Form 10B / 10BB Audit Report for Trusts

Form 10B is applicable to charitable or religious trusts and institutions registered under Section 12AB of the Income Tax Act 1961 whose total income before claiming exemption under Section 11 exceeds Rs 5 crore, or which receive foreign contribution, or which apply income outside India. Form 10BB applies to educational institutions and hospitals claiming exemption under Section 10(23C)(iv), (v), (vi), or (via) with income exceeding the prescribed threshold. The distinction was clarified by CBDT Notification No. 7/2023 dated February 21, 2023, which revised the forms and the filing thresholds. Both forms must be signed by a Chartered Accountant holding a Certificate of Practice, and the audit report must be furnished electronically on the Income Tax portal before the due date of filing the return of income.

The audit report in Form 10B or Form 10BB must be filed on or before the due date for filing the return of income under Section 139(1) of the Income Tax Act 1961 (≡ §263/§349, IT Act 2025), which for trusts is typically October 31 of the assessment year (or such extended date as notified by CBDT). Late filing of the audit report results in disallowance of the exemption claimed under Section 11 or Section 10(23C) for that year, as the filing of the audit report is a mandatory condition precedent to claiming the exemption per the provisos to those sections. Additionally, a penalty of Rs 1,500 per day subject to a maximum of Rs 1 lakh may be levied under Section 271B for failure to get accounts audited and furnish the report in time. Rectification applications under Section 154 cannot cure the defect of a late audit report once the assessment is completed.

When a trust accumulates income beyond the 15% ordinary accumulation limit permitted under Section 11(1)(a), the additional accumulation is allowed for up to 5 years under Section 11(2) of the Income Tax Act 1961, subject to the trust filing Form 10 (notice of accumulation) before the due date of return and specifying the purpose of accumulation. The CA conducting the Form 10B audit must verify that Form 10 was duly filed, that the funds so accumulated are invested or deposited in the modes specified under Section 11(5) (e.g., government securities, scheduled bank FDs, post office savings), and that the accumulated funds are applied toward the stated purpose within the 5-year period. Any unexplained deviation from the stated purpose or failure to apply within the period results in the accumulated amount being treated as income of the trust in the year of deviation under Section 11(3).

In Form 10B (as revised per CBDT Notification 7/2023), the CA must independently verify Schedule RA (receipts and payments account), Schedule IE-1 to IE-4 (income and expenditure heads), and Schedule AOA (application of income) against the trust's books and bank statements — management representation alone is insufficient for these. The CA must also independently confirm the registration status under Section 12AB, the list of related parties under Section 13(3) to identify prohibited transactions, and whether any income has been applied for benefit of specified persons under Section 13(1)(c). For voluntary contributions forming part of the corpus under Section 11(1)(d), the CA must verify that separate earmarking is maintained in books and that the corpus has not been applied toward revenue expenses. Representations are acceptable only for non-quantifiable assertions such as the objects of the trust remaining the same.

No. An educational institution cannot simultaneously claim exemption under Section 10(23C)(vi) and under Section 11 of the Income Tax Act 1961 — the two regimes are mutually exclusive, as clarified by the Supreme Court in Queen's Educational Society v. CIT (2015) and reaffirmed in CBDT Circular No. 14/2019. If the institution is registered under Section 12AB, it must claim exemption under Section 11 and file Form 10B; if it is approved under Section 10(23C)(vi) by the prescribed authority (CBDT for incomes above Rs 5 crore), it must file Form 10BB. Institutions that have both registrations active must choose one regime, and the CBDT has directed that Section 10(23C) approval will lapse upon registration under Section 12AB as per the Finance Act 2020 amendments effective from April 1, 2021.