Form 10BB

Introduction:

As per section 10(23C) of the income tax act, certain government and non-government universities and educational institutions can claim full exemption. The institutions or universities should be strictly for educational purposes, not for profit making. While government educational institutions are fully exempt, non-government institutions having an annual income of up to INR 5 crores are exempt. Educational institutions having an annual income exceeding INR 5 crores can claim exemption subject to certain approvals.

Form 10BB consists of all the information about the trust/educational institution's incomes, expenses, assets, and liabilities. Form 10BB is filed as an audit report by a chartered accountant after auditing the books for the given financial year.

Importance of Form 10BB of the Income Tax Act

As per the Taxation Laws Amendment Act (2006), all trusts or organizations are eligible to claim an exemption under section 10(23C). To claim the exemption, the organizations must furnish their audit reports in Form 10BB.

Moreover, it is important for trusts and educational institutions to get their books audited by a Chartered Accountant if their annual income exceeds the minimum threshold.

What Is Charitable Purpose & Applicability For Form 10BB?

According to Section 2 of the Income-Tax Act, a charitable purpose includes:

• Education.
  
• Medical relief.
• Relief to the poor.
• Public utility advancement (wherein total receipts do not exceed 20% by the trust.)

Under sections 13, 12AA, 12A, 12 & 11 of the Income Tax Act deal with the taxation of charitable institutions. The purposes of charitable trusts have a broader meaning & must be interpreted liberally.

Such organizations must comply with the following rules & regulations:

• There must be no discrimination based on caste, creed, or religion for the public to act as the trust’s beneficiaries.
• Any alteration or change in the object clause must require prior approval of the income tax authorities.
• According to section 13 of the Act, the trust must not give any special treatment or benefits to its founders or other related parties.
• The nature of trusts is irrevocable.
• The transfer of the trust’s assets to another registered that has the same objective on dissolution.

What is the Applicability of Form 10BB?

Form 10BB is applicable:

• The total income of the trust or the institutions registered under section 12AB or section 10(23C0 is less than or equivalent to 5 crores before taking into account the provisions of sections 11 & 12 or sections 10(23C)(iv),(v),(vi)(via) of the act.
• During the preceding year, the trust or institution did not receive any contributions from abroad.
• During the previous year, the trust or institution didn’t use any of its income that was earned outside of India.

Documents Required for Registration of Charitable Trust Along with Form 10BB

The documents required for registration of charitable trust along with Form 10BB are:

• PAN Card
• Trust Deed
• Certificate of Incorporation
• The Landlord must give NOC (in case of rented or leased property)
• Copy of bills (electricity, water, gas, telephone)
• Progress report of last 3 years
• Financial statement& the ITR of the last 3 years
• Donor list along with their addresses & PAN details
• List of members of trustee along with photographs & contact details

How to Fill Form 10BB of the Income Tax Act?

Before you start filling the Form 10BB of the income tax act, make sure you have the following documents -

The following details are required:

• Balance sheet
• Income & expenditure statement
• Profit & loss statement

The details are divided into 3 parts, namely,

PART A – General Details

• Institution name
• Official address
• PAN number
• The assessment year (AY)
• Registration number
• Approval date of the institution
• The sub-clause related to the said concept under section 10(23C)

PART B – Income Application

The activities performed by the institution.

• To meet the trust’s objective, the total amount earned & applied during the year
• The income collected not exceeding 15% of the total income to meet the objective of the trust.
• In case the income is used for other purposes, then the details of such use The income collected by the institution exceeding 15% of the total income.

PART C – Other Information

• If someone has invested funds in any other ways, then the details of such investment
• Statement of profit & gains earned by institution.
• Whether the trust has paid the collected income to another trust
• If any voluntary contribution of a kind was received in the last year
• If any anonymous donation is made in the institution in the last year

Frequently Asked Questions:

Who needs to file Form 10BB?

The Form must be submitted by educational institutions and nonprofit trusts that seek to improve society in India.

What is the rule 10BB of Income Tax Act?

The audit report of a fund, trust, or educational institution is required to be presented on Form 108B in accordance with section 10(23C) of rule 16CC.

What is the 10BB of Income Tax Act?

Exemptions can be availed under section 10 by filing the Form 10BB of the income tax act. Educational institutions, medical institutions, and hospitals all can get this exemption.

Who is Form 10B applicable to?

Educational institutions or charitable trusts

What is the requirement to file Form 10BB?

Form 10BB must be filled out and submitted by every organization seeking an exemption under section 10(23C), including its earnings, costs, assets, and liabilities.

When is Form 10BB required to be filed?

Form 10BB is required to be filed along with the income tax returns.