Introduction
Form 10B and Form 10BB are crucial documents required for availing tax exemptions under Sections 11 and 12 of the Income Tax Act, 1961. While both serve similar purposes, they differ in their applicability, disclosures, and due dates. This article provides insights into these forms, their significance, differences, due dates, consequences of non-compliance, penalties, and essential review points.
Background
Recently, CBDT issued Notification No. 7/2023 on 21.02.2023, introducing new audit report forms, Form 10B and Form 10BB, for charitable trusts, religious trusts, and other institutions [“referred to as ‘charities’]. Effective from Assessment Year 2023-24, this amendment shifts the criteria for form applicability from registration status to total income.
1. What is an Audit report - Form 10B/10BB?
The Form 10B/10BB consists of a list of information required to be filled about charities’s incomes, expenses, disclosures as prescribed. It is filed as an audit report by a chartered accountant after auditing the books for the given financial year.
2. Why is it important and to whom it is applicable?
Form 10B/10BB of the Income Tax Act is a form filed to avail the tax exemption under section 10(23C), section 11 and section 12 of the Income Tax Act, 1961.
It is required to be filled by every charity having valid registrations u/s 12AB and 10(23C) of the Income Tax Act, 1961, and having total income exceeding the basic exemption limit (i.e. INR 2,50,000) for trusts. Section 8 companies, however, are required to file an audit report regardless of income if they have valid registrations u/s 12AB and 10(23C) of the Income Tax Act, 1961.
3. In terms of applicability, what is the difference between Form 10B and Form 10BB?
Form 10B is required if the total income exceeds ₹5 crore, any foreign contributions are received, or income is applied outside India.
Form 10BB is required if the total income is up to ₹5 crore, no foreign contributions are received, and no income is applied outside India.
4. In terms of disclosures, what is the difference between Form 10B and Form 10BB?
Form 10B is elaborative and has several disclosure requirements as compared to Form 10BB. Below table will give a brief comparison.
Sr. No. | Content | Form 10B | Form 10BB |
1 | Clauses | 49 | 32 |
2 | Sections | 22 | 9 |
3 | Schedules | 26 | 6 |
4 | Notes | 12 | 6 |
5. What is the due date to file Form 10B/Form 10BB?
Form 10B/10BB shall be filed before the specified date referred to in section 44AB i.e. one month before the due date for filing of return u/s 139(1)
Accordingly, the due date for filing the audit report is 30th September of the Assessment year. Example: For FY 2023-24 the due date for filing Form 10B/Form 10BB is 30th September, 2024.
In case of any delay in filing the audit report, the concerned income tax authority may condone the delay if satisfied that it was due to circumstances beyond the control of the NGO.
6. What is the consequence of not filing the audit report forms?
Failure to file the audit report forms results in the loss of tax exemption benefits under section 10(23C), Sections 11 and 12 for that year. Additionally, income is calculated according to Sections 13(10) and 13(11) of the income tax act.
This computation allows deductions for expenditures (excluding capital expenditures) incurred in India for the trust or institution's objectives, provided certain conditions are met. These conditions include:
(a) the expenditure not being from the trust's existing corpus at the end of the preceding financial year,
(b) not funded by loans,
(c) depreciation claims not being for assets claimed as income application, and
(d) the expenditure not taking the form of contributions or donations to individuals.
7. Can the audit form - Form 10B/Form 10BB be revised?
The option to revise the form 10B/10BB is available on the income tax portal for AY 23-24 as of the publishing date of this article.
8. Is there any penalty for a Chartered Accountant if incorrect information is provided in such a report or certificate?
Yes, under section 271J, a penalty of INR 10,000 can be levied for each report or certificate where incorrect information is furnished.
9. Things to review in the Form 10B/Form 10BB before filing.
Below are a few crucial aspects to review before the auditor submits the form 10B/10BB.
