CBDT vide Notification No. 7/2023 in GSR 118(E) dated 21.02.2023 and through Income-tax (3rd Amendment) Rules, 2023 amended Rule 16CC and Rule 17B of the Income-tax Rules, 1962 and also amended the tax audit report required to be furnished by Charitable Trusts or Institutions including NGOs registered under section 12A or approved under section 10(23C) of the Income-tax Act, 1961 (‘Act’) in Form No. 10B and Form No. 10BB. This amendment shall come into force from 01.04.2023.
Amendments related to Audit Reports of Trusts - at a glance
The following rules and forms are amended by the Income-tax (3rd Amendment) Rules-
Applicability of Audit Report in Form 10B/Form 10BB
This amendment has shifted the focus of the applicability of forms for furnishing the tax audit report from the basis of registration to the basis of total income. Prior to the amendment, Form No. 10B was required to be filed by a trust or institution registered u/s 12A of the Act while the institutions or funds approved u/s 10(23C) were required to furnish their tax audit reports in Form No. 10BB.
Post amendment, Form No. 10B shall be required to be used for furnishing the tax audit report where the total income of the trust or institution or fund or hospital, or university or any other educational institution is more than Rs. 5 crore during the previous year. Besides, if such trust or institution has received any amount of foreign contribution under FCRA, 2010 or applied any part of its income outside India then also such trust or institution is required to furnish its tax audit report in Form No. 10B irrespective of the fact whether the trust or institution is registered under section 12A of approved under section 10(23C) of the Act.
In this context, it is noteworthy that no threshold limit is prescribed for receipt of foreign contribution or application of income outside India. Hence, if any trust or institution received even Rupee One as foreign contribution or applies a nominal amount of its income outside India, it has to furnish tax audit report in Form No. 10B.
Tax Audit Report in any other cases is required to be furnished in Form No. 10BB irrespective of the fact whether the trust or institution is registered under section 12A of approved under section 10(23C) of the Act.
Hence, smaller trusts or institutions are required to furnish their tax audit report in Form No. 10BB. In other words, the following type of Trusts or Institutions are required to furnish their tax audit report in Form No. 10BB-
1. Where the total income of the trust or institutions does not exceed Rs. 5 crore during the previous year.
2. Where the trust or institution does not receive any amount of foreign contribution.
3. Where the trust or institution does not apply any amount of its income outside India in the previous year.
Thus, the requirement to furnish tax audit report in Form No. 10B & Form No. 10BB by trust or institutions is as under-
The above is illustrated with numerical examples in the following table for a better understanding of the applicability of tax audit form-
Case of two types of trusts is taken. One trust, ABC foundation which is registered u/s 12AB of the Act and XYZ Jan Kalyan Seva Samiti, which is approved u/s 10(23C) of the Act.
Amendment in Rule 16CC-Tax Audit Report for Institutions approved u/s 10(23C)
Rule 16CC of the Rules prescribes the form for furnishing of tax audit report under the 10th proviso to section 10(23C) of the Act. The 3rd amendment rules prescribes that a fund or institution or trust or any university or other educational institution or any hospital or other medical institution shall furnish-
(I) the audit report in Form 10B where-
(i) the total income of such a fund or institution or trust or university or other educational institution or hospital or other medical institution, without giving effect to the provisions of the sub-clauses (iv), (v), (vi) and (via) of the said clause, exceeds rupees five crores during the previous year; or
(ii) such fund or institution or trust or university or other educational institution or hospital or other medical institution has received any foreign contribution during the previous year; or
(iii) such fund or institution or trust or university or other educational institution or hospital or other medical institution has applied any part of its income outside India during the previous year;
(II) the audit report in Form 10BB, in any other case.
Prior to the amendment, a fund or institution or trust or university or other educational institution or hospital or other medical institution approved u/s 10(23C) was required to furnish an audit report under the 10th proviso to section 10(23C) only in Form No. 10BB irrespective of its total income. In other words, Audit Report in Form No. 10BB was applicable only to an institution approved u/s 10(23C).
The Explanation to Rule 16CC defines ‘foreign contribution’ as it is defined in the Foreign Contribution (Regulation) Act, 2010.
Hence, post the amendment and as per the amended Rule 16CC, any institution approved under section 10(23C) if its gross income exceeds Rs. 5 crore during the previous year or received any foreign contribution during the previous year or have applied any part of its income outside India during the previous year shall file its audit report in Form No. 10B.
Any institution approved under section 10(23C), which does not fall in any one of the above three criteria, shall file its audit report in Form No. 10BB.
Hence, from the foregoings, it is clear that prior to the amendment, any institution approved u/s 10(23C) was required to file its tax audit report in Form No. 10BB, but now after the amendment, if any of the three conditions mentioned in the sub-rule (a) of Rule 16CC are satisfied, then only audit report in Form No. 10B needs to be furnished. In any other cases, audit report in Form No. 10BB needs to be filed.
