NGO & Charitable Trust Annual Compliance (Form 10B / 10BD)

The audit report (Form 10B or 10BB) must be filed by a Chartered Accountant on behalf of a charitable or religious trust or institution registered under Section 12AB of the Income-tax Act 1961, where the total income of the organisation before availing the exemption under Sections 11 and 12 exceeds the maximum amount not chargeable to tax in a financial year. 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 income-tax 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. Audits for FY 2025-26 still use Form 10B or Form 10BB; from tax year 2026-27 both are replaced by Form 112 under the Income-tax Act 2025.

Form 10BD is the Statement of Donations that every 80G-registered charitable organisation must file on the income-tax portal by 31 May immediately following the end of the financial year in which the donations were received. It lists every donation received during the year for which an 80G deduction can be claimed, with the donor's name, PAN or Aadhaar, amount, mode of payment, and the nature of the donation (corpus or otherwise). Once Form 10BD is filed and verified, the organisation downloads Form 10BE — the certificate of donation that it gives to each donor for the 80G deduction in their own income-tax return. The department matches each donor's 80G claim with the statement the organisation files, so a missing or wrong Form 10BD can cost donors their deduction, and non-filing also attracts a late fee and a penalty under the Act.

Section 12AB is the current provision (effective from 1 April 2021) under which charitable and religious trusts and institutions obtain and maintain income-tax exemption on their income that is applied to charitable purposes. It replaced the earlier provisions of Section 12A and Section 12AA under the Finance Act 2020. Entities that held 12A / 12AA registrations as at 1 April 2021 were required to re-register under the new 12AB framework by filing Form 10A. New registrations are provisional for three years; 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. From 1 April 2026, under the Income-tax Act 2025, registration applications use new forms (Form 10A becomes Form 104 and Form 10AB becomes Form 105). Without a valid 12AB registration, the organisation cannot claim exemption under Sections 11 and 12.

Under Section 11(1) of the Income-tax Act, a charitable trust or institution is exempt on income it applies to charitable or religious purposes in India, to the extent it is so applied. The Act lets the organisation 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, to treat the shortfall as applied in the following year. The second is to accumulate the amount under Section 11(2) by giving notice in Form 10, specifying the purpose and the period (up to 5 years), with the money held in the modes listed in Section 11(5). For FY 2025-26 and earlier, Form 10 and Form 9A must be filed at least two months before the due date for the return; 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. If accumulated income is not used for the stated purpose within the period, it is treated as the income of the year immediately following the period; if it is applied to another purpose or leaves the permitted modes, it is treated as the income of the year in which that happens.

Section 11(5) of the Income-tax Act specifies the forms in which a charitable trust or institution must hold its funds that are not immediately applied to charitable purposes. Permitted modes include: savings certificates; deposits in the Post Office Savings Bank; deposits in a scheduled bank or a co-operative society engaged in banking business; units of UTI; securities issued by the Central or State Government; debentures fully guaranteed by the Central or State Government; investment or deposit in a public sector company; certain long-term finance bonds; investment in immovable property; and other modes prescribed by the Income-tax Rules, which include units of certain mutual funds. Accumulated money that leaves the permitted modes is treated as income of the year in which it leaves them.

The Foreign Contribution (Regulation) Act 2010 (FCRA) and the Foreign Contribution (Regulation) Rules 2011 regulate the receipt of foreign contributions (money, securities, or articles from a foreign source) by associations, organisations, and individuals in India. Any Indian NGO, trust, society, or Section 8 company that wishes to receive donations, grants, or contributions from a foreign source (foreign individual, foreign company, or foreign foundation) must either hold an FCRA registration granted by the MHA or obtain prior permission from the MHA for each receipt. Educational, cultural, economic, religious, or social organisations are eligible. Newly registered entities or those seeking a specific foreign contribution can apply for prior permission (PP) rather than registration.

FC-4 is the Annual Return required under Rule 17 of the Foreign Contribution (Regulation) Rules 2011 to be filed by every FCRA-registered organisation on the FCRA Online portal of the MHA by 31 December each year. It discloses all foreign contributions received during the financial year, the purpose for which each contribution was received, the amount utilised under each activity head, the closing balance, and the investment of surplus funds. The return must be certified by the Chief Functionary of the organisation and accompanied by the audited income-expenditure accounts for the FCRA funds. Late filing, incorrect filing, or non-filing can result in an MHA notice, suspension of FCRA registration, or cancellation — all of which freeze the organisation's ability to receive any foreign contribution.

