Explained: Meaning of Section 25 company

What is this category of company — which is at the centre of the National Herald controversy?

A “Section 25” company is registered under Section 25 of the Companies Act, 1956. This section provides an alternative to those who want to promote charity without creating a Trust or a Society for the purpose. It allows the formation of a company, which will exist as a legal entity in its own right, separate from the person promoting it. The crucial bit, however, is that any company under this section must necessarily re-invest any and all income towards promoting the said object or charity. In essence, unlike a regular company, where owners and shareholders can make profits or receive dividends, no money gets out of a Section 25 company.

A Section 25 company is often preferred because it is easier to start — being exempt from statutory requirements of minimum paid-up capital. They are much easier to run than Trusts and Societies, as board meetings require a smaller quorum and requirements for calling such meetings are less rigid. It is easier to increase the number of directors, it is easier for people donating money to join or leave or transfer shares to others, and such a company is obliged to fulfill far less stringent book-keeping and auditing requirements as against a regular company. Lastly, a Section 25 company enjoys significant tax benefits. Depending on how it is registered under the Income-Tax Act, companies could benefit from income-tax exemptions, or from the provision wherein people donating money to these companies receive income deductions in their income-tax liability. Such companies are also exempt from stamp duty payments. Section 25 is preferred by several businessmen because they are conversant with the company structure, while benefits from several exemptions make it easy for philanthropy.

Udit Misra

Udit Misra is Senior Associate Editor at The Indian Express. Misra has reported on the Indian economy and policy landscape for the past two decades. He holds a Master’s degree in Economics from the Delhi School of Economics and is a Chevening South Asia Journalism Fellow from the University of Westminster. Misra is known for explanatory journalism and is a trusted voice among readers not just for simplifying complex economic concepts but also making sense of economic news both in India and abroad. Professional Focus He writes three regular columns for the publication. ExplainSpeaking: A weekly explanatory column that answers the most important questions surrounding the economic and policy developments. GDP (Graphs, Data, Perspectives): Another weekly column that uses interesting charts and data to provide perspective on an issue dominating the news during the week. Book, Line & Thinker: A fortnightly column that for reviewing books, both new and old. Recent Notable Articles (Late 2025) His recent work focuses heavily on the weakening Indian Rupee, the global impact of U.S. economic policy under Donald Trump, and long-term domestic growth projections: Currency and Macroeconomics: "GDP: Anatomy of rupee weakness against the dollar" (Dec 19, 2025) — Investigating why the Rupee remains weak despite India's status as a fast-growing economy. "GDP: Amid the rupee's fall, how investors are shunning the Indian economy" (Dec 5, 2025). "Nobel Prize in Economic Sciences 2025: How the winners explained economic growth" (Oct 13, 2025). Global Geopolitics and Trade: "Has the US already lost to China? Trump's policies and the shifting global order" (Dec 8, 2025). "The Great Sanctions Hack: Why economic sanctions don't work the way we expect" (Nov 23, 2025) — Based on former RBI Governor Urjit Patel's new book. "ExplainSpeaking: How Trump's tariffs have run into an affordability crisis" (Nov 20, 2025). Domestic Policy and Data: "GDP: New labour codes and opportunity for India's weakest states" (Nov 28, 2025). "ExplainSpeaking | Piyush Goyal says India will be a $30 trillion economy in 25 years: Decoding the projections" (Oct 30, 2025) — A critical look at the feasibility of high-growth targets. "GDP: Examining latest GST collections, and where different states stand" (Nov 7, 2025). International Economic Comparisons: "GDP: What ails Germany, world's third-largest economy, and how it could grow" (Nov 14, 2025). "On the loss of Europe's competitive edge" (Oct 17, 2025). Signature Style Udit Misra is known his calm, data-driven, explanation-first economics journalism. He avoids ideological posturing, and writes with the aim of raising the standard of public discourse by providing readers with clarity and understanding of the ground realities. You can follow him on X (formerly Twitter) at @ieuditmisra ... Read More