Under the Income Tax Act, ordinary taxpayers are required to maintain books of accounts and get them audited which has been prescribed. Till now there was no specific provision for books of accounts to be maintained by charitable organisations. Finance act 2022 has now prescribed books of accounts and other documents to be maintained by such organisations if their total income exceeds the maximum amount not chargeable to tax. These books of accounts have been discussed in this article.

The New Rule

The key extracts of the newly notified rule are given below:

Every charitable institution is required to keep and maintain the following books of accounts and other documents:

i) Books of account including the cash book, ledger, journal, copies of bills, original bills, and any other books.

ii) Books of account for a business undertaking and business carried on by assessee

iii) Other documents for maintaining a record of :

  • All projects and Institutions run by the person containing details of the name address and objectives
  • Income in respect of voluntary contribution containing details of donor, income from property held under trust along with the list of such property, and other income of institution or trust, etc
  • The application of income in and outside India, deemed application of income, income accumulated or set apart money invested in the specified mode etc
  • Voluntary contribution received and its application
  • Loans and borrowings
  • Properties held by trust
  • The specified person

Mode in which documents may be kept:-

The books of account and other documents may be kept in written form electronic form digital from or as printouts of data stored digitally

Place where to be kept

The books of account and other documents shall be kept and maintained by the entities at their registered office. However books may be kept in another place if management decides to do so by passing a resolution.

Period for which books to be maintained

The books of account and other documents shall be kept and maintained for 10 years from the end of the relevant assessment year

Conclusion

Hence for FY 2022-2023 all charitable entities would be required to maintain books of account and documents as per details provided in the article above. It is advisable that your charitable organization gets its accounting software modified so that the above rules are complied with. Have you started this process ?

Complete text of the new Rule 17AA can be Books of accounts to be maintained by university, charitable/medical institutions

The author is a practicing Chartered Accountant, Senior Partner in Kohli Chitkara & Co. LLP and can be contacted at sandeep@kcccas.com. Any comments or queries are welcome.

DISCLAIMER : The information provided in this article is for general informational purposes only. All efforts have been made to provide accurate information in this document, however it should not be perceived as a professional or legal advice. Reader should consult a professional before making any decision based upon this document. Under no circumstance author or the publisher shall have any liability to you for any loss or damage of any kind incurred as a result of the use of this information.

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Author Bio

Qualification: CA in Practice
Company: KOHLI CHITKARA $ CO. LLP
Location: DELHI, Delhi, India
Member Since: 21 Mar 2019 | Total Posts: 17
Well versed with various accounting and taxation issues. Managed accounts of various mid sized companies, overseeing their statutory compliances. In depth knowledge of taxation matters both direct and indirect. Experienced in the area of company affairs, incorporation of companies, setting up of sub View Full Profile

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