Introduction: The Bombay Chartered Accountants Society, representing the interests of charitable trusts in India, has urgently sought a one-year deferment for the applicability of Form 10B/10BB, the Audit Report for Charitable Trusts. This request, addressed to the Hon’ble Finance Minister of the Government of India, is based on significant challenges and issues faced by eligible trusts in complying with the newly introduced forms.
Background: Form 10B/10BB is an essential audit report applicable to eligible trusts, encompassing various institutions, universities, hospitals, and philanthropic organizations whose income qualifies for specific tax exemptions under Indian tax law. The threshold for filing these forms is if the total income of such eligible trusts, before considering tax benefits, exceeds Rs. 250,000.
New Forms 10B and 10BB were introduced on February 21, 2023, with specific criteria for their usage. Form 10B is obligatory when the total income of an eligible trust exceeds five crores, if the trust received foreign contributions, or if it applied any part of its income outside India. In all other cases, audit reports are filed in Form 10BB.
Failure to file the audit report as mandated can lead to charitable trusts losing their exemption under relevant sections of the tax code, making them liable to taxation on their income.
Problems and Issues Regarding Compliance: The main challenge charitable trusts face is the complexity and extensive requirements of Forms 10B and 10BB. These forms mirror Form 3CD, designed for large business entities with turnovers exceeding Rs. 10 crore. Extracting and compiling data from past and present records related to receipts and expenditures is a substantial task for trusts.
Most charitable trusts operate with the help of volunteers and non-professionally qualified administrative staff. The current forms demand a deep understanding of tax law, which may result in various interpretations and complications. Additionally, the forms were introduced late in the financial year, with the utility to fill them made available only shortly before the deadline.
The transition from the old, simpler Form 10B to the new comprehensive forms within a short timeframe is posing a considerable challenge for charitable trusts. The due date to file these forms for the fiscal year 2022-23 is September 30, 2023.
Conclusion: In light of the significant challenges and hardships faced by charitable trusts in complying with the new audit requirements, the Bombay Chartered Accountants Society urgently requests a one-year deferment for the applicability of Forms 10B and 10BB. They propose that the old form should continue to apply for assessment year 2023-24 and 2024-25. Failing to take urgent remedial action may result in trusts losing their exemption, ultimately impacting their charitable activities.
The society awaits an early and favorable response from the government to alleviate the burden on charitable trusts and ensure the continuity of their vital philanthropic work.
Also Read : Request for Deferment or Extension of Due Date for Filing Forms 10B, 10BB & ITR-7
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Bombay Chartered Accountants’ Society
September 11. 2023
The Hon’ble Finance Minister,
Government of India,
New Delhi.
Respected Madam
Sub: Request to defer the applicability of form 10B / 10BB (Audit report for Charitable Trusts) by one year
Background
Form 10B/10BB is an Audit Report for Charitable Trusts and applicable to following (hereinafter referred to as eligible trusts)
1. A fund or institution or trust or any university or other educational institution or any hospital or other medical institution whose income is exempt under clauses (iv), (v), (vi) and (via) of section 10(23C).
2. A fund or institution or trust whose income is eligible for benefit of section 11/12
Form 1013/10BB is required to be filed if the total income of the eligible trusts, before considering benefit of section 10(23C) or section 11/12 exceeds Rs. 250.000
New Forms 10B and 10BB were introduced vide Notification No. 7/2023 dated February 21, 2023. Form 106 is to be filed when,
(i) the total income of such eligible trust, without giving effect to the provisions of sections 10(23C), section 11 and 12 of the Act, exceeds rupees five crores during the previous year; or
(ii) such eligible trust has received any foreign contribution during the previous year; or
(iii) such eligible trust has applied any part of its income outside India during the previous year;
In other cases, audit report will be in Form 10BB.
A failure to file the audit report as required by section 12A(1)(b) will result in a Charitable trust
losing exemption under section 10(23C) / section 11, making it liable to tax on its income.
Problems and issues regarding compliance
Form 106 has 49 clauses (with many subciauses) and 29 schedules. Form 1088 is a subset of Form 10B and has 32 clauses and 7 schedules. Both the forms are on the lines of Form 3CD, which applies to business entities with a turnover in excess of Rs 10 crore.
Substantial data/ information is mandated by the forms, which relates to operations of current year as well as of past years. The eligible trusts are required to extract the information from the past and present records. The information relates to receipts earned and amounts spent by the trust.
Charitable trusts carry on Philanthropic activities and bridge the gap, supplementing the efforts of the Government to reach out to and uplift every needy citizen. The day to day activities of most of the trusts are managed by Trustees with the help of administrative staff. The staff is not professionally qualified. Many a times, the trust does not have full time employees and carries out its activities with the help of volunteers. The current forms have several clauses which require a deep understanding of the law and are amenable to different interpretations. The forms were notified at the far end of the financial year (February 2023) and the utility to fill these forms has been made available only a few days ago.
The old form 10B was a short form, seeking information which was readily available with the trusts. But it is a huge challenge for the trusts to extract and compile the data/information sought in the new form in such a short period of time. The due date to file the form for re 2022-23 is September 30, 2023.
It is therefore requested that the new forms be deferred for a period of one year to assessment year 2024-25 and for assessment year 2023-24. the old form should continue to apply. If some drastic and urgent remedial action is not taken, it may result in Charitable trusts losing exemption and causing trusts tremendous hardship and substantial harm, ultimately impacting charitable activities.
We await your early and favourable response.
For Bombay Chartered Accountants Society
|
CA Chirag Doshi (President) |
CA Deepak Shah
(Chairman Taxation committee) |
CA Anil Sathe
(Co-Chairman Taxation committee) |
Very good move in the interest of the difficulties faced by the fellow CAs. Let us hope that the same is deferred.