Section 8 Company vs Trust vs Society: Which Fits?
In short
A non-profit in India can be a trust created by a trust deed, a society registered under the Societies Registration Act, 1860 with at least seven members, or a company licensed under section 8 of the Companies Act, 2013 with at least two members and two directors (seven and three for a public one). The Section 8 company has the strongest legal identity and the most compliance, the trust is the simplest to form, and the society sits in between. The income tax rules are the same for all three: each must register under section 332 of the Income-tax Act, 2025 to keep its income exempt, and get approval under section 354 before donors can claim a deduction.
People who want to run a school, a foundation, a health programme or a community project usually reach the same fork in the road: should it be a trust, a society or a Section 8 company? All three can do charitable work, receive donations and be exempt from income tax. They differ in the law they come from, how many founders they need, how they are run and how much paperwork they create every year.
This guide compares them on the points that matter in practice. It uses the text of section 8 of the Companies Act, 2013, the Societies Registration Act, 1860 as reproduced by the Government of Delhi, and the non-profit chapter of the Income-tax Act, 2025_Bill.pdf), which applies from 1 April 2026.
What is the difference between a Section 8 company, a trust and a society?
The difference is the legal form. A Section 8 company is a company registered with the Ministry of Corporate Affairs under a licence that bars it from paying dividends. A society is an association of at least seven people registered with the state's Registrar of Societies. A trust is an arrangement in which a settlor hands property to trustees to hold for a charitable purpose set out in a trust deed.
| Point | Section 8 company | Trust | Society |
|---|---|---|---|
| Law | Companies Act, 2013 (section 8) and the Companies (Incorporation) Rules, 2014 | Trust deed, plus a state public trusts law where one exists (for example the Maharashtra Public Trusts Act, 1950) | Societies Registration Act, 1860 or the state's own societies law |
| Registered with | Registrar of Companies, through SPICe+ | Sub-Registrar (deed registered under the Registration Act, 1908), or the Charity Commissioner in states with a public trusts law | State Registrar of Societies |
| Minimum founders | 2 members and 2 directors (private); 7 members and 3 directors (public) | A settlor and the trustees named in the deed | 7 persons |
| Founding document | Memorandum (Form INC-13) and articles | Trust deed | Memorandum of association and rules |
| Legal identity | Body corporate with perpetual succession (section 9) | Property is held by the trustees | Property vests in the governing body; sues and is sued through the officer named in its rules |
| Changing objects | Needs the Central Government's prior approval (section 8(4)) | As the deed allows | Two special meetings and a three-fifths vote (section 12) |
| On closure | Surplus assets go to another Section 8 company with similar objects or to the IBC Fund (section 8(9)) | As the deed provides; cannot go back to the founders if the trust is to keep tax registration | Surplus goes to another society, never to members (section 14) |
| Annual filings under its own law | Audited accounts in AOC-4, annual return in MGT-7, board meetings and AGM | Usually none centrally; state law filings where applicable | Annual list of the governing body (section 4) |
| Income tax | Registration under section 332 and approval under section 354 of the Income-tax Act, 2025 | Same | Same |
How is a Section 8 company formed?
A Section 8 company is formed through the normal SPICe+ incorporation, with the licence applied for in the same form. Under rule 19 of the Companies (Incorporation) Rules, 2014, the application goes to the Registrar with the memorandum in Form INC-13, the articles, a declaration by an advocate, chartered accountant, cost accountant or company secretary in practice that the documents comply with section 8, and an estimate of income and expenditure for the next three years.
Section 8(1) allows the licence only where the company's objects promote commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment or a similar object, where it will apply its profits and income to those objects, and where it prohibits dividends to members. In return, the company does not need "Limited" or "Private Limited" in its name. Its name must instead include a word such as Foundation, Forum, Association, Federation, Chambers, Confederation or Council (rule 8 of the same rules).
The member and director minimums are the normal company ones: two members and two directors for a private company, seven members and three directors for a public company (section 3 and section 149). Our Section 8 company registration service covers the documents and steps.
How is a society registered?
Under section 1 of the Societies Registration Act, 1860, any seven or more persons associated for a literary, scientific or charitable purpose, or a purpose listed in section 20, can form a society by signing a memorandum of association and filing it with the Registrar. Section 2 requires the memorandum to state the society's name, its objects and the names, addresses and occupations of its governing body, with a copy of its rules certified by at least three members of that body.
