Audit & Filing


Section 12A states two conditions for availing the exemption available under the Act, the first condition is regarding registration and the second condition is regarding audit by qualified chartered accountant. It means audit is pre-requisite for claiming exemption under section 11 and 12, where the total income of the trust computed without giving effect to the provisions of section 11 and 12 exceeds Rs 2,50,000 in any previous year, then the accounts of the trust for that year should be audited by a Chartered Accountant.

Under the Section 12A(b) of the Income Tax Act there is a condition for audit in Form 10B & furnishing of the audit report along with return. However, earlier there was no mention of the time limit by which audit report has to be obtained. Now finance bill 2020 has provided the time limit within which audit report has to be obtained and uploaded. The bill says in relation to the accounts of the assessee of the previous year relevant to an assessment year, date means one month prior to the due date for furnishing the return of income under sub-section (1) of section 139”.

Hence it becomes mandatory that audit report needs to be obtained one month prior to due date i.e. before 30th September of every year, even if for some reason the filing of Audit Report is delayed.

Filing of return

All Charitable Organisations having income exceeding the minimum exemption limit during the previous year are required to file their return of income. The ‘income’ for the purposes of filing the return should be computed without giving effect to the provisions of sections 11 and 12 of the Act. Such returns are to be filed with the Income-Tax Officer or the Assessing Officer under whose local jurisdiction they fall. The return is to be filed as per the provisions of section 139(4A) and (4C) in the manner provided in section 139 of the Act.

All organisations or truts are required to file the return in ITR-7 by 31st October (as amended by Finance Act 2020, earlier it was 30th September) of the assessment year as where the income of a charitable trust, before claiming exemption under section 11 to 12 exceeds the maximum amount chargeable to tax, its accounts are required to be audited. If it does not wish to take exemption under sections 11 and 12 then the due date shall be 31st July of the assessment year. The return must be accompanied by an Audit Report in Form 10B prescribed under Rule 17B of the Income-Tax Rule, 1962.

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