CBDT tightens Audit Reporting Norms for Charitable Trusts
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Income tax authorities have tightened reporting norms for charitable trusts, with more information required in the audit reports and more responsibility on the auditor. The Central Board of Direct Taxes (CBDT) has notified 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.
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 income tax department has been keeping a close watch on charitable trusts and has, over the years, significantly tightened provisions to ensure that only genuine trusts and activities enjoy the exemption.
To this end, the Union Budget 2023-24 has also announced a number of changes in tax treatment of charitable trusts. It has proposed to levy exit tax when the trust gets merged with a non-charitable organisation but with dissimilar object, or does not transfer the asset to another charitable trust. Further, it has also proposed to consider only 85% of the eligible donations made by a trust or institution to another trust or institution as application of such donation for charitable or religious purposes.
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.
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 income tax department has been keeping a close watch on charitable trusts and has, over the years, significantly tightened provisions to ensure that only genuine trusts and activities enjoy the exemption.
To this end, the Union Budget 2023-24 has also announced a number of changes in tax treatment of charitable trusts. It has proposed to levy exit tax when the trust gets merged with a non-charitable organisation but with dissimilar object, or does not transfer the asset to another charitable trust. Further, it has also proposed to consider only 85% of the eligible donations made by a trust or institution to another trust or institution as application of such donation for charitable or religious purposes.
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