Section 20 lists the purposes that qualify, including charitable societies, the promotion of science, literature or the fine arts, the diffusion of useful knowledge and the maintenance of libraries, reading rooms, museums and galleries. Several states have replaced the 1860 Act with their own law, so check which Act applies where the society will have its registered office. In Delhi the 1860 Act applies, and our Delhi company registration guide compares it with the other structures available there.
How is a charitable trust created?
A charitable trust is created by a trust deed in which the settlor sets out the charitable objects, names the trustees and transfers the initial property, often a modest sum of money, to them. There is no single national registration law for public charitable trusts. A few states have one: Maharashtra, for example, requires public trusts to register with the Charity Commissioner under the Maharashtra Public Trusts Act, 1950.
Elsewhere, including Delhi, the deed is registered with the Sub-Registrar under the Registration Act, 1908. Section 17 of that Act makes registration compulsory for documents such as gifts and settlements of immovable property worth ₹100 or more, and a document must be presented within four months of execution, as the Delhi Revenue Department explains in its registration FAQ. A registered deed is also what banks and the Income-tax Department will ask to see.
How are they governed day to day?
A Section 8 company is run by its board under the Companies Act, with board meetings, a general meeting of members, minutes, statutory registers and a statutory audit, just like any other company. A society is run by the governing body named in its memorandum under its own rules, which decide how members join, how office-bearers are elected and how meetings are held. A trust is run by its trustees under the deed, and the deed decides how trustees are appointed, replaced and how they take decisions.
That flexibility cuts both ways. A trust with a well-drafted deed can be run by a small family or founding group for decades. A trust with a vague deed can deadlock when trustees disagree, with no statutory default to fall back on. A Section 8 company has the clearest rules because the Companies Act fills every gap, but it also gives members voting rights that founders sometimes overlook.
Which structure has the most compliance?
The Section 8 company has the most. It files its audited financial statements in AOC-4 and its annual return in MGT-7 every year, and it can never use the lighter small company regime (see MGT-7 vs MGT-7A). Its directors need DINs and must complete DIR-3 KYC. Any change to its memorandum or articles needs the Central Government's prior approval under section 8(4), and a breach of section 8 can lead to a fine on the company of ₹10 lakh to ₹1 crore and revocation of its licence under section 8(6) and (11).
A society's main statutory filing is the annual list of its governing body under section 4 of the 1860 Act, due within 14 days of its annual general meeting, or in January if its rules do not provide for an AGM. A trust in a state without a public trusts law has no regular filing under trust law. For all three, most of the annual work comes from the Income-tax Act, which treats them alike.
How does the Income-tax Act, 2025 treat each structure?
It treats them the same. Section 332(1) lets a public trust, a society registered under the Societies Registration Act, 1860 or any other law, and a company registered under section 8 apply to the Principal Commissioner or Commissioner of Income-tax for registration as a "registered non-profit organisation". Without that registration, the entity's income is taxed like anyone else's.
Section 332 replaces the registration under sections 12A, 12AA and 12AB of the Income-tax Act, 1961, which the new Act still recognises as a "specified provision" in section 355. The registration stages are:
| Case | Apply | Order within | Valid for |
|---|---|---|---|
| New entity, activities not yet started | At any time in the tax year from which registration is sought | One month from the end of the month of application (provisional registration) | Three tax years |
| Provisionally registered, activities started | Within six months of starting activities | Six months from the end of the quarter of application | Five tax years |
| Registration due to expire | At least six months before expiry | Six months from the end of the quarter of application | Five tax years |
| Objects changed so they no longer meet the conditions | Within 30 days of the change | Six months from the end of the quarter of application | Five tax years |
Under section 332(5), the five-year validity becomes ten years for an entity whose total income, before the non-profit exemption, did not exceed ₹5 crore in each of the two preceding tax years. Missing the deadline for a renewal or a change of objects, without the delay being condoned, can lead to tax on accreted income under section 352.
