What Is Section 25? And Why People Still Talk About It
If you’ve spent any time around NGOs, charitable foundations, or older nonprofit organizations, chances are you’ve heard someone casually say this:
“We are a Section 25 company.”
It still pops up in conversations.
It still appears in old documents.
And it still confuses first-time founders.
The problem is simple.
Section 25 used to exist.
But it doesn’t anymore.
So, what exactly was Section 25?
Let’s go back in time for a moment.
Under the Companies Act, 1956, Section 25 was a special provision. It allowed certain companies to be formed not for profit, but for charitable or social purposes.
These companies were created for things like
- education
- art and culture
- science and research
- social welfare
- charitable activities
And there was one strict rule.
They could not distribute profits.
Any income earned had to be used only for achieving the company’s stated objectives. No dividends. No profit sharing. No exceptions.
This structure became very popular for NGOs that wanted the credibility of a “company” but without a profit motive. That’s why the term “Section 25 company” became so common.
Section 25 of the Companies Act, 1956—How It Actually Worked
Under the old law, Section 25 allowed the Central Government to grant a special license to such non-profit companies.
Once licensed, these companies got certain relaxations:
- they didn’t need “Limited” or “Private Limited” in their name
- capital requirements were flexible
- profit distribution was completely prohibited
This framework worked well for years. Many well-known NGOs across India were registered this way before 2013.
Does Section 25 Exist Under the Companies Act, 2013?
This is where most confusion begins.
Let’s be very clear:
👉 There is no Section 25 in the Companies Act, 2013.
None.
When the Companies Act, 2013, replaced the old 1956 Act, Section 25 was removed.
But the idea behind it was not discarded.
Instead, it was replaced.
Section 8 Replaced Section 25
Under the new law, Section 8 was introduced.
Section 8 carries forward the same philosophy:
- non-profit purpose
- charitable objectives
- no dividend distribution
So when people today say “Section 25 company,” what they usually mean is:
👉 a Section 8 company, using the old terminology out of habit.
Legally speaking:
- Section 25 = old law
- Section 8 = current law
Same intent. Updated framework.
Why People Still Search for “Section 25 Companies Act 2013”
You’ll often see people searching phrases like
- section 25 of the companies act 2013
- section 25 of the Companies Act 2013
But legally, these sections don’t exist.
The confusion survives because:
- old NGOs still use the term informally
- older websites haven’t been updated
- legacy documents still mention Section 25
But for any new registration today, Section 8 is the only valid route.
What Does “Section 25 Company” Mean Today?
In today’s legal context, a “Section 25 company” usually refers to one of two things:
- An NGO that was registered under Section 25 of the 1956 Act and continues to operate, or
- A Section 8 company that people are calling “Section 25” out of habit
Legally, both are governed by the Companies Act, 2013 now.
Why Was the Name Changed From Section 25 to Section 8?
This wasn’t just a cosmetic change.
The 2013 Act aimed to:
- modernise company law
- reduce discretionary government approvals
- introduce better transparency
- strengthen compliance
Section 8 shifted the approval process largely to the Registrar of Companies (RoC) and brought clearer rules around governance, filings, and accountability.
The soul stayed the same.
The system became tighter.
Difference Between Section 25 and Section 8 Company
- Section 25 company
→ existed under the Companies Act, 1956
→ no longer open for new registrations - Section 8 company
→ exists under the Companies Act, 2013
→ current and legally valid structure
Both serve the same purpose: nonprofit work.
The difference is about law and time, not intention.
Purpose Never Changed
Whether someone calls it Section 25 or Section 8, the core idea remains unchanged:
- no profit distribution
- income used only for objectives
- focus on education, health, welfare, culture, science
Only the legal wrapper has changed.
A Quick Word on Income Tax Section 25
Some people also mix this up with:
- Section 25 of the Income Tax Act
- Section 25A of the Income Tax Act
These have nothing to do with NGO registration.
They deal with tax assessments and specific income scenarios.
The numbering overlap is purely coincidental.
Why the Term “Section 25 Company” Still Refuses to Die
Simple reasons:
- legacy paperwork
- older NGOs still using the name
- informal usage in conversations
- outdated online articles
But legally speaking, if you’re registering a nonprofit today, Section 25 is not an option.
Can You Register a Section 25 Company Today?
Short answer?
❌ No.
Longer answer?
If you want to register a nonprofit company today, the law recognizes only one route:
👉 Section 8 company under the Companies Act, 2013
Anything else is just history.
Which Is Better Today: Section 25 or Section 8?
If we’re being practical, Section 8 wins easily.
Why?
- clearer compliance framework
- faster approvals
- better credibility with donors and CSR contributors
- alignment with current law
Section 25 served its purpose.
Section 8 is the present and the future.
Let’s say an NGO was registered in 2008 as
“ABC Foundation – Section 25 Company”
After 2013:
- it automatically came under the new act.
- it follows Section 8 compliance now
- the name may still say “Section 25” informally
But legally, it operates as a Section 8 company.
Final Takeaway
Here’s the clean summary:
- What is Section 25?
→ Old provision under Companies Act, 1956 - Section 25 of the Companies Act, 2013?
→ Does not exist - Section 25 company today?
→ Legacy term for a non-profit company - What is the difference between a Section 8 and a Section 25 company?
→ Same purpose, different law and era
If you’re starting something new, always go with Section 8.
Planning to Register or Convert a Non-Profit?
A lot of founders still get stuck because of outdated terminology and half-information floating online. If you’re planning to register a nonprofit, convert an old Section 25 entity, or just want clarity before filing anything, getting it checked once can save months later. You can explore practical guidance and end-to-end support for NGO registration and compliance at Callmyca.com.
