NGO Annual Compliance India — Form 10B, 10BD: Who Needs It and Who Does Not
Any registered trust, society or Section 8 company that claims income-tax exemption on its surplus, or that gives donors 80G receipts, has a yearly compliance cycle: a Chartered Accountant's audit report in Form 10B or Form 10BB (both replaced by Form 112 from tax year 2026-27), a statement of donations in Form 10BD with matching certificates (Form 10BE) for donors, the income-tax return, and, depending on the entity, MCA filings and an FCRA annual return. An unregistered informal group has no statutory filing duties, but it also has no exemption and no 80G. The questions below sort out who needs which filing and where organisations most often go wrong. The full scope of the service is on the NGO Annual Compliance India — Form 10B, 10BD page.
Who this engagement is not for
Not every organisation needs a full annual compliance engagement. If you have not yet obtained 12AB or 80G registration and are still in the set-up phase, what you need is registration support (who needs 12A and 80G), not an annual cycle. A foreign NGO operating through a liaison office in India is governed by FEMA, not by the domestic charitable-trust framework. A CSR foundation set up by a corporate parent may already have its filings handled by the parent's own team. And an entity with no activity, income or bank transactions still needs its filings looked at, but the scope is small.
The annual cycle in order
For a trust or society, the sequence runs roughly like this each year. Books close on 31 March. By 31 May the statement of donations in Form 10BD is filed and the donor certificates in Form 10BE are issued. Any notice of accumulation in Form 10, or option to treat a shortfall as applied next year in Form 9A (both discussed below), has to be filed, for FY 2025-26 and earlier, at least two months before the due date for the return, so it falls before the audit report. Under the Income-tax Act 2025, the equivalent Forms 108 and 109 are due on or before the return due date, so confirm the timing for tax year 2026-27 onwards. The accounts are audited, the CA files the audit report (Form 10B or 10BB) a month before the return due date, and the return in ITR-7 follows. Confirm each year's notified return due date instead of assuming last year's, because it has been extended in some years.
A Section 8 company adds the company-law track: an AGM within six months of the year end, financial statements in Form AOC-4 within 30 days of the AGM, the annual return in Form MGT-7 within 60 days of the AGM, and director KYC (Form DIR-3-KYC-Web) once every third financial year by 30 June. An FCRA-registered organisation adds the FCRA annual return, due within nine months of the financial year end, that is by 31 December, and a nil return is mandatory even in a year with no foreign receipts. Renewal of income-tax registration sits alongside all of this: provisional registration lasts three years and the application for regular registration in Form 10AB is due at least six months before the provisional period ends, or within six months of commencing activities, whichever is earlier; regular registration runs for five years, or ten years in the cases the Act specifies, and is renewed the same way.
The Income-tax Act 2025 takes effect from 1 April 2026. The 1961 Act forms above generally continue for income of earlier years. From 1 April 2026 registration applications use the new forms (Form 10A becomes Form 104 and Form 10AB becomes Form 105), and for later years the donation forms are renumbered (Form 10BD becomes Form 113 and Form 10BE becomes Form 114) and Form 10B and Form 10BB are replaced by Form 112. Section numbers change as well as form numbers, so use the form and section names that apply to the year you are filing for.
What exactly is Form 10B and who needs to file it?
The audit report for a charitable or religious trust or institution is filed in one of two forms. Form 10B applies where the income before exemption exceeds the prescribed ceiling, or foreign contribution was received, or income was applied outside India; otherwise Form 10BB applies, and this holds for both 12A and 10(23C) entities. A Chartered Accountant files the form on the e-filing portal with a digital signature, after the organisation nominates the CA through the My CA service, and the organisation then accepts the filed form. The audit report must be furnished a month before the due date of the return. From tax year 2026-27 Form 10B and Form 10BB are replaced by Form 112 under section 348 of the Income-tax Act 2025; audits for FY 2025-26 still use Form 10B or 10BB.
In practice: The disclosures on income applied, benefits to related persons and investments need much more detailed underlying records than a basic accounts file. Organisations that were preparing this in-house or with a basic CA arrangement often find the records do not support the disclosure. We audit and prepare this form end-to-end.
What are Form 10BD and Form 10BE, and what happens if they are missed?
Form 10BD is the statement of donations that an institution approved for 80G files with the department. It is due by 31 May after the financial year in which the donations were received. Once it is filed and verified, the institution downloads Form 10BE and gives each donor the certificate. The department's guidance says the donor's claim in the return is matched with what the institution reported in Form 10BD, so a late or wrong statement costs the donor the deduction, not only the organisation its reputation. Non-filing also attracts a per-day late fee and a penalty under the Act, so the consequence is not just donor churn.