Amendment in Rule 17B - Tax Audit Report for Trusts registered u/s 12AB
Rule 17B of the Rules prescribes the form for furnishing of tax audit report under section 12A(1)(b)(ii) of the Act. The 3rd amendment rules prescribes that a trust or institution shall furnish-
(I) the audit report in Form 10B where-
(i) the total income of such trust or institution, without giving effect to the provisions of sections 11 and 12 of the Act, exceeds rupees five crores during the previous year; or
(ii) such trust or institution has received any foreign contribution during the previous year; or
(iii) such trust or institution has applied any part of its income outside India during the previous year;
(II) the audit report in Form 10BB, in any other case.
Prior to the amendment, a trust or institution was required to furnish an audit report under section 12A only in Form No. 10B irrespective of its total income. In other words, Audit Report in Form No. 10B was applicable only to a trust or institution registered u/s 12AB.
The Explanation to Rule 17B defines ‘foreign contribution’ as it is defined in the Foreign Contribution (Regulation) Act, 2010.
Hence, post the amendment and as per the amended Rule 17B, any trust or institution registered under section 12AB if its gross income exceeds Rs. 5 crore during the previous year or received any foreign contribution during the previous year or have applied any part of its income outside India during the previous year shall file its audit report in Form No. 10B.
A trust or institution registered under section 12AB, which does not fall in any one of the above three criteria, shall file its audit report in Form No. 10BB.
Hence, from the foregoing, it is clear that prior to the amendment, a trust or institution registered u/s 12AB was required to file its tax audit report in Form No. 10B, but now after the amendment, if any of the three conditions mentioned in the sub-rule (a) of Rule 17B are satisfied, then only audit report in Form No. 10B needs to be furnished. In any other cases, audit report in Form No. 10BB needs to be filed.
Applicability of new Audit Form in form no. 10B and Form No. 10BB
The notification states that these amended rules shall apply from 01.04.2023. Hence, it shall apply from assessment year 2023-24 relevant to financial year 2022-23. Thus, the audit report for trusts or institutions for the ongoing financial year 2022-23 shall be in the amended Form No. 10B or Form No. 10BB.
Study of New Form No. 10B & Form No. 10BB
The new Form No. 10B and Form No. 10BB are more comprehensive compared to the pre-amended forms. A simple 3-4 page audit report is now expanded to 17-page and 6-page notification forms respectively.
New drastic changes have been introduced in the new audit report forms. This is necessitated due to the fact that in the last 2-3 years drastic amendments have been introduced in the Act related to charitable trusts and institutions registered u/s 12Ab as well as approved u/s 10(23C). The old forms were not capturing those data, hence, changes in the new audit forms for trusts and institutions have been made.
Recently, rules related to compulsory maintenance of books of accounts and other records have been notified by the CBDT. The new forms make a reference to those books of accounts.
Analysis of new Form No. 10B & Form No. 10BB
The Annexure to New Audit Report in Form No. 10B has retained the information as was required to be furnished in the old Form No. 10B, however, much more detailed information is sought in the annexure to the new form as discussed below. These are common audit report forms for trusts or institutions registered u/s 12AB or approved u/s 10(23C).
1. The auditor has to detail the observations or disqualifications in the new Audit Report forms.
2. Details of registration/approval or provisional registration/provisional approval are required.
3. Details of all Authors, founders, members, trustees, etc are required to be given.
4. The objects of the trust or institution are required to be stated with modifications, if any, carried out during the year. In case of modification, whether the application is made and the status of the said application (pending, accepted, rejected) is required to be reported.
5. In case, provisional registration/approval is granted, whether activities have been commenced or not and if commenced, whether the application for regular registration is filed or not and if filed, the application status needs to be reported.
6. Details regarding the maintenance of books of accounts and other records need to be reported.
7. Details regarding the object of general public utility have to be given. If any activity thereof is in the nature of trade, commerce or business has to be separately reported with the percentage of receipts from such activity to total receipts.
8. Details of the business undertaking of the trust or institution need to be separately disclosed.
9. Details of tax deducted at source (TDS) is required to be reported to mention the amount on which tax is deducted is related to trade, commerce or business or not.
10. Details regarding the filing of the statement of donation in Form No. 10BD, donations not reported or could not be reported in Form No. 10BD due to non-availability of identification number of the donor, donations received in kind, anonymous donations not taxable and taxable u/s 115BBC.
11. Amount of voluntary contribution including foreign contribution, forming part of the corpus, and application of voluntary contribution.
