Income Tax Circulars

CBDT’s New Circular on Audit Reporting: A Deep Dive into Circular No. 17/2023

This circular provides clarifications concerning the requirements of audit reports for funds, trusts, educational institutions, medical institutions, etc., under specific provisions of the Income-tax Act, 1961.

Background Leading to Its Introduction:

1. Entities like funds, trusts, and educational or medical institutions need to furnish audit reports in Form No. 10B/Form No. 10BB under specific provisions of the Income-tax Act.
2. There have been representations about challenges in providing details of persons who have made a ‘substantial contribution’ to the entity – specifically, contributors whose cumulative contribution surpasses fifty thousand rupees by the end of the previous financial year as mentioned in section 13(3)(b) of the Act.

Key Provisions:

For the assessment year 2023-24, while filling Form No. 10B and Form No. 10BB:.

• Details should be provided for contributors whose total contribution in the previous year itself exceeds fifty thousand rupees, instead of the cumulative contribution up to the end of the relevant previous year.
• If available, details of relatives of such significant contributors can be provided.
• If available, details of entities (concerns) where this significant contributor has a substantial interest should be provided.

Implications for Stakeholders:

1. Simplification of Reporting: The shift from cumulative to the annual contribution makes it easier for entities to determine and report significant contributors.
2. Transparency: By including details of relatives and concerns where the contributor has an interest, it adds an additional layer of transparency to financial disclosures.
3. Operational Ease: The clarification can ease the operational difficulties in filing returns and reduce errors or omissions.
4. Concerns for Privacy: On the downside, the provision might raise concerns over the privacy of contributors and their associations.

Major Takeaways:

1. For the assessment year 2023-24, entities need to focus on contributors’ contributions from the previous year instead of cumulative figures.
2. The inclusion of details about relatives and concerns provides deeper insight into the financial nexus and relationships of significant contributors.
3. The circular is a response to practical challenges faced by stakeholders and shows the government’s willingness to address such concerns through clarifications.

To sum it up, CBDT Circular No. 17/2023 is aimed at simplifying the reporting mechanism while ensuring transparency and accountability in the financial disclosures of the specified entities.

Circular-No.-172023-​Order-under-section-119-of-the-Income-tax-Act-1961