Income Tax

All about Form 10BB of Income Tax Act

Form 10BB of the Income Tax Act is filed by the educational institutions or the charitable trusts used for the betterment of society within India. These institutions & trusts has to comply with certain requirements to continue their work.

In this article we will have a look at Form 10BB, its use & applicability.

What is charitable purpose & the applicability for Form 10BB?

According to Section 2 of Income tax Act, a charitable purpose includes:

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

Under the sections 13, 12AA, 12A, 12 & 11 of the Income Tax Act deals with the taxation of charitable institutions. The purposes for charitable trusts has a broader meaning & must be interpreted liberally.

Such organisations must comply with the following rules & regulations:

• There must be no discrimination based on caste, creed or religion for the public acting as 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 trust’s assets to another registered that has the same objective on dissolution.

Documents required for registration of charitable trust alongwith Form 10BB

The documents required for registration of charitable trust alongwith 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 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 a trust deed. The application of registration will be done through Form 10A & the trust will avail the benefits under section 80G of the Income Tax Act. The institutions to avail the benefits under section 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 the charitable purposes. In case, if the funds collected exceeds Rs. 2, 50,000 then the trust must submit an audit report in the Form 10BB.

What is the 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.

What is the applicability of Form 10BB?

Form 10BB aids the educational institutions to claim an exemption under Section 10 of the Income Tax Act, 1961. If a charitable trust or educational institution is registered under section 12 or 12AA, then it can claim exemption under section 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 income tax return through ITR – 7 & an audit report via Form 10BB. The applicants has to select an appropriate sub – clause under Section 10 from the drop down menu for the same. They have to fill 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 trusts or an educational institutions 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 exemption must have the accounts of trust audited if the annual income exceeds a threshold limit.

According to the Taxation Laws (Amendment) Act 2006^[1], all the 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 to submit the Form 10BB, such delays were for Assessment Years (AY) 2016 – 2017 & 2017 – 2018.

What are the 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 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.

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