Notification No. 7/2023, issued by the Central Board of Direct Taxes (CBDT) on February 21, 2023, is a big deal for organizations like charities and religious groups. It introduces two new forms for their audit reports: Form 10B and Form 10BB. These forms are crucial for these organizations to report their finances correctly. It’s essential to figure out which form applies to your organization to follow the latest tax rules and stay out of trouble.
To figure out which form, Form 10B or Form 10BB, your organization should use, you need to carefully look at what your organization does.
- If your organization mainly does good things like helping people, educating, providing healthcare, or reducing poverty, then go for Form 10B.
- If your organization is more about religious, cultural, or other non-charitable activities that get tax benefits, then choose Form 10BB.
The updated IT Rule 16CC gives clear rules about when organizations should use either Form No. 10B or Form No. 10BB for their audit reports, as per the Income Tax Act. The decision depends on things like how much money the organization makes if it gets money from foreign sources, and if it spends money outside India in the previous year.
Form of Audit Report in Form No. 10B and Form No. 10BB:
1. Form No. 10B: Form 10B is a new audit report form introduced in Notification No. 7/2023. It’s designed for charitable trusts and institutions that focus on charitable activities and want to qualify for tax exemptions based on their philanthropic work. Organizations eligible for Form 10B are typically involved in things like education, healthcare, poverty relief, or similar charitable efforts. This form requires detailed information about the organization’s finances, activities, and adherence to the Income Tax Act, of 1961. You should use Form 10B if any of these conditions apply:
- The total income of the fund, institution, trust, university, educational institution, hospital, or medical institution exceeds five Crores rupees during the previous year (excluding specific sub-clauses of clause 23C).
- The organization has received foreign contributions during the previous year, wherein the term “foreign contribution” aligns with the definition provided in clause (h) of sub-section (1) of section 2 of the Foreign Contribution (Regulation) Act, 2010 (42 of 2010). This implies that organizations receiving foreign contributions must employ Form No. 10B for their audit report.
- The organization has allocated any portion of its income outside India during the previous year.
2. Form No. 10BB:
Form 10BB is a new report form introduced under Notification No. 7/2023. It’s meant for organizations that aren’t exactly charitable trusts but are involved in religious or other activities, making them eligible for tax exemptions under specific sections of the Income Tax Act, of 1961.
- Form 10BB focuses on gathering information related to the religious, cultural, or non-charitable activities these organizations are doing.
- So, if your organization mainly runs places of worship, cultural centers, or conducts religious ceremonies, then Form 10BB is the form you should use.
In simpler terms, if your organization doesn’t fit the conditions specified for Form No. 10B, use Form 10BB if you’re into religious or similar activities and want tax exemptions.
key differences between Form No. 10B and Form No. 10BB under the Income Tax Act 1961:
|Aspect||Form 10B||Form 10BB|
|Regulatory Basis||Filed based on Rule 17B under Section 12AB of the Income Tax Act.||Filed based on Rule 16CC associated with Section 10 of the Income Tax Act.|
|Applicability||Primarily used by charitable institutions and religious trusts. These include trusts running educational institutions, hospitals, and organizations involved in religious and social welfare activities.||Primarily used by educational institutions formed for educational purposes and hospitals or other medical institutions with non-profit-making objectives. This includes universities, colleges, schools, and medical institutions.|
|Audit Report||Serves as an audit report for charitable institutions and religious trusts, helping them maintain their tax-exempt status and comply with the conditions of Section 12AB.||Serves as an audit report for educational institutions and medical institutions, ensuring that they meet the criteria set forth in Section 10(23C) of the Income Tax Act. This section provides exemptions for certain educational and medical institutions.|
In summary, Form 10B is connected with charitable institutions and religious trusts operating under Section 12AB, while Form 10BB is linked to educational institutions and medical facilities operating under Section 10(23C) of the Income-tax Act, 1961. These forms serve as audit reports for specific types of organizations: Form 10B for those falling under Section 12AB, and Form 10BB for those falling under Section 10(23C), including funds, trusts, universities, educational institutions, hospitals, and medical institutions mentioned in sub-clauses (iv), (v), (vi), or (via) of Section 10(23C).
These reports are essential for organizations seeking income tax exemptions, provided they receive approval from the designated authority. Understanding the distinction between these forms is crucial for organizations to ensure accurate compliance with tax regulations.