Income Tax

Form 10bb of Income Tax Act – Guide

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.

What is Form 10BB?

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.

What Is Charitable Purpose & Applicability For Form 10BB?

According to Section 2 of the Income-Tax Act, a charitable purpose includes:

• Education;
• Medical relief;
• Relief to the poor;
• Public utility advancement (wherein total receipts do not exceed 20% by the trust.)

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:

• There must be no discrimination based on caste, creed, or religion for the public to act as the trust’s beneficiaries.
• Any alteration or change in the object clause must require prior approval of the income tax authorities.
• According to section 13 of the Act, the trust must not give any special treatment or benefits to its founders or other related parties.
• The nature of trusts is irrevocable.
• The transfer of the trust’s assets to another registered that has the same objective on dissolution.

When is Form 10BB applicable?

Form 10BB is applicable:

• The total income of the trust or the institutions registered under section 12AB or section 10(23C0 is less than or equivalent to 5 crores before taking into account the provisions of sections 11 & 12 or sections 10(23C)(iv),(v),(vi)(via) of the act.
• During the preceding year, the trust or institution did not receive any contributions from abroad.
• During the previous year, the trust or institution didn’t use any of its income that was earned outside of India.

Documents Required For Registration of Charitable Trust Along With Form 10BB

The documents required for registration of charitable trust along with Form 10BB are:

• PAN Card
• Trust Deed
• Certificate of Incorporation
• The Landlord must give NOC (in case of rented or leased property)
• Copy of bills (electricity, water, gas, telephone)
• Progress report of last 3 years
• Financial statement& the ITR of the last 3 years
• Donor list along with their addresses & PAN details
• List of members of trustee along with photographs & contact details

How Taxation Of Charitable Trusts & Educational Institutions Calculated & Filed In Form 10BB?

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.

Difference Between Form 10B & 10BB?

There is a difference between Form 10B & 10BB as:

• Form 10B is filed as per Rule 17B of Section 12AB, whereas Form 10BB is filed as per Rule 16CC under Section 10.
• Form 10B helps in the audit & regulates the charitable & religious trusts, whereas Form 10BB helps in regulating the educational institutions.

The applicant has to file both of the forms with other required forms from such institutions or trusts.

Applicability Of Form 10BB?

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.

Why Is Form 10BB Needed?

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.

Details Required For Form 10BB Income Tax Filing?

The following details are required:

• Balance sheet
• Income & expenditure statement
• Profit & loss statement

The details are divided into 3 parts, namely,

PART A – General Details

1. Institution name
2. Official address
3. PAN number
4. The assessment year (AY)
5. Registration number
6. Approval date of the institution
7. The sub-clause related to the said concept under section 10(23C)

PART B – Income Application

1. The activities performed by the institution
2. To meet the trust’s objective, the total amount earned & applied during the year
3. The income collected not exceeding 15% of the total income to meet the objective of the trust.
4. In case the income is used for other purposes, then the details of such use
5. The income collected by the institution exceeding 15% of the total income

PART C – Other Information

1. If someone has invested funds in any other ways, then the details of such investment
2. Statement of profit & gains earned by institution
3. Whether the trust has paid the collected income to another trust
4. If any voluntary contribution of a kind was received in the last year
5. If any anonymous donation is made in the institution in the last year

Conclusion

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.

FAQs

Read our article: How to file the Form 10BA of Income Tax?