Form | Section | Clause | Brief Description | Points to keep in mind |
Form 10B/10BB | Basic Details | 1 - 6 | Covers following details namely:
| To ensure the same is matching with name as per PAN card and registered address is same as appearing in the records. (MCA site/latest trust deed) For “Other addresses, if any” - Address approved via resolution and which has been intimated to the jurisdictional Assessing Officer in writing within 7 days from the date of the said resolution is required to be given. |
Form 10B/10BB | Legal | 7 | Covers the type of incorporation - Trust/Society/Company/Others | Incorporation documents can be checked to validate the same |
Form 10B | Registration Details | 9 | Disclosure of all the registrations under Income Tax Act, 1961 which are valid during the period of reporting. Covers following details namely:
| This includes only registrations done under Income Tax Act, namely section 12AB and section 80G, section 10(23C) and section 35 if applicable. Details can be validated with the copy of the certificate. (Same can be downloaded from the Income tax portal). |
Form 10B/10BB | Management | 10/9 | Disclosure in prescribed format as given in form for various stakeholders namely:
| Same can be validated as per latest trust deed/MOA/AOA/ latest resolution passed to effect the same if any. To ensure the details mentioned of the stakeholders be updated ones i.e. address and PAN/Aadhaar/others as applicable (Refer Notes - 6 of Form 10B form) |
Form 10B | Objects | 11 | Covers mainly the following objects namely:
| It is important to note here that multiple objects can be selected if the NGO is carrying out multiple objects during the period of reporting. |
Form 10B/10BB | Voluntary Contribution | 21 and 22/12 and 13 | Mentions about the filing of Form 10BD and total sum of donations reported in Form 10BD | Can be validated with the filed form. |
Form 10B/10BB | Voluntary Contribution | 25/16 | Mentions about the amount of foreign contribution received during the reporting period | Can be validated with FCRA records. |
Form 10B/10BB | Voluntary Contribution | 26/17 | Mentions about the amount of Corpus received during the reporting period | Can be validated with Corpus Register with regards to “Total Amount received” |
Form 10B | Application of Income | 31 | Mentions the breakup of Donation to any other person and Object wise application into 9 categories (Religious/Relief of poor/Education, etc.). | The categories mentioned here should be from the objects mentioned in Clause 11. Further, costs like admin and fund-raising cost could be divided in the ratio of program cost. |
Form 10B/10BB | Person referred to in 13(3) | 41/28 | Mentions the details such as Name, PAN/Aadhar, address of specified persons as prescribed u/s 13(3) - Refer note 11 of Form 10B. Further, the specified person would also include details of any donor who has donated more than INR 50,000/- in the relevant previous year i.e. year of reporting. | Same can be validated with Form 10BD disclosure filtering the amounts that exceed INR 50,000 per donor during the year of reporting. (Relevant circular link - where clarification was issued that details may be provided for the period of reporting). For transactions involving other specified persons, their status can be confirmed using the trust deed, memorandum of association (MOA), or articles of association (AOA). When dealing with relatives or related entities where these specified persons have a significant interest, it's best practice to obtain confirmation directly from them. |
Form 10B/10BB | Person referred to in 13(3) | 42(c)/ 29(c) | Mentions the details of Salary/allowance/any other payment made by the NGO to any specified persons u/s 13(3) for services rendered by them and the amount so paid is in excess of what may be reasonably paid for such service. Accordingly, in our view, the schedule is to be filled up only in cases where the amount paid exceeds what is reasonable. However, some auditors have taken a stand that the schedule needs to be filled up even if the payment does not exceed what is reasonable. The schedule includes the following details:
With respect to payment made, it requires following disclosures:
(Format to be filled : Schedule SP - c for Form 10B) Please note for form 10BB, it just requires a response in “Yes/No” format. | Once the list is prepared for clause 41, validate if there was any payment made from NGO to them from the accounting records. |
*Kindly be advised that we have highlighted only key points for the NGO's reference once the form is submitted for review and approval. We recommend thoroughly reviewing the entire form with the assistance of a professional subject matter expert before submission.
10. When filing Form 10B/Form 10BB is considered to be completed ?
Filing of form is considered to be completed only when the taxpayer/NGO accepts the form uploaded by CA and verifies the same with active DSC or EVC registered on e-filing portal.
11. Whether any attachments are required to be attached while filing the Form?
Yes, following attachments are mandatory to be attached under “Attachments” panel of form-
Income and Expenditure Account/Profit and Loss Account
Balance Sheet
There is an optional attachment option as well named “Miscellaneous Attachments” where any other relevant document may be attached. In case any disclosures / clarifications need to be filed relating to any of the clauses, the same may be attached here.
Please note that the size of each attachment shall not exceed 5MB. All the attachments should be in PDF/ZIP format only and all the files in ZIP file should contain files in PDF format only.
Conclusion:
Ensuring compliance with Form 10B/Form 10BB is vital for preserving tax-exempt status. By thoroughly preparing and reviewing these reports, organizations demonstrate fiscal responsibility and transparency, fostering trust while guarding against penalties and non-compliance.
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