Educational institutions and charitable trusts are responsible for providing assistance to many sections of society in India. Several benefits that the government provides for such organisations' work must be filed on time to qualify for them. To stay legal, educational institutions must maintain Form 10BB of the Income Tax Act. 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 works as per the laws prescribed in Sections 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
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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 organizations must abide by the following rules and regulations.
- The general public serves as the trust’s beneficiaries and will face no discrimination based on caste, creed, religion, or sex.
- Any change to the object clause requires the prior approval of the concerned income tax authorities.
- Founders or other related parties cannot receive any unique benefits from the trust, according to Section 80TTB
- When the trust terminates, all assets of the trust are to be transferred to another registered trust that shares the same objectives as the trust that dissolved.
- Irrevocable nature of trusts.
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 of benefits provided by 80G, it must file Form 10G in triplicate. Institutions must have registered under Section 12AA in order to be eligible for the benefits offered by SEC 80P and 80B of the Income Tax Act.
Further, the trust must undertake only activities for which it has received permission from the Income Tax Department. Additionally, if funds collected exceed ₹ 2,50,000, the trustor institution is required to submit an audit report via Form 10B.
LLP income tax rates are the same as individual income tax rates, and they vary based on the total income earned during the financial year. Know more: LLP income tax rates
Documents Required to Register a Charitable Trust or Educational Institution in India
- Registration certificate
- Trust deed
- A letter of no objection from the landlord (if the premises are rented)
- PAN card
- Electricity/water/gas/telephone/internet bill/property tax receipt
- Evidence of welfare activities conducted
- The last three years’ progress report
- Additionally, Financial statements and Income tax returns for the last three years
- List of donors, their addresses, and PAN details
- List of trustee members, along with their photographs, contact details, and CVs
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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
Education institutions can claim an exemption from the Income tax return for NRI under Section 10 of the Income Tax Act using Form 10BB. 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, organizations 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 – https://www.cbic.gov.in/resources//htdocs-cbec/income.pdf, all organizations 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 organizations 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
- Balance sheet
- Income and expenditure statement
- Profit and loss account
- Name of the institution
- Official address
- Permanent Account Number
- Assessment Year
- Concerned sub-clause of Section 10(23C)
- Registration number
- Date of approval of the institution
- Nature of activities performed by the institution
- Total income earned and amount applied during the year to meet the trust’s objectives
- Income accumulated to meet the trust’s objectives, without exceeding 15% of total income
- Whether income was used for other purposes, and if so details regarding such usage
- Any amount exceeding 15% of the institution’s total income was accumulated
- Whether anyone invested any funds in other ways, and if so details regarding such investments
- Details regarding the profits and gains earned by the institution
- Whether the trust paid any accumulated income to another trust
- Moreover, whether any voluntary contribution of a different kind was received last year
- Whether the institution received any anonymous donations last year
How to File Form 10BB Online?
Before filing Form 10BB, ensure you have the following documents ready:
- Balance Sheet
- Income and Expenditure Statement
Follow these steps to file Form 10BB:
Step 1: Log in to the e-filing portal
Step 2: Click on ‘e-File’, then navigate to ‘Income Tax forms’, and select ‘File Income Tax Forms’.
Step 3: Choose ‘Persons not dependent on any Source of Income’ and click ‘File now’ for Form 10BB
Step 4: Select the Assessment year, assign it to a Chartered Accountant (CA), attach the required documents, and click ‘Continue’
Step 5: The CA will accept the assignment through their login and upload the Form
Step 6: Review and accept the form uploaded by the CA through the Worklists under the ‘For Your Action’ tab.
Form 10BB is Structured Into Three Main Sections:
Section A: General Information
This section requires organisations to provide essential details such as:
- Name of the institution
- Official address
- Permanent Account Number (PAN)
- Assessment year
- Registration number
- Relevant sub-clause under Section 10(23C) of the Income Tax Act
Section B: Income Application
This section focuses on the organisation’s core activities and financial aspects, including:
- Primary business activities
- Total revenue earned during the year
- Total expenditure applied for the objects of the trust
- Details of income utilisation for purposes other than stated objectives, if applicable
- Information on income sources exceeding 15% of the total income
- Compliance with the 15% profit reserve requirement, ensuring at least 85% of total income is allocated to the organisation’s activities
Section C: Other Information
This section mandates comprehensive disclosure of the following:
- Details of any funds deposited in modes other than those specified under Section 11(5)
- Profit details and maintenance of books
- Donations or transfers made to other trusts
- Voluntary contributions received in the previous year
- Anonymous donations received during the preceding year
Form 10BB Due Date
Form 10BB must be filed by the 30 September of the relevant assessment year, which is one month before the due date for filing the Income Tax Return (ITR).
Conclusion
Hope , we have provided sufficient information. If any doubt or help regarding Form 10 BB , Please reach out to our team or leave a comment below.
Frequently Asked Questions
What is form 10BB of income tax?
Form 10BB of income tax is a document required under Section 80G of the Income Tax Act, which mandates charitable or religious organisations to provide details of their activities and financial management. It ensures transparency in the utilisation of donations and helps in claiming tax exemptions for donors.
Who is required to file form 10B?
Form 10B is required to be filed by educational institutions like schools, colleges, or universities seeking tax exemptions under Section 10(23C) of the Income Tax Act, 1961. It verifies compliance with specified conditions regarding educational activities, income application, and maintenance of records.
What is the form 10 for income tax?
Form 10 for income tax pertains to the declaration under Section 80G for donations made to charitable institutions. It ensures that donors can claim deductions for their contributions as per the Income Tax Act provisions, substantiating the charitable nature and eligibility of the recipient organisation.
What is Section 10B of the Income Tax Act,1961?
Section 10B of the Act provides tax benefits to newly established industrial undertakings in certain specified areas. It allows for a deduction of profits derived from such undertakings for a specified period, aiming to encourage industrial growth and employment generation in those regions.
What is the difference between form 10B and 10BB?
Form 10B and Form 10BB serve distinct purposes under the Income Tax Act,1961. Form 10B is for educational institutions to validate their eligibility for tax exemptions, while Form 10BB is for charitable institutions to report on the utilisation of funds and qualify for tax benefits under Section 80G.
Who is form 10B applicable to?
Form 10B is applicable to educational institutions such as schools, colleges, and universities that seek tax exemptions under Section 10(23C) of the Income Tax Act. It ensures compliance with educational objectives and financial transparency to maintain their tax-exempt status.
Who needs to file form 10BD?
Form 10BD is required to be filed by individuals or Hindu Undivided Families (HUFs) who receive income from banking business or income in the form of interest or any other income under Section 80TTA. It allows them to claim deductions on such income, ensuring compliance with tax regulations.
Read more,
- What is section 80DDB of Income tax act?
- What are the types of ITR forms?
- A complete guide to File an ITR in India
- What Is an Income Tax Return?
- Complete the Procedure to File Income Tax Return
- Why Income Tax Return Filing is Important?
