Form 10B: Your Guide to Compliance (Income Tax Act 2025)

The Indian Income Tax Act is constantly changing to respond to the complex financial environment. For charitable and religious trusts, institutions, universities, educational institutions, hospitals, and medical institutions, following specific provisions is crucial to maintain their tax-exempt status. One essential requirement is the filing of Form 10B, an audit report that ensures transparency and compliance with the law.

As we approach the Assessment Year 2025-26, which includes the Financial Year 2024-25, understanding Form 10B’s details becomes even more important. This blog post will explore its applicability, key features, the filing process, and why it is vital for eligible entities.

What is Form 10B?

Form 10B is an audit report that certain charitable or religious trusts, institutions, universities, educational institutions, hospitals, and medical institutions must submit. A Chartered Accountant (CA) prepares and certifies this report to ensure that the entity's financial statements and operations comply with the Income Tax Act of 1961.

In essence, Form 10B confirms that the trust or institution has kept proper books of account and used its income for the charitable or religious purposes for which it was created, according to the rules set by the Income Tax Department.

Why is Form 10B Important?

The main reason Form 10B matters is its role in keeping the tax-exempt status of these organizations. Without a properly filed and audited Form 10B, eligible entities risk losing their exemptions under Section 11, Section 12, or Section 10(23C) of the Income Tax Act. This could result in their income being taxed, leading to potential penalties and interest.

In short, Form 10B serves as a safeguard, allowing the Income Tax Department to review the financial activities of these entities and ensure that public funds, often received as donations, are used for their intended purposes.

Who Needs to File Form 10B (Applicability for AY 2025-26)?

The rules about Form 10B changed significantly with the Income Tax (Third Amendment) Rules, 2023, and these revised rules continue to apply for AY 2025-26. Previously, Form 10B and Form 10BB had different criteria for applicability. Now, Form 10B has a wider scope.

A trust, institution, university, educational institution, hospital, or medical institution registered under Section 12A/12AB or approved under Section 10(23C) generally must file Form 10B if any of the following conditions are met during the previous year (FY 2024-25 for AY 2025-26):

• Total Income Exceeds ₹5 Crore: If the total income of the auditee, not considering the provisions of Section 10(23C) (iv), (v), (vi), and (via), or Sections 11 and 12 of the Act, exceeds ₹5 crore.
• Receipt of Foreign Contribution: If the auditee received any foreign contribution during the previous year, regardless of its total income or registration status.
• Application of Income Outside India: If the auditee used any part of its income outside India during the previous year.

In simpler terms: If your charitable or religious organization, university, hospital, or educational institution:

• Has a gross income (before claiming exemptions) of more than ₹5 crore.
• Received any funds from outside India.
• Spent any of its income outside India.

Then, filing Form 10B is necessary to keep tax exemptions. For all other cases where an audit is still needed, Form 10BB might be necessary. It's important to consult with a tax professional to determine the correct form.

Key Aspects and Contents of Form 10B

Form 10B is a detailed document that requires extensive financial information and declarations. It is generally divided into several sections, which include:

• General Information: Basic details of the trust or institution, such as Name, PAN, Address, and the relevant Assessment Year.
• Income and Application of Funds: A detailed breakdown of income from various sources and how that income has been used for charitable or religious purposes. This includes specific details on:
  • Income derived from property held for charitable or religious purposes.
  • Voluntary contributions (donations).
  • Income from incidental business activities.
  • Details of how income has been spent for the trust or institution’s objectives, including amounts used within and outside India.
  • Amounts set aside for future use (within permissible limits, usually 15% of income).
• Compliance with Specific Provisions: This section is crucial as it requires the auditor to report on adherence to various conditions specified in the Income Tax Act, particularly related to:
  • Section 13(3) compliance: Reporting details of specified persons (authors, founders, trustees, substantial contributors, their relatives, or concerns where they have substantial interest) and any benefits provided to them. Any improper benefits could lead to losing exemptions.
  • Specified Violations: Reporting any violations as outlined in Explanation 2 to the fifteenth proviso to section 10(23C) or the Explanation to section 12AB(4), along with quantifying the financial aspects of these violations. This includes misusing income, engaging in prohibited commercial activities, or failing to maintain proper books of accounts.
• Maintenance of Books of Account: An opinion from the auditor on whether proper books of account have been maintained according to the Income Tax Act requirements and if the financial statements match these books.
• Audit Observations/Qualifications: Any negative remarks, qualifications, or disclaimers issued by the auditor during the audit process must be reported here.
• Verification: A declaration by the Chartered Accountant that the information provided is true and correct to the best of their knowledge and belief.
• Attachments: The form typically requires the attachment of the audited financial statements, including the Income and Expenditure Account/Profit and Loss Account and the Balance Sheet.