Once registered, the organisation's taxable regular income is nil if it applies or accumulates at least 85% of its regular income for its objects in the year (section 336). Specified income, such as certain anonymous donations, is taxed at 30% (sections 334 and 337). If its total income before the exemption exceeds the basic exemption limit, it must keep books, have them audited and file a return (sections 347, 348 and 349).
How do donors get a tax deduction?
Donors get a deduction under section 133(1)(b)(ii) of the Income-tax Act, 2025 only if the organisation holds a separate approval under section 354, which replaces approval under section 80G(5) of the 1961 Act. To qualify, the organisation must not be for the benefit of a particular religious community or caste, must not spend more than 5% of its total income on religious purposes, must not be allowed by its deed or rules to transfer assets for non-charitable purposes, and must file a statement of donations and issue certificates to donors.
The approval follows the same stages as registration: provisional approval for three tax years for a new organisation, then a five-year approval once activities have started. The legal form makes no difference to it.
Can a non-profit charge fees or run a business?
Yes, within limits that apply to all three forms. Under section 345, a registered non-profit can carry on a commercial activity only if it is incidental to its objectives and it keeps separate books for it. An organisation whose object is the "advancement of any other object of general public utility" faces a tighter test under section 346: the activity must be carried on in the course of that object and its receipts cannot exceed 20% of the organisation's total receipts for the year.
Which structure should you choose?
Choose by who will fund you and how long you expect to last. Many institutional donors and foreign funders are more comfortable with a Section 8 company because the Companies Act gives it clear governance, public filings and a body corporate that survives changes in people. Its cost is more compliance every year.
A trust suits a founder or family who want to keep control with a small group of trustees and run a contained programme, such as a scholarship fund or a single school. A society suits a membership organisation, such as an alumni body, a professional association or a cultural group, where members elect the people who run it. For tax purposes the choice is neutral, because sections 332 and 354 apply equally to all three.
If you are also weighing an ordinary company for a social enterprise that will pay dividends, see our comparison of a private and public limited company, and our summary of the Income-tax Act, 2025 for the new section numbers.
Frequently asked questions
How many people are needed to start a trust, a society or a Section 8 company?
A society needs at least seven people to sign its memorandum under section 1 of the Societies Registration Act, 1860. A private Section 8 company needs at least two members and two directors, and a public one seven members and three directors. A trust needs a settlor and the trustees named in its deed, and no central law fixes a minimum number of trustees, although the deed should name enough people to take decisions if one is unavailable.
Is a society a separate legal entity?
Only partly. Under section 5 of the Societies Registration Act, 1860, a society's property, if not vested in trustees, is deemed to vest in its governing body, and under section 6 it sues and is sued in the name of its president, chairman, principal secretary or trustees as its rules decide. A Section 8 company, by contrast, is a body corporate in its own name with perpetual succession under section 9 of the Companies Act.
Does a charitable trust deed have to be registered?
In most cases, yes. Section 17 of the Registration Act, 1908 makes registration compulsory for documents such as gifts and settlements of immovable property worth ₹100 or more, so a deed transferring land or a building must be registered with the Sub-Registrar. Even where only money is settled, banks and the Income-tax Department expect a registered deed before opening an account or granting registration under section 332.
Which law governs a public charitable trust in India?
There is no single national law for public charitable trusts. Some states have their own, such as the Maharashtra Public Trusts Act, 1950, which requires registration with the Charity Commissioner. Elsewhere the trust is governed by its deed, the general law of trusts as applied by the courts, and the Registration Act, 1908 for registering the deed. For income tax, a public trust registers under section 332 of the Income-tax Act, 2025 like any other non-profit.
Can a Section 8 company change its objects after registration?
Only with the Central Government's prior approval. Section 8(4)(i) of the Companies Act, 2013 says a Section 8 company cannot alter its memorandum or articles without that approval. If the new objects no longer meet the conditions of its income tax registration, it must also apply to the Income-tax Department within 30 days of the change under section 332, or risk losing its registration.
How can a society change its objects?
Section 12 of the Societies Registration Act, 1860 requires the governing body to send a written report on the proposal to every member at least ten days before a special meeting, and the change must then be approved by three-fifths of the members present at a second special meeting held a month after the first. The amended objects must still be purposes the Act allows.
What happens to a society's assets when it is dissolved?