Yes. FCRA accounts must be audited separately from the domestic funds of the organisation. Rule 17(1) of the FCRA Rules requires that the annual return FC-4 be accompanied by an income-expenditure statement and balance sheet for FCRA funds, audited by a Chartered Accountant. This is a distinct audit from the statutory audit of the organisation's overall accounts under the Income-tax Act. The auditor signs the FCRA accounts separately. Many organisations overlook this requirement and submit FC-4 with only the general statutory audit certificate — which is not compliant.

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-Web for all directors once every third financial year (by 30 June), and event-based filings for any changes in directors, address, or share capital. 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.

Yes. There is no prohibition under the Income-tax Act or FCRA on a charitable organisation employing paid staff and paying reasonable salaries. Salaries paid to staff are treated as application of income to charitable purposes (administrative expenditure) and count towards the 85% application requirement, provided they are reasonable in relation to the organisation's size and activities and are documented through employment agreements, salary registers, and payroll records. The organisation must deduct TDS on salaries under Section 192 and register for PF (at 20 employees) and ESI (at 10 employees) where applicable.

Under the Income-tax Act, a charitable trust that pays remuneration to its settlor (founder trustee) or to persons who have contributed property to the trust in a manner that results in a benefit to the contributor may have its exemption put at risk under Section 13, which deems income or property to be used for the benefit of such persons where, for example, salary paid to them exceeds what may be reasonably paid for their services. The rules are complex and depend on the nature of the trust deed and the relationship between the trustee and the organisation. For a Section 8 Company, the licence condition in Section 8(1) requires that payment of any dividend to members be prohibited, but reasonable pay for services actually rendered is not a dividend. A Section 8 company can therefore pay its Managing Director a reasonable salary; it cannot pay dividends.

To initiate the annual compliance engagement for a financial year, PNPC requires: all bank statements for the year (all accounts, including the FCRA-designated account); books of account (trial balance, general ledger, or accounting software access); a list of all donations received with donor name, PAN, amount, and date; copies of the 12AB and 80G registration certificates; the previous year's audited financial statements and ITR-7; and for Section 8 companies, the minutes of all Board meetings held during the year. For FCRA entities, the FCRA-designated SBI account statement and the details of all foreign contributions received. We provide a structured document collection template to every new client.

Non-filing or late filing of Form 10BD attracts a late fee for each day of delay and a penalty under the Act (the amounts are set by the Act and are not repeated here; confirm them on the Income Tax Department site). It also has practical consequences: the organisation cannot download Form 10BE (the donor certificate), so donors cannot claim their 80G deduction, which damages donor relationships and fundraising, and the absence of Form 10BD for any year will be a significant adverse finding if the department scrutinises an 80G-approved organisation or reviews an application for renewal.

If the 12AB registration is cancelled or lapses due to failure to renew, the organisation stops getting the benefit of the Sections 11 and 12 exemptions from the point the registration ceases, and its income may become taxable. The exact consequences, including any tax on accumulated assets and the effect on earlier years, depend on the facts and should be confirmed with a CA before any decision. Additionally, if 80G approval is tied to the 12AB registration, it also lapses — removing the donor deduction benefit simultaneously.

A corpus donation is a donation made specifically to augment the permanent corpus (capital) of the trust or institution — it is earmarked by the donor in writing at the time of donation for this purpose. Under Section 11(1)(d) of the Income-tax Act, corpus donations are not included in the income of the charitable trust and therefore do not count in the 85% application computation. However, corpus funds must be invested under Section 11(5)-compliant instruments and cannot be used for programme expenditure unless the trust deed permits corpus utilisation. General (non-corpus) donations are income and must be applied at the 85% rate. This distinction matters enormously for Form 10B, Form 10BD, and the balance sheet classification.

