferred for CSR funds.

• Trust: Eligible, but corporate donors may prefer Section 8 entities for governance transparency.

8. Foreign Contributions (FCRA)

Both are eligible, but compliance is easier for:

• Section 8 Company, due to tighter documentation and reporting standards.

Comparison Overview

Which Is Better?

Choose Section 8 Company if you want:

• High trust from donors

• Corporate CSR funding

• Strict governance and professional management

• National/international operations

Choose an NGO Trust if you want:

• Simple and quick setup

• Local community projects

• Flexible administration

• Lower compliance burden

Conclusion

Both Section 8 companies and NGO trusts play a significant role in India’s social development ecosystem. The right choice depends on the scale, nature of activities, funding model, and long term vision of the organisation. Section 8 companies offer higher credibility and compliance, while trusts provide operational flexibility and simpler governance.

Bisways Consulting Group assists NGOs, trusts, and Section 8 companies with registration, compliance, taxation, auditing, and CSR documentation — ensuring smooth and legally compliant operations.