October 7, 2026 · Guides

Nidhi Company vs Section 8 Company

Nidhi vs Section 8 company is a common question from groups that want to serve a community without running a plain commercial business. Both are companies with a social flavour, but they exist for different reasons and follow different rules. A Nidhi serves its members’ thrift, while a Section 8 company promotes a charitable or similar objective and keeps profits inside it.

In this guide

Purpose and object
Side by side
Who gets the money
Lending and microfinance
How to choose
FAQs

Purpose and object

A Nidhi has a single object: cultivating thrift and savings among its members by taking their deposits and lending to them. The benefit flows back to those members. It is a public company under Section 406 of the Companies Act, 2013 and the Nidhi Rules, 2014, and its name must end with “Nidhi Limited”.

A Section 8 company is formed under Section 8 of the Act to promote objects such as commerce, art, science, sports, education, research, social welfare, religion, charity or environment protection, as we understand the provision. It applies its income to those objects and does not distribute dividends to members. Check the current text of Section 8 before drafting its objects.

Side by side

Point	Nidhi company	Section 8 company
Main aim	Thrift and mutual benefit of members	Charitable or similar objects, not profit for members
Profit to members	Dividend allowed, commonly capped at 25 percent of paid-up capital	No dividend; surplus goes back into the objects
Company type	Public company only	Private or public, as the promoters choose
Approval	NDH-4 declaration after incorporation	Licence from the Central Government at incorporation
Deposits and loans	Core business, members only	Not its purpose; lending as a business needs RBI rules checked
Name	Must end with “Nidhi Limited”	Carries the usual Section 8 naming rules

These points are per the Act and Rules as we read them. Confirm the current text on the MCA portal.

Who gets the money

This is the real dividing line. In a Nidhi, members put in share capital and deposits, they borrow, and they can receive a dividend on their shares. In a Section 8 company, members may fund the work, but the surplus cannot be shared out; the company must apply it to its stated objects.

That is why a group wanting to lend money to its own people for a return belongs in a Nidhi, and a group raising funds for a cause belongs in a Section 8 company. Compare the member-benefit model in Nidhi mutual benefit company.

Lending and microfinance

Some Section 8 companies carry on microfinance, but they do it under the RBI framework for lenders rather than under the Nidhi Rules. A Nidhi needs no RBI approval, yet its lending stops at its own members and follows the Rules for deposits, security and loan caps. If you want to compare the lending models, see Nidhi company vs microfinance company and Nidhi company vs chit fund.

How to choose

Choose a Nidhi if members will deposit and borrow, and you want the surplus shared as dividend within the Rules.
Choose a Section 8 company if the aim is charity, education or welfare, and you accept that members take no profit.
Do not use a Section 8 company to run a deposit-and-loan scheme for members. That is the Nidhi model, with its own approvals.

To start a Nidhi, see Nidhi company registration and what a Nidhi is in our basic guide. You can also ask us about the Nidhi registration service.

Need help with your Nidhi company? See our Nidhi company registration service, call +91 93117 95484, or write to mail@taxhint.in.

FAQs

What is the main difference between a Nidhi and a Section 8 company?

A Nidhi exists for the thrift and mutual benefit of its members and can pay dividends. A Section 8 company pursues charitable or similar objects and cannot distribute profit to members.

Can a Section 8 company accept deposits from members like a Nidhi?

That is not its purpose, and lending as a business brings other rules into play. Take advice before building a deposit scheme inside a Section 8 company.

Does a Nidhi need a Section 8 licence?

No. A Nidhi is a public company that applies for the NDH-4 declaration, not a Section 8 licence.

Can a Nidhi pay dividends to members?

Yes, within the limits in the Rules; the cap is commonly stated as 25 percent of paid-up capital in a financial year. Check the current Rule before declaring one.