In practice: Organisations sometimes hand out physical 80G receipts at the time of donation but forget or delay Form 10BD. The paper receipt alone does not get the donor the deduction; the statement and the certificate generated from it are what the system checks. Capturing donor PAN through the year makes the May filing routine.
What is the 85% application rule and what happens if the organisation cannot meet it?
Under Section 11(1) of the Income-tax Act, a charitable trust or institution's income is exempt to the extent it is applied to charitable or religious purposes in India. The Act also lets the trust accumulate up to 15% of its income without any filing, so in practice at least 85% of the year's income is applied or deemed applied. Where less than 85% is applied, two routes are open. The first is a written option, made in Form 9A (for FY 2025-26 and earlier) at least two months before the due date for the return, to treat the shortfall as applied in the following year. The second is to accumulate the amount under Section 11(2): the trust gives written notice to the Assessing Officer in Form 10, for FY 2025-26 and earlier at least two months before the return due date, stating the purpose and the period, which cannot exceed five years, and the accumulated money must be invested or deposited in the modes listed in Section 11(5). If the accumulated income is not used for that purpose within the period, it is treated as the income of the year after the period ends (Section 11(3)(c)). If it is applied to a different purpose, or ceases to be invested in the permitted modes, it is treated as the income of the year in which that happens (Section 11(3)(a) and (b)).
In practice: The 85% test is computed on the 'income' received in the year, not on receipts — and the distinction between receipts and income can matter (for example, voluntary contributions made with a specific direction that they form part of the corpus are excluded from income under Section 11(1)(d)). We advise organisations on whether they are tracking towards the 85% threshold before the year closes, so corrective action can be taken. Filing Form 10 is a backstop, not a routine solution.
What are the obligations of a Section 8 Company compared to a Trust or Society?
A Section 8 Company registered under the Companies Act 2013 has the annual compliance burden of a company, with some easements — in addition to its income-tax obligations as a charitable entity. This includes: mandatory statutory audit (regardless of income level), AOC-4 financial statement filing within 30 days of AGM, MGT-7 annual return within 60 days of AGM, AGM within 6 months of financial year end, Board meetings (the Section 8 exemption notification requires at least one every six calendar months, and the easement is available only to a company with no default in filing its financial statements or annual return), DIR-3 KYC for all directors once every third consecutive financial year (by 30 June), and event-based filings for any changes in directors or address. Trusts and Societies do not have MCA obligations. The trade-off: Section 8 Companies are generally perceived as more credible and transparent by institutional donors and grant-makers because of the MCA public disclosure. The registration side of that choice is covered in who needs a Section 8 company, and the company annual cycle in annual compliance for private companies, OPCs and Section 8 companies.
In practice: We advise clients who are choosing between a Trust, Society, and Section 8 Company for a new charitable initiative that Section 8 is the preferred structure if the organisation anticipates significant institutional funding, a large governance board, or cross-state operations — because the MCA framework imposes discipline and public accountability. For small community trusts with local donor bases, a registered trust is often sufficient.
Can a trustee or director of an NGO receive remuneration?
Paying someone who works for the organisation is not the problem; paying a related person more than the work is worth is. Section 13 of the Income-tax Act lists the persons whose benefit puts the exemption at risk: the author or founder, a substantial contributor, a trustee or manager, their relatives, and concerns in which they have a substantial interest. The Act deems income or property to be used for their benefit in specified cases, including where salary or allowances paid to such a person for services exceed what may be reasonably paid, where the trust's money is lent to them without adequate security or interest, where its property is made available without adequate rent, or where assets are bought from or sold to them at unfair prices. For a Section 8 company, the licence condition is separate: it must prohibit dividends to members (Section 8(1)), but reasonable pay for services actually rendered is not a dividend.
In practice: This is one of the most frequently misunderstood areas in NGO governance. Many trusts are structured informally, with founder trustees drawing amounts from the organisation that — if characterised as remuneration — could attract Section 13 scrutiny. We review the basis of all payments to trustees or related persons during the audit and flag any that carry risk.
Can a trust or NGO receive donations from Non-Resident Indians (NRIs)?
Yes, and whether FCRA applies depends on the donor's citizenship, not on where the donor lives. The Ministry of Home Affairs' FCRA FAQs say a contribution by an Indian citizen living abroad, from personal savings through normal banking channels, is not treated as foreign contribution, and that it is advisable to take the donor's passport details to confirm he or she holds an Indian passport. The same FAQs say a donation from a person of Indian origin who has acquired foreign citizenship is foreign contribution, and this includes PIO and OCI cardholders. NRI donations that are not foreign contribution can go in Form 10BD like any other domestic donation.
In practice: This is a nuance that frequently trips up NGOs with diaspora donor bases. We verify donor nationality at intake for every donation from abroad — the passport copy tells the story. For the FCRA side, see who needs FCRA registration.