The Filing Process: Step-by-Step

Filing Form 10B is an online process and must be completed through the e-filing portal of the Income Tax Department. Here’s a general overview of the steps:

1. Registration: Both the trust or institution (taxpayer) and the Chartered Accountant (CA) must be registered users on the Income Tax e-filing portal and have active PANs.
2. CA Assignment: The taxpayer must first add and assign Form 10B to their designated CA through the 'My CA' service on the e-filing portal.
3. CA Access and Acceptance: The CA logs in to their e-filing account, views the assigned form in their 'Worklist,' and accepts the assignment.
4. Form Preparation: The CA downloads the Form 10B utility (usually an offline JSON utility) from the Income Tax portal. They fill in all required details, including financial information, compliance checks, and audit observations.

   Note on Attachments: The utility allows for attaching supporting documents like financial statements in PDF/ZIP format. There might be size limits (e.g., 5 MB per document, 50 MB total for attachments).

   CSV Upload for Large Data: For schedules with many records (e.g., over 50), the utility typically provides an option to upload data via a CSV file, rather than entering details manually in a table.

5. Online Submission by CA: Once the form is filled and validated, the CA generates the JSON file and uploads it with any needed PDF attachments on the e-filing portal using their Digital Signature Certificate (DSC).
6. Taxpayer Acceptance: After the CA submits the form, the taxpayer logs in to their e-filing account, reviews the submitted Form 10B, and must accept it. This acceptance usually requires an active DSC or Electronic Verification Code (EVC). The filing is considered complete only after the taxpayer's acceptance.

Due Date for Form 10B (AY 2025-26)

The due date for submitting Form 10B is typically one month before the deadline for filing the Income Tax Return under Section 139(1).

For the Assessment Year 2025-26 (for the Financial Year 2024-25):

• The due date for filing ITR for trusts and institutions that require an audit (including Form 10B) is generally October 31, 2025.
• Therefore, the due date for filing Form 10B for AY 2025-26 is September 30, 2025.

It is essential to meet this deadline to avoid penalties and the potential loss of tax exemptions.

Consequences of Non-Filing or Late Filing

Failing to file Form 10B or submitting it after the due date can have serious consequences for the trust or institution:

• Loss of Tax Exemption: The most significant result is the potential loss of exemption under Sections 11, 12, or 10(23C) for the relevant assessment year. This means the trust or institution’s income could become fully taxable.
• Tax Liability: The organization may face taxes on its earnings, which can greatly affect its financial resources.
• Penalties and Interest: The Income Tax Department may impose penalties and interest for non-compliance.
• Reputational Damage: Non-compliance can harm the organization’s reputation, affecting its ability to receive donations and grants.

Important Considerations

• Amendments: The Income Tax Act is frequently updated. Always refer to the latest rules and notifications from the CBDT (Central Board of Direct Taxes) and the Income Tax Department for the most accurate and up-to-date information.
• Professional Assistance: Due to the complexities involved, especially with the reporting of specified persons and violations, it is advisable to work with a qualified Chartered Accountant for the audit and filing of Form 10B.
• Record Keeping: Keeping detailed and accurate books of account and supporting documents throughout the financial year is vital for a smooth audit and filing process.

Conclusion

Form 10B is more than just a procedural requirement; it's a crucial tool for ensuring accountability and transparency in the operations of charitable and religious organizations in India. By understanding its applicability, diligently preparing the necessary information, and meeting the due dates, these entities can continue to maintain their tax-exempt status and focus on their important missions. For AY 2025-26, staying compliant with Form 10B will be essential for successfully navigating the regulatory landscape.

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