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Form 10BB of the Income Tax Act is filed by educational institutions or charitable trusts used for the betterment of society within India. These institutions & trusts have to comply with certain requirements to continue their work.
The Income Tax Act specifies a specific form, known as Form 10BB, for charitable trusts, educational institutions, healthcare facilities, and hospitals that are intended for charitable purposes rather than financial gains. The trusts, educational institutions, or organizations’ income, expenses, assets, and liabilities are all covered in full in Form 10BB. It functions as an audit report created by a chartered accountant after a rigorous review of the financial records for the particular financial year. In order to claim deductions under section 10(23C) of the Income Tax Act of 1961, this Form is required.
According to Section 2 of the Income-Tax Act, a charitable purpose includes:
Under sections 13, 12AA, 12A, 12 & 11 of the Income Tax Act deal with the taxation of charitable institutions. The purposes of charitable trusts have a broader meaning & must be interpreted liberally.
Such organizations must comply with the following rules & regulations:
Form 10BB is applicable:
The documents required for registration of charitable trust along with Form 10BB are:
The trustees will form the trust after the drafting & registration of a trust deed. The application for registration will be made through Form 10A & the trust will avail of the benefits under section 80G of the Income Tax Act. The institutions to avail the benefits under sections 11 & 12 of the Act, then such institutions must be registered under Section 12AA of the Act. Furthermore, the trust must be involved in the activities defined for charitable purposes. In case if the funds collected exceed Rs. 2, 50,000, then the trust must submit an audit report in Form 10BB.
There is a difference between Form 10B & 10BB as:
The applicant has to file both of the forms with other required forms from such institutions or trusts.
Form 10BB aids educational institutions in claiming an exemption under Section 10 of the Income Tax Act of 1961. If a charitable trust or educational institution is registered under section 12 or 12AA, then it can claim an exemption under sections 10(1) & 10(23C) of the Income Tax Act, 1961.
To file for an exemption under section 10(23C) of the Act, the organizations have to file an income tax return through ITR – 7 & an audit report via Form 10BB. The applicants have to select an appropriate sub–clause under Section 10 from the drop-down menu for the same. They have to fill in all the personal details in Section A & details regarding the exemption claimed & the aggregate annual receipts must be filled in Section B.
A charitable trust or an educational institution established for the purpose stated in section 12 or 12AA to claim exemption from the Income Tax department. The Income tax department, in order to give an exemption, must have the accounts of the trust audited if the annual income exceeds a threshold limit.
According to the Taxation Laws (Amendment) Act 2006[1], all organizations or trusts to enjoy the exemption under section 10(23C) have to submit the audit report via Form 10BB.
Form 10BB applies to all the transactions made from Financial Year 2006 – 2007 onwards. The CBBT (Central Board of Direct Taxes) has given relaxations to the organizations that have delayed submitting Form 10BB; such delays were for Assessment Years (AY) 2016 – 2017 & 2017 – 2018.
The following details are required:
The details are divided into 3 parts, namely,
PART A – General Details
PART B – Income Application
PART C – Other Information
Form 10BB is filed as the audit report under section 10(23C) of the Income Tax Act, 1961, in case of any charitable or religious trusts or educational institutions established for the charitable purposes enlisted in Section 11 of the Act. Thus, if such institutions or trusts have exceeded the limit, then Form 10BB must be filed.
The Form must be submitted by educational institutions and nonprofit trusts that seek to improve society in India.
The audit report of a fund, trust, or educational institution is required to be presented on Form 108B in accordance with section 10(23C) of rule 16CC.
Exemptions can be availed under section 10 by filing the Form 10BB of the income tax act. Educational institutions, medical institutions, and hospitals all can get this exemption.
Educational institutions or charitable trusts
Form 10BB must be filled out and submitted by every organization seeking an exemption under section 10(23C), including its earnings, costs, assets, and liabilities.
Form 10BB is required to be filed along with the income tax returns.
Read our article: How to file the Form 10BA of Income Tax?
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