What disclosures must an NGO make regarding related-party transactions?
For the income-tax exemption, the audit report itself carries the disclosure: it asks the auditor to report income or property used for the benefit of the Section 13(3) persons and investments in concerns where they have a substantial interest. Confirm the current schedules of the form for your year. Where Section 13 is triggered, the exemption is at risk to the extent of that use, so the exposure can be large. For Section 8 Companies, Section 188 of the Companies Act 2013 also applies to related-party transactions, requiring approvals and disclosure in the financial statements and Directors' Report where its conditions are met. PNPC identifies and documents all related-party transactions as a standing part of the audit exercise.
In practice: Section 13 issues are one of the most common grounds for income-tax scrutiny of NGOs. Informal payments to trustees, rent paid to trustee-owned property without market-rate benchmarking, loans to related persons, or use of trust assets for private purposes — all of these can trigger Section 13. Keep a written basis for every transaction with a related person.
What is the difference between 'application' and 'accumulation' of income for a charitable trust?
Application means the actual use or expenditure of trust income for charitable purposes during the financial year. Accumulation means retaining income that is not immediately applied — either within the 15% the Act allows (no filing needed) or beyond it, with a specific purpose declared in Form 10 under Section 11(2) (for FY 2025-26 and earlier, at least two months before the return due date). Accumulated income under Section 11(2) must be applied within five years for the stated purpose and must sit in the investment modes listed in Section 11(5), which include savings certificates, Post Office savings accounts, deposits with scheduled banks, government securities, and investment in immovable property, among others. If it is not used within the period, it is treated as income of the year after the period ends; if it is applied for another purpose or leaves the permitted investment modes, it is treated as income of the year in which that happens.
In practice: A trust should never accumulate beyond 15% without filing Form 10 — and Form 10 must be filed (for FY 2025-26 and earlier) at least two months before the ITR-7 due date, not at or after filing the return. We identify clients approaching the 85% threshold in the third quarter and advise on whether they need to accelerate expenditure before year-end or prepare a Form 10 accumulation notice. This is an active advisory function, not an afterthought.
Is GST applicable to an NGO or charitable trust?
NGOs and charitable trusts can be subject to GST depending on the nature of their activities. The GST rate notification exempts services by an entity registered under the Income-tax Act's charitable-trust provisions when they fall within "charitable activities", a defined list that includes, for example, the advancement of religion, spirituality or yoga and the preservation of the environment. Services outside the list are not covered by that entry, and an NGO that earns income from commercial activities — renting out premises, paid consulting, selling goods, a commercial training programme — should test each stream separately. Confirm the current rate and exemption position for each stream with PNPC or the GST portal.
In practice: Many NGOs assume all their activities are GST-exempt because of their charitable status. This is not accurate. If you rent out your auditorium or training hall to a commercial entity, or run a fee-based skills training programme, GST may apply. We review GST applicability as part of the onboarding for every new NGO client.
Can a Section 8 Company be converted back to a regular private limited company?
Possibly, but it is not a simple filing. Section 8(4) of the Companies Act says a licensed company may alter its memorandum or articles only with the Central Government's prior approval and may convert into a company of another kind only after complying with the conditions prescribed by the Incorporation Rules. Treat the process as needing the Regional Director's involvement and check the current form and conditions before you start. If the company held 12AB and 80G approvals, the income-tax position on accumulated exempt income needs advice before any conversion, because it may become taxable.
In practice: Conversion of a Section 8 Company is relatively rare and carries significant tax implications. We advise most clients against conversion unless there is a compelling strategic reason — it is generally better to operate multiple entities for different purposes than to convert a charitable entity to a commercial one.
Common mistakes
- Relying on paper receipts. The donor's deduction is checked against your Form 10BD, so a receipt without the statement behind it does not help them.
- Accumulating without notice. Retaining more than the 15% the Act allows, with no Form 10 filed in time (for FY 2025-26 and earlier, at least two months before the return due date), exposes the excess.
- Investing outside the permitted modes. Accumulated money that leaves the Section 11(5) modes is treated as income of the year in which it leaves them.
- Mixing FCRA and domestic money. Keep foreign contributions in their own books and the designated account, so the FCRA annual return reconciles.
- Letting registrations lapse. Track the provisional and regular registration end dates as fixed items on the calendar.
Where this sits in the wider engagement
NGO Annual Compliance India — Form 10B, 10BD rarely arrives on its own. The statutory basis and the current requirements are set out on the NGO Annual Compliance India — Form 10B, 10BD service page, and the related services are grouped under Business Setup. For the step-by-step version, see the process from start to finish and what continues afterwards.
What PNPC does
PNPC Global has practised since 1986 across India and the UAE. On NGO Annual Compliance India — Form 10B, 10BD we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.