Form 10 BB – Income Tax Department

Last Updated at: Sep 08, 2022
Form 10 BB

Several charitable trusts and educational institutions work for the betterment of society within India. While they lend a helping hand to several sections of society, these institutions and trusts also have to follow specific compliance requirements. To be eligible for the various benefits that the government provides to such organisations for their work, these groups have to ensure they file all the required documents in time. Form 10BB of the Income Tax Act is one such filing requirement that educational institutions need to maintain to stay legal. In this article, we will take a look at Form 10BB, why it is necessary, and Form 10 BB’s applicability.

What Is a Charitable Purpose as per the Income Tax Laws?

Taxation of charitable institutions and trusts work as per the laws prescribed in Section 13, 12AA, 12A, 12, and 11 of the Income Tax Act. As per Sub-section 15 of Section 2, a charitable purpose includes any of the following;

  • Relief to poor
  • Education
  • Medical relief
  • Advancement of public utility, wherein receipts do not exceed 20% of total receipts accepted by the trust

Since the word ‘includes’ refers to a broader definition, individuals must liberally interpret the law and add actions that follow the same line of thought. For instance, the act of publishing books, reference materials and research papers of professional interest may also be a charitable purpose. Also, such organisations must abide by the following rules and regulations. 

  1. The general public serves as the trust’s beneficiaries and will face no discrimination based on caste, creed, religion, or sex.
  2. Any change to the object clause requires the prior approval of the concerned income tax authorities.
  3. As per Section 13, the trust must not provide any unique benefits to its founders or other related parties.
  4. The trustees must transfer the trust’s assets to another registered trust that shares the same objectives on dissolution.
  5. Irrevocable nature of trusts.

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Taxation of Charitable Trusts and Educational Institutions

A founder and their trustees may form a trust after drafting and registering a deed with the registrar of trusts. The application for registration occurs via the filing of Form 10A, and if the trust wishes to avail benefits provided by 80G, it must file Form 10G in triplicate. To be applicable for the benefits offered by Section 11 and 12 of the Income Tax Act, the institutions must have registered under Section 12AA. Further, the trust must undertake only activities for which it has received permission from the Income Tax Department. Additionally, if funds collected exceed INR 2,50,000, the trustor institution must submit an audit report via Form 10B.

Documents Required to Register a Charitable Trust or Educational Institution in India

  1. Registration certificate 
  2. Trust deed
  3. No-objection Certificate from Landlord (in case of rented premises)
  4. PAN card 
  5. Electricity/water/gas/telephone/internet bill/property tax receipt 
  6. Evidence of welfare activities conducted
  7. Progress report from the last three years 
  8. Additionally, Financial statements and income tax returns for the last three years
  9. List of donors, their addresses, and PAN details
  10. List of trustee members, along with their photographs, contact details, and CVs 

Form 10B Vs Form 10BB of the Income Tax Act

While Form 10B works as per Rule 17B of Section 12AB, Form No 10BB works as per Rule 16CC under Section 10. Similarly, while the former helps with auditing and regulating charitable and religious trusts, Form 10BB helps regulate educational institutions. Applicants must file both these forms along with other returns required from such institutions. Moreover, Form 10BB of the Income Tax Act works as an audit report for universities, other educational institutions, and medical institutions.

Form 10BB Applicability

Form 10BB helps educational institutions claim an exemption under Section 10 of the Income Tax Act. If your trust or educational institutions are registered under either Section 12A or 12AA, it can claim exceptions only under Sections 10(1) and 10(23C). However, to claim this exemption, organisations must file a return via Form ITR-7 and an audit report via Form 10BB. Applicants must select the appropriate sub-clause of Section 10 from the drop-down list for the same and then fill all their personal details in Section A. Section B contains details regarding the exemption claimed and aggregate annual receipts received. 

Need for Form 10BB of the Income Tax Act

Any educational or institution, university, hospital, or trust that claims exemption from the IT department will have to get their accounts audited if their annual income exceeds a benchmark. As per the Taxation Laws (Amendment) Act, 2006, all organisations that enjoy exemptions under Section 10(23C) must submit an Audit report via Form No 10BB. Moreover, Form 10BB is applicable for all transactions made from Financial Year 2006 – 2007 onwards. The Central Board of Direct Taxes pardoned organisations that submitted Form 10BB after a significant delay in recent years. Such delays were for filings made for the Assessment Years 2016-2017 and 2017-2018. 

Details required for Form 10BB Income Tax Filing

  1. Balance sheet 
  2. Income and expenditure statement
  3. Profit and loss account 

Part A – General Details

  1. Name of the institution 
  2. Official address
  3. Permanent Account Number
  4. Assessment Year
  5. Concerned sub-clause of Section 10(23C) 
  6. Registration number 
  7. Date of approval of the institution 

Part B – Income Application

  1. Nature of activities performed by the institution
  2. Total income earned and amount applied during the year to meet the trust’s objectives
  3. Income accumulated to meet the trust’s objectives, without exceeding 15% of total income
  4. Whether income was used for other purposes, and if so details regarding such usage
  5. Whether the institution accumulated any amount exceeding 15% of the total income

Part C – Other Information

  1. Whether anyone invested any funds in other ways, and if so details regarding such investments
  2. Details regarding the profits and gains earned by the institution
  3. Whether the trust paid any accumulated income to another trust
  4. Moreover, whether any voluntary contribution of a different kind was received last year
  5. Whether the institution received any anonymous donations last year