Section 8 of Income Tax Act: Dividend Income and Section 8 Company

In summary

The term “Section 8” can refer to two different legal provisions. Section 8 of the Income-tax Act, 1961 dealt with dividend income, while Section 8 of the Companies Act, 2013 concerns non-profit companies.

• Income-tax Act Section 8 dealt with the timing of dividend taxation.
• Section 8 of the 1961 Act was repealed from 1 April 2026.
• The corresponding dividend provision is Section 7 of the Income-tax Act, 2025.
• A Section 8 Company is incorporated under the Companies Act, 2013.
• Section 8 Companies cannot distribute dividends to their members.
• Tax benefits for eligible non-profit organisations require separate compliance.

This distinction is important because a Section 8 Company is not a company created under Section 8 of the Income-tax Act.

Section 8 of the Income-tax Act, 1961 dealt with dividend income and determined the previous year in which specified dividend income was treated as the income of the taxpayer.

For a dividend covered by the provision, the income was generally attributed to the previous year in which it was declared, distributed, or paid, as applicable. For an interim dividend, the provision referred to the year in which the amount was unconditionally made available to the entitled member.

However, this provision needs to be read historically now. The Income-tax Act, 1961 was repealed with effect from 1 April 2026. The corresponding provision under the Income-tax Act, 2025 is Section 7, which deals with income deemed to be received and dividend deemed to be income in a tax year.

What changed from 1 April 2026

For tax years beginning from 1 April 2026, the Income-tax Act, 2025 applies. Therefore, references to Section 8 of the 1961 Act generally relate to the earlier law or transactions governed by that Act.

The Income Tax Department's current materials continue to use the 1961 Act for relevant assessment-year provisions and historical compliance, so the applicable law depends on the period and transaction being considered.

A Section 8 Company is a company incorporated under Section 8 of the Companies Act, 2013 for promoting specified objectives rather than distributing profits to its members.

The Companies Act framework covers objectives such as:

• Commerce, art, and science.
• Sports and education.
• Research and social welfare.
• Religion and charity.
• Protection of the environment.
• Other objects of public benefit permitted under the law.

A Section 8 Company can generate a surplus. However, the surplus is intended to be applied towards its permitted objectives rather than distributed as dividends to members. The Ministry of Corporate Affairs describes Section 8 companies as not-for-profit companies whose surplus is ploughed back towards their objects.

No. Incorporation as a Section 8 Company does not by itself make all of its income exempt from Income Tax.

Tax exemption depends on the applicable provisions, registration or approval, income utilisation, documentation, and other prescribed conditions.

Under the Income-tax Act, 1961 framework, charitable or religious entities could obtain benefits under provisions including Sections 11 and 12, subject to the relevant conditions. The Section 12A of Income Tax Act framework is relevant to understanding the earlier registration regime.

For tax years governed by the Income-tax Act, 2025, non-profit organisations have corresponding registration and approval provisions, including Section 332 for registration and Section 354 for certain donation-related approvals. The Income Tax Department's current Form 104 and Form 105 guidance confirms that a company registered under Section 8 of the Companies Act can fall within the non-profit organisation framework under Section 332.

A qualifying Section 8 Company may be able to access tax benefits available to eligible non-profit organisations, provided it meets the applicable requirements.

Exemption on eligible income

Income of an eligible charitable or religious organisation can qualify for exemption subject to the conditions under the applicable Income-tax Act provisions.

The exemption is therefore conditional rather than automatic. Income application, registration, reporting, audit, and other requirements can affect eligibility.

Benefits relating to donations

An eligible organisation can also obtain approval that allows qualifying donations to receive tax-deduction treatment for donors, subject to the applicable provisions.

Under the Income-tax Act, 2025, the Income Tax Department has introduced provisions and forms dealing with registration and donation-related approvals. Form 113, for example, is used by eligible registered non-profit organisations to report qualifying donations, with Form 114 serving as the corresponding donation certificate.

For comparison, you can also read about Section 80GGB of Income Tax Act, which covers deductions for qualifying contributions by eligible Indian companies to political parties or electoral trusts.

A Section 8 Company seeking tax benefits needs to distinguish its company-law obligations from its Income Tax requirements.

Depending on its circumstances, compliance can include:

• Maintaining proper books and financial records.
• Applying income towards permitted objectives.
• Maintaining evidence supporting donations and expenditure.
• Obtaining and maintaining the required tax registration or approval.
• Filing the applicable Income Tax Return.
• Obtaining an audit report where prescribed.
• Meeting applicable reporting and disclosure requirements.
• Maintaining records supporting the organisation's charitable or permitted activities.

The Income Tax Department currently provides Form 10B for applicable charitable or religious trusts and institutions registered under Section 12A of the 1961 Act, while the 2025 Act has introduced new registration procedures for non-profit organisations.

Failure to meet an applicable condition can affect the organisation's eligibility for tax benefits. The precise consequence depends on the provision involved, the nature of the non-compliance, and the relevant tax period.

For example, failure to satisfy registration, income-application, audit, or reporting requirements can affect an exemption claim.

A Section 8 Company should therefore not assume that its non-profit status alone determines its Income Tax liability.

The principal difference is the purpose for which the entity is incorporated and how its surplus is treated.

Last updated: September 2026

Good documentation helps establish how the organisation receives and uses its funds.

Records may include financial statements, bank records, donation details, invoices, expenditure records, board or governing-body records, registration documents, audit reports, and Income Tax filings.

The exact records required depend on the company's activities and the applicable company-law and tax provisions.

Entities dealing with other tax provisions can also review Section 80P of Income Tax Act where relevant to their circumstances.

“Section 8” has two distinct meanings that should not be confused. Section 8 of the Income-tax Act, 1961 dealt with the timing of dividend income, but that Act was repealed from 1 April 2026. Its corresponding provision under the Income-tax Act, 2025 is Section 7.

A Section 8 Company, meanwhile, is incorporated under the Companies Act, 2013 for permitted non-profit objectives. Its tax benefits are conditional and depend on the applicable registration, approval, income utilisation, and compliance requirements.

Last reviewed: September 2026

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