Form 10BB finds its applicability under specific circumstances:
1. Income Threshold: It is applicable when the total income of a trust or institution does not exceed Rs. 5 crore in the previous fiscal year.
2. No Foreign Contributions: The form applies if the trust or institution has not received any foreign contributions.
3. Income Utilization: Additionally, it applies if the trust or institution has not utilized any portion of its income outside India in the previous fiscal year.
Form No. 10BB, introduced for Assessment Year 2023-24, necessitates various disclosures by the auditee to enhance transparency and compliance. In this article, we will discuss some of these disclosure requirements connected with the initiation of activities, the location of bookkeeping, and the provision of statements concerning donations received by such trusts or institutions.
Commencement of Activities:
Point No. 10 of the Audit Report Form 10BB necessitates the provision of certain details:
1. Whether the auditee, if provisionally registered or provisionally approved, commenced activities in the preceding year.
Under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, newly established trusts or institutions must follow a two-step registration process:
- Apply for provisional registration by filing Form 10A no later than one month before commencing activities.
- Subsequently, apply for regular registration within six months of commencing activities or within six months before the expiry of provisional registration, whichever occurs earlier.
If the response is affirmative, the form requires the auditee to furnish:
1. The date of commencement of activities.
2. Whether an application for registration under section sub-clause (iii) of clause (ac) of sub-section (1) of section 12A or approval under clause (iii) of the first proviso to Clause (23C) of section 10 has been submitted.
- This application involves filing Form 10AB, a requirement for newly established trusts or institutions with provisional registration or provisional approval.
- They must reapply for regular registration within six months of commencing activities or six months before the provisional registration expires, whichever comes first, by submitting Form 10AB.
- If the application has been filed, the form prompts the inclusion of the application filing date.
Consequences of Non-filing of Form 10AB:
- Failure to file Form 10AB within the stipulated period results in the trust or institution being considered ineligible for registration or approval in the previous fiscal year when the deadline expires.
- Furthermore, the principal officer or trustee of the entity, along with the entity itself, becomes liable to pay tax on accreted income at the maximum marginal rate within fourteen days from the end of the previous fiscal year, as per Section 115TD of the Act.
- Accreted income refers to the aggregate Fair Market Value (FMV) of total assets, reduced by liabilities, on the specified date, with valuation methods defined by rules. This accreted income is subject to taxation at the Maximum Marginal Rate.
Details of Place for Bookkeeping:
- Point No. 11 of the Audit Report Form 10BB necessitates the provision of details regarding the location of books of accounts and other documents.
- Rule 17AA of the Income Tax Rules specifies that these records can be maintained in written, electronic, digital, or other electromagnetic data storage forms at the registered office.
- However, a management resolution and written notification to the jurisdictional Assessing Officer can permit the storage of these records at an alternative location in India.
- These records must be maintained for ten years after the relevant assessment year.
The form requests the auditee to confirm:
1. Whether the books of account and other documents have been maintained as prescribed under rule 17AA.
2. If so, whether the books of account are kept at the registered office.
If the answer to the second question is negative, the form requires the following details:
- The address of the alternative location where the books are kept.
- The date of the management’s decision to store accounts at this location.
- The date of intimation to the Assessing Officer regarding this decision, in accordance with the proviso to sub-rule (3) of rule 17AA.
- Rule 18AB of the Income Tax Act mandates that certain entities furnish statements of particulars concerning donations received using Form 10BD.
- When filing Form 10BD, the assessee must provide details such as the donor’s name, address, and identification (PAN or Aadhar if available; otherwise, other identification details like Taxpayer identification number, Passport number, Voter ID, Driving License, Ration Card), type of donation (Corpus, Specific Grant, or other), and mode of donation (Cash, Kind, Electronic, or other).
Audit Report 10BB Sections 12, 13 & 14:
These sections of the Audit Report 10BB require the auditee to provide details regarding Form No. 10BD:
1. Whether the auditee has filed Form No. 10BD for the previous year.
2. If Form No. 10BD has been filed, the form requests the sum total of donations reported in Form No. 10BD.
Reasons for Non-Filing of Form 10BD:
- Donations may not have been reported due to the unavailability of any ID (PAN, Aadhar, Passport No, Voter ID, Driving Licence, Ration Card).
- Non-filing may also be due to the entity’s lack of registration under Section 80G or Sec 35(1).
Consequences of Non-Filing of Form 10BD:
Non-filing of Form 10BD results in a fee of Rs. 200 per day of delay, as per the newly inserted section 234G. In addition to the delay fee, failure to file this statement incurs penalties under section 271K, which range from Rs. 10,000 to Rs. 1,00,000.
In conclusion, Form 10BB plays a crucial role in ensuring transparency and compliance for trusts and institutions, guiding them through various disclosure requirements related to the commencement of activities, the location of bookkeeping, and the reporting of donations. Complying with these requirements is not only necessary for maintaining eligibility but also for avoiding penalties and adverse tax consequences.