Draft notification issued to amend audit rules for trusts; seeks more details

This is the first time in over 45 years that the audit report for trusts/institutions are proposed to be amended. (Representational Image)

In a move which will allow the tax department to seek more details from trusts or institutions, the Central Board of Direct Taxes (CBDT) on Tuesday released a draft notification for amending Rule 17B related to audit rules for trusts or institutions.

The draft notification, which has been put in public domain for comments till June 5, includes a new eight page Form 10B as against existing three page form, seeking details like foreign donation received and details of donors to whom certificates are issued for claiming deduction under I-T Act, statute under which trust/institution is constituted, registration under Income-tax Act, object of trust institution, details of income and application of income, registration status under Foreign Contribution (Regulation) Act, (FCRA), 2010 and method of accounting policy along with various other details.

This is the first time in over 45 years that the audit report for trusts/institutions are proposed to be amended. The CBDT, which is the policymaking body for income tax department, said since the existing Rule 17B and Form 10B were notified long ago, there is a need to rationalise them to align with the requirements of the present times .

In case of trust/institution with object classified as advancement of any other object of general public utility , the draft notification seeks details as to whether such activity is in the nature of trade, commerce, business or services in relation thereto for cess, fees etc., details of receipt from such activity. For instances where business undertaking is held as property held under trust , the proposed form requires extensive details and also filing of audit report in Form 3CA/3CB as applicable.

Tax experts said the various additional disclosure requirements will increase responsibility of auditors as they would now be required to certify that the particulars given in the annexure are true and correct.

With the proposed changes in the tax audit report for charitable trusts, the responsibility of the auditors will increase significantly as there are various additional disclosure requirements in the Annexure to Form 10B. Above all, as per the revised form 10B, now the auditor needs to certify that in his opinion and to the best of the information and according to explanations given, the particulars given in the said Annexure are true and correct. Thus the responsibility of the Assessee as well as the auditor will increase significantly post implementation of these changes, Prateek Agarwal, partner Audit & Assurance, Nangia & Co LLP said.

The revised Statement of particulars seeks extensive details of the operations of the Trusts, which will ensure that the trust is fully compliant with the applicable processes and procedures. Considering that this Form was last revised 45 years ago, the details sought in the new form may seem too many, but they justify the needs of the present times. The revised audit form 10B shows the radical shift in the manner in which the tax and regulatory authorities of Digital India look at the compliances, Agarwal said.

This was long overdue as the audit report format for charitable organisation was kept unchanged for the past many years and over time, the law and jurisprudence in regard to those have evolved to a great extent, Ashok Maheshwary & Associates LLP Partner Amit Maheshwari said.