12. Details of income applied outside India
13. Details of application resulting in payment in excess of Rs. 50 lakh during the previous year to any person
14. Details of the amount required to be disallowed from the application
15. Details of specified violations need to be reported
16. Comprehensive details of corpus donation
17. Details of foreign contribution received and application out of it
18. Transactions with related persons
Form No. 10B has 12 ‘Notes on form 10B’ to explain the fields and terms of the New Form 10B.
Form No. 10BB is the simpler form of Form No. 10B and is not exhaustive and comprehensive as Form No. 10B. However, it also asks for almost all the relevant information as contained in Form No. 10B.
Read the full text of CBDT Notification No. 7/2023 dated 21.02.2023 on Changes in Form No. 10B and Form No. 10BB
MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES) NOTIFICATION New Delhi, the 21st February, 2023
G.S.R. 118(E).— In exercise of the powers conferred by clause (b) of the tenth proviso to clause (23C) of section 10, sub-clause (ii) of clause (b) of sub-section (1) of section 12A read with section 295 of the Income-tax Act, 1961 (43 of 1961)(hereinafter referred to as the Act), the Central Board of Direct taxes hereby makes the following rules further to amend the Income-tax Rules,1962, namely:─
1. Short title and commencement. — (1) These rules may be called the Income-tax Amendment (3rd Amendment) Rules, 2023.
(2) They shall come into force from the 1st day of April, 2023.
2. In the Income-tax Rules, 1962 hereinafter referred to as the principal Rules, for rule 16CC, the following rule shall be substituted, namely:—
‘16CC.Form of report of audit prescribed under tenth proviso to section 10(23C).—The report of audit of the accounts of a fund or institution or trust or any university or other educational institution or any hospital or other medical institution which is required to be furnished under clause (b) of the tenth proviso to clause (23C) of section 10 shall be in—
(a)Form No. 10B where—
(I) the total income of such fund or institution or trust or university or other educational institution or hospital or other medical institution, without giving effect to the provisions of the sub-clauses (iv), (v), (vi) and (via) of the said clause, exceeds rupees five crores during the previous year; or
(II) such fund or institution or trust or university or other educational institution or hospital or other medical institution has received any foreign contribution during the previous year; or
(III) such fund or institution or trust or university or other educational institution or hospital or other medical institution has applied any part of its income outside India during the previous year;
(b) Form No. 10BB in other cases.
Explanation.— For the purposes of sub-clause (II) of clause (a), the expression “foreign contribution” shall have the same meaning assigned to it in clause (h) of sub-section (1) of section 2 of the Foreign Contribution (Regulation) Act, 2010 (42 of 2010).’.
3. In the principal Rules, for rule 17B, the following rule shall be substituted, namely:—
‘17B.Audit report in the case of charitable or religious trusts, etc.— The report of audit of the accounts of a trust or institution which is required to be furnished under sub-clause (ii) of clause (b) of sub-section (1) of section 12A, shall be in—
(a)Form No. 10B where—
(I) the total income of such trust or institution, without giving effect to the provisions of sections 11 and 12 of the Act, exceeds rupees five crores during the previous year; or
(II) such trust or institution has received any foreign contribution during the previous year; or
(III) such trust or institution has applied any part of its income outside India during the previous year;
(b) Form No. 10BB in other cases.
Explanation.— For the purposes of sub-clause (II) of clause (a), the expression foreign contribution shall have the same meaning assigned to it in clause (h) of sub-section (1) of section 2 of the Foreign Contribution (Regulation) Act, 2010 (42 of 2010).’.
4. In the principal Rules, for Form no. 10B, the following form shall be substituted, namely:—
‘FORM No. 10B
[See rule 16CC and 17B]
Audit report under clause (b) of the tenth proviso to clause (23C) of section 10 and sub-clause (ii) of clause (b) of subsection (1) of section 12A of the Income-tax Act, 1961, in the case of a fund or trust or institution or any university or other educational institution or any hospital or other medical institution.
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‘FORM No. 10BB
[See rule 16CC and 17B]
Audit report under clause (b) of the tenth proviso to clause (23C) of section 10 and sub-clause (ii) of clause (b) of sub-section (1) of section 12A of the Income-tax Act, 1961, in the case of a fund or trust or institution or any university or other educational institution or any hospital or other medical institution which is required to be furnished under clause (b) of the tenth proviso to clause (23C) of section 10 or a trust or institution which is required to be furnished under sub-clause (ii) of clause (b) of section 12A
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[Notification No. 7/2023 [F. No.370142/47/2023-TPL]
VIPUL AGARWAL, Director (Tax Policy and Legislation Division)
Note. - The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii) vide notification number S.O. 969(E), dated the 26th March, 1962 and was last amended vide notification number G.S.R. 95 (E), dated 14th February, 2023
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