Section 80G of the Income-tax Act allows an individual or company donor to claim a deduction from their taxable income for donations made to 80G-approved charitable organisations. The rate of deduction is typically 50% of the donated amount, or 100% for certain notified national funds. The deduction is subject to a limit of 10% of the donor's adjusted gross total income — meaning donations exceeding this limit do not generate additional deduction. The 80G deduction can only be claimed on the basis of a valid Form 10BE issued by the NGO after filing Form 10BD, or a donation receipt from certain notified funds.

Yes. Receiving any foreign contribution without valid FCRA registration or prior permission from MHA is an offence under Section 11 of the FCRA 2010. The consequences are severe: the Act provides for prosecution and penalties (Sections 35 and 37) and, after conviction, a bar on accepting foreign contribution (Section 38), and any registration granted later may be suspended or cancelled. Even amounts received before FCRA registration was obtained must be disclosed, and the organisation should seek legal advice on compounding or regularisation with the MHA. This is a serious matter with criminal dimensions — not an administrative oversight.

Donations from NRIs (persons of Indian origin who are non-residents) are treated differently under FCRA than donations from foreign nationals or foreign organisations. The Ministry of Home Affairs FCRA FAQs say that a contribution by a citizen of India living abroad (an NRI holding an Indian passport), from personal savings through the normal banking channels, is not treated as foreign contribution. Such donations can be received without FCRA registration and can be included on Form 10BD for the 80G deduction. However, donations from foreign nationals (non-Indian passport holders), foreign companies, or foreign foundations are foreign contributions and require FCRA registration.

Yes, a trust or society can change its auditor — there are no statutory restrictions on auditor tenure under the Income-tax Act (unlike for companies under the Companies Act, where Section 139 mandates rotation after 5 or 10 years for specified classes of companies). For Section 8 Companies, Section 139 of the Companies Act 2013 applies — auditors must be appointed for a term of up to 5 years and rotation requirements apply to listed and prescribed categories of companies. A change of auditor mid-year means the new CA takes over and files Form 10B based on the full-year audit. The outgoing CA's workpapers should be handed over. PNPC handles smooth auditor transitions without any disruption to the compliance calendar.

For charitable organisations whose accounts are required to be audited (i.e., where income before exemption exceeds the maximum amount not chargeable to tax), the statutory due date for filing ITR-7 is 31 October of the assessment year, and for organisations not requiring audit it is 31 July. The CBDT has extended these dates in some years, so confirm the notified due date each year instead of assuming last year's; extensions are not guaranteed or predictable. For FCRA-registered entities, the 31 October income-tax deadline and the 31 December FC-4 deadline run close together, compressing the second half of the year significantly.

For trusts and societies: Section 13 of the Income-tax Act prohibits a registered charitable entity from applying its income for the benefit of the founder, trustee, manager, member of their family, or any person who has made a substantial contribution to the trust. If income or property of the trust is used for the benefit of any such 'specified person', the exemption under Section 11 is at risk to the extent of that use. For Section 8 Companies: Section 188 of the Companies Act 2013 requires Board and shareholder approval for related-party transactions above specified thresholds, and disclosure in the financial statements and Directors' Report. The audit report 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. PNPC identifies and documents all related-party transactions as a standing part of the audit exercise.

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 statutory 15% limit (which does not require any filing) or beyond 15% with a specific purpose declared in Form 10 under Section 11(2) (for FY 2025-26 and earlier, filed with the income-tax authority at least two months before the return due date). Accumulated income under Section 11(2) must be applied within 5 years for the stated purpose. If it is not applied within that period, it is treated as income of the year immediately following the period; if it is applied for another purpose or leaves the Section 11(5) modes, it is treated as income of the year in which that happens.

Yes. If a trust intends to construct or acquire a building for charitable purposes — for example, a hospital building, school facility, or community centre — and cannot complete the construction within the current financial year, it can accumulate income under Section 11(2) by filing Form 10, specifying the construction purpose and the expected period of completion. The accumulated amount is then available to be applied to the construction over the declared period. However, the trust deed must permit the trust to own immovable property, and the property must be used exclusively for charitable purposes — not for any commercial or private use.

Entities that obtained fresh 80G approval after 1 April 2021 received provisional approval valid for three years. The application for regular approval in Form 10AB is due at least six months before the provisional period expires, or within six months of commencing activities, whichever is earlier; regular approval is granted for five years, or ten years in the cases the Act specifies, and is renewed the same way. The application is supported by the registration details, financial statements, activity details and details of the management; confirm the current list with the department. The income-tax authority reviews the application and may conduct an inquiry before granting regular approval. PNPC initiates the Form 10AB process at least 6 months before the provisional period expires.

