Charitable trusts are now subject to stricter reporting regulations by the income tax authorities, requiring additional information in audit reports and placing greater responsibility on auditors.
Thus, the Central Board of Direct Taxes (CBDT) has introduced changes to the audit reports for charitable trusts.
Let’s understand the latest updates for Charitable trusts through this article.
I-T Department Tightens Regulations to Prevent Misuse of Tax Exemptions for Charitable and Religious Trusts
- According to current laws, income from charitable and religious trusts is tax exempt, subject to certain conditions.
- However, due to concerns over the misuse of these benefits, the income tax department has been closely monitoring charitable trusts and has significantly tightened regulations over the years to ensure that only genuine trusts and activities qualify for the exemption.
Changes to Form 10B and Expanded Auditor Responsibilities
- The new audit report, Form 10B, must include details of income exceeding Rs 5 crore, any foreign contributions, and any income earned outside of the country in the previous year.
- The auditor’s role in certifying information for charitable trusts has been expanded beyond the requirements of the ITR Filing.
- Additionally, several standard reporting clauses that were previously applicable only to other assesses under the tax audit regime have now been included in the Form 10B auditor’s report for charitable trusts.
Conclusion
The new reporting requirements for charitable and religious trusts impose significant obligations on auditors.
They are now required to report in detail on the institution’s objects and operations, including contributions, income application, taxability under Section 115BBI of the ITA, 1961, capital asset transfers, transactions with specified persons, and violations.
These amendments aim to regulate and monitor these organizations to ensure they fulfill their objectives and comply with the law, resulting in the auditee being subject to a much wider review and scrutiny by the regulators.
12A and 80G Registration for NGO: Process, Benefits, Document
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