The Central Board of Direct Taxes (CBDT) has proposed an amendment to Rule 17B of the Income-tax Rules, 1962, with a particular focus on audit rules concerning trusts and institutions. This proposal comes in response to an evolving financial landscape, motivating modifications that better align the rule and Form 10B with current times. The draft notification introduces a series of changes, including a more comprehensive Form 10B and further disclosure requirements. These changes aim to ensure extensive details of the operations of the Trusts, fostering compliance and accountability.
The History of Rule 17B and Form 10B
Rule 17B, along with Form 10B, were added to the Income-tax Rules, 1962, under the Income-tax (2nd Amendment) Rules, 1973. Rule 17B mandates that the Report of Audit of the accounts of a trust or institution be presented in Form No. 10B. In addition to providing an Audit Report, Form No 10B requires the filing of a “Statement of particulars” as an Annexure.
Changes Proposed in the Draft Notification
The CBDT’s draft notification introduces a new, more detailed Form 10B. Replacing the existing three-page form, the new version spans eight pages. This form requests information such as foreign donation receipts, details of donors who have received certificates for claiming deductions under the I-T Act, and the statute under which the trust/institution is constituted. Additional required information includes registration status under the Income-tax Act, the objectives of the trust institution, income details and application of income, registration status under the Foreign Contribution (Regulation) Act, FCRA 2010, and accounting policy methods, among other details.
New Disclosure Requirements for Trusts/Institutions
For trusts or institutions that aim towards the ‘advancement of any other object of general public utility,’ the draft notification requires details regarding whether such activity is in the nature of trade, commerce, business, or services for cess, fees, etc., and details of receipts from such activities.
New Requirements for Property Held Under Trust
For situations where a business undertaking is held as ‘property held under trust,’ the proposed form necessitates extensive details and the filing of an audit report.
| Particulars | New Requirements |
|---|---|
| Form 10B size | Increased to eight pages |
| Information required | Expanded to cover various aspects of the trust/institution |
| Trusts/Institutions with ‘general public utility’ goal | Must provide more specific operational details |
| Property held under trust | Audit report and extensive details required |
Increased Responsibility for Tax Experts and Auditors
Tax experts suggest that these additional disclosure requirements will significantly increase the responsibilities of auditors, who will now need to certify the truth and correctness of the particulars given in the annexure. Similarly, the Assessee’s responsibility will grow substantially following the implementation of these changes. The aim of these developments is to enhance accountability and transparency in the functioning of trusts and institutions.
