Difference Between NGO & Section 8 Company

What is an NGO?
An NGO (Non-Governmental Organization) is a non-profit group that works independently from the government to address social, economic, or environmental issues. NGOs can take different forms, such as charities, advocacy groups, development organizations, and research institutions.
Unlike government agencies, NGOs rely on funding from private donors, companies, and international organizations rather than the government. They work in areas like education, healthcare, environmental protection, human rights, and disaster relief. Their main goal is to serve the public and bring positive change to society.
Laws Governing NGOs in India
Just like Section 8 Companies, NGOs in India must follow several laws, including:
• Societies Registration Act, 1860 – Governs NGO registration and management.
• FCRA, 1976 – Regulates foreign funding.
• Income Tax Act, 1961 – Defines tax benefits and exemptions.
• GST Act, 2017 – Applies tax regulations on NGO-related goods and services.
• FEMA, 1999 – Manages foreign exchange transactions for NGOs.
• Indian Constitution – Provides fundamental rights like freedom of speech and association, which allow NGOs to function freely.
NGOs must comply with these laws to maintain their credibility and continue receiving donations and grants. Following the right legal procedures ensures that NGOs can focus on their mission without any legal troubles.
Key Differences Between an NGO and a Section 8 Company
If you’re planning to start a non-profit in India, you might be wondering whether to register as an NGO or a Section 8 Company. Both serve social causes, but they have different legal structures and rules. Let’s break it down in simple terms.
1. Legal Framework
A Section 8 Company is registered under the Companies Act, 2013, while an NGO is usually registered under the Societies Registration Act, 1860 or the Indian Trust Act, 1882. This means a Section 8 Company follows stricter corporate rules, whereas NGOs have more flexible legal structures.
2. Structure & Management
A Section 8 Company has a formal setup with directors and shareholders, just like any private company. In contrast, an NGO is managed by trustees or members, and its structure is usually more informal.
3. Purpose
Both exist to serve society, but their focus differs.
Section 8 Companies are formed to promote areas like education, arts, sports, science, or social welfare in a structured way.
NGOs can work in any social cause, whether small or large, local or international.
4. Fundraising
Section 8 Companies can raise funds by issuing shares and even earning income from services, as long as profits are used for social purposes.
NGOs rely mostly on donations, grants, and charity events to fund their activities.
5. Taxation
Both can get tax exemptions, but the rules vary:
Section 8 Companies must comply with corporate tax laws, even if they get some exemptions.
NGOs can get full tax benefits under Section 12A and 80G of the Income Tax Act, provided they meet the conditions.
6. Reporting & Compliance
Section 8 Companies have to file annual financial reports, audits, and tax returns, just like any registered company.
NGOs have fewer strict rules, but they must maintain records of donations and spending, especially if they receive foreign funding.
7. Liability
In a Section 8 Company, the directors and shareholders have limited liability, meaning their personal assets are protected if the company faces financial issues.
In an NGO, depending on the type of registration, members or trustees could be personally liable for debts and obligations.