NEW DELHI: Charitable trusts in India will start feeling the heat from income tax authorities soon. Their reporting norms have been tightened with more information required in the audit reports and more responsibility on the auditor.
The Central Board of Direct Taxes (CBDT) has notified these changes in audit reports for charitable trusts. The audit report will be in Form 10B with details on income exceeding Rs 5 crore, any foreign contributions as well as any income from outside the country in the previous year.
The report now requires the auditor to certify information that was previously only limited to reporting in the income tax return. Further, various standard reporting clauses applicable to other assessees under tax audit regime have now been made part of the Form 10B auditor’s report.
According to experts, the new reporting requirements cast a much larger obligation on the auditor who is now required to report on the objects and operations of the institution, including detailed reporting on contributions, application of income, taxability under Section 115BBI of the ITA, 1961, capital asset transfers, transactions with specified persons and violations.
“The amendments are directed to regulate and monitor these institutions and organisations to ensure fulfilment of objectives and adherence to law and shall result in the auditee being subject to a much wider review and scrutiny by the regulators,” say experts.
Under current laws, income of a charitable and religious trust is exempt from tax, subject to certain conditions. But with concerns over misuse of these benefits, the IT Department has been keeping a close watch on trusts and has, over the years, tightened provisions to ensure that only genuine trusts and activities enjoy the exemption.