They cannot go to members. Section 13 of the Societies Registration Act, 1860 lets three-fifths of the members decide to dissolve the society, and section 14 says any property left after paying debts must be given to another society chosen by three-fifths of the members present, or by the court if they cannot agree. This protects assets built up with donations and tax exemptions.
Can a partnership firm be a member of a Section 8 company?
Yes. Section 8(3) of the Companies Act, 2013 expressly allows a firm to be a member of a Section 8 company, which is not normally possible in other companies because a firm is not a legal person. This lets a professional firm or family business join a foundation as a member in its own name.
What is the penalty if a Section 8 company breaks its licence conditions?
The Central Government can revoke the licence under section 8(6) and order the company to add "Limited" or "Private Limited" to its name, and it may then order the company to be wound up or amalgamated with another Section 8 company. Under section 8(11), the company also faces a fine of not less than ₹10 lakh, which can extend to ₹1 crore, and officers in default face separate penalties.
What is section 332 of the Income-tax Act, 2025?
Section 332 is the registration provision for non-profit organisations under the new Act, in force from 1 April 2026. Public trusts, registered societies, Section 8 companies, universities and certain other institutions apply to the Principal Commissioner or Commissioner of Income-tax to become a "registered non-profit organisation". It replaces registration under sections 12A, 12AA and 12AB of the Income-tax Act, 1961, and registrations under those sections continue to count.
What is provisional registration for a new NGO?
It is the first registration a new non-profit gets before its activities start. Under the table in section 332(3) of the Income-tax Act, 2025, the application can be made at any time in the tax year, the Commissioner must pass the order within one month from the end of the month of application, and the registration is valid for three tax years. The organisation must then apply for regular registration within six months of starting activities.
For how long is income tax registration of a trust valid?
Regular registration under section 332 is valid for five tax years and must be renewed at least six months before it expires. Under section 332(5), the period becomes ten years where the organisation's total income, before the non-profit exemption, did not exceed ₹5 crore in each of the two tax years before the year of application. Provisional registration lasts three tax years.
What is section 354 of the Income-tax Act, 2025?
Section 354 is the approval that lets donors claim a deduction under section 133(1)(b)(ii) for donations to a non-profit, replacing approval under section 80G(5) of the Income-tax Act, 1961. The organisation must not benefit a particular religious community or caste, must keep religious spending within 5% of total income, must keep regular accounts, file a statement of donations and issue donation certificates to donors.
How much of its income must a registered NGO spend in a year?
To pay no tax on its regular income, a registered non-profit must apply or accumulate at least 85% of that income for its charitable or religious purposes in the tax year, under section 336 of the Income-tax Act, 2025. If it falls short, 85% of its regular income, reduced by what it did apply or accumulate, is taxable. Regular income includes voluntary contributions, income from its property and investments and gains of permitted commercial activities.
Are anonymous donations to a trust or society taxable?
Yes, beyond a limit. Section 337 of the Income-tax Act, 2025 treats anonymous donations to a registered non-profit as specified income, taxed at 30% under section 334, except up to ₹1 lakh or 5% of total donations received in the year, whichever is higher. An organisation set up wholly for religious purposes is outside this rule, so keeping the name and address of every donor matters.
Can a trust or society charge fees for its services?
Yes, if the activity is incidental to its objectives and it keeps separate books for it, as section 345 of the Income-tax Act, 2025 requires. An organisation whose object is the advancement of any other object of general public utility can do so only in the course of that object, and its receipts from commercial activities cannot exceed 20% of its total receipts in the year under section 346. Relief of the poor, education, yoga and medical relief are listed charitable purposes in section 2(23), so the 20% test does not apply to them.
Does a society have to file anything with the Registrar every year?
Yes. Section 4 of the Societies Registration Act, 1860 requires a society to file a list of the names, addresses and occupations of its governing body with the Registrar once a year, within 14 days after its annual general meeting, or in January if its rules do not provide for an AGM. States with their own societies law may require more filings, so check the law of your state.
Can a trust, society or Section 8 company accept foreign donations?
Only after registration or prior permission from the Ministry of Home Affairs under the Foreign Contribution (Regulation) Act, 2010, whichever legal form it takes. The legal form does not change this requirement. A new organisation usually starts with prior permission for a specific grant, because registration expects a track record of work.