Section 10(23C) of the Income-tax Act provides income-tax exemption to specific categories of educational institutions, hospitals, and certain other institutions — universities, hospitals with gross receipts exceeding prescribed thresholds, and institutions wholly or substantially financed by government. Institutions claiming exemption under Section 10(23C) sub-clauses (iv), (v), (vi) or (via) (which include public charitable trusts, educational institutions and hospitals) apply under a separate framework administered by the Principal Commissioner of Income-tax — not the same registration as Section 12AB/80G. The audit report form is chosen by conditions, not by the section under which exemption is claimed: Form 10B or Form 10BB as described above, and Form 112 from tax year 2026-27. Many large hospitals and universities in India are 10(23C) entities rather than 12AB entities.

NGOs and charitable trusts can be subject to GST depending on the nature of their activities. Key exemptions: 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. However, if an NGO earns income from commercial activities — renting out premises, providing paid consulting, selling goods, operating a commercial training programme — those revenues may attract GST. GST registration becomes necessary once turnover crosses the applicable threshold; confirm the current threshold and exemption position for each income stream.

Yes. A charitable trust, society, or Section 8 company that pays salary to its employees must deduct TDS under Section 192 of the Income-tax Act on any employee's salary income that exceeds the basic exemption limit applicable to that employee. The organisation must also: deduct TDS on professional fees, contractor payments, and rent under the relevant TDS sections (194J, 194C, 194I); pay the deducted TDS to the government by the 7th of the following month; file quarterly TDS returns (Form 24Q for salary, 26Q for non-salary TDS); and issue Form 16 to employees and Form 16A to non-employees annually.

Yes. Interest income earned by a charitable trust on fixed deposits and other investments is included in the 'income' of the trust under Section 11. This income is eligible for exemption if it is applied to charitable purposes at the 85% rate and if the deposits are maintained in Section 11(5)-compliant instruments (FDs in Scheduled banks are compliant). The interest income must be disclosed in the income-tax return (ITR-7) and in Form 10B. The amount of interest income is not separately taxed — it forms part of the total income and is eligible for exemption along with other income.

For income-tax returns (ITR-7), the belated return can be filed only up to 31 December of the assessment year under Section 139(4) — so approximately 9 months after the year-end. After that, a return can be filed only if the income-tax department issues a notice under Section 148 (for escaped assessment). For MCA annual returns (for Section 8 companies), belated forms can be filed with an additional fee per day of delay per form, with no ceiling — so a 3-year backlog could carry very large fee liabilities. FCRA FC-4 has its own late filing process on the MHA portal. PNPC has experience regularising compliance gaps across multiple years — but the cost and complexity increase substantially with each year of delay.

PNPC's annual NGO compliance engagement covers: books of account review and trial balance preparation; statutory audit of all accounts; FCRA accounts audit (where applicable); Form 10B preparation and upload by CA; Form 10BD preparation and filing by 31 May; Form 10BE generation and distribution to donors; ITR-7 preparation and filing; FCRA FC-4 preparation and filing by 31 December (for FCRA entities); AOC-4 and MGT-7 filing for Section 8 companies; AGM and Board meeting support; DIR-3 KYC Web for all directors when due; state charity commissioner filings for applicable states; 12AB and 80G renewal initiation when due; and an annual compliance review consultation after all filings are complete. The engagement is managed by a dedicated CA with NGO compliance experience — not delegated to a junior associate without oversight.

Yes, but it is not straightforward. A Section 8 Company can convert to a regular private limited company under Section 8(4) of the Companies Act 2013, only after the Central Government's prior approval and compliance with the conditions prescribed by the Incorporation Rules; check the current form and conditions before you start. Additionally, if the Section 8 company held 12AB and 80G registrations, the income-tax position on accumulated exempt income needs advice before any conversion, because it may become taxable.

Under the Income-tax Act, books of account and related documents must be maintained for at least 6 years from the end of the relevant assessment year (effectively 8 years from the financial year). For FCRA entities, Rule 17A of the FCRA Rules requires that accounts and records relating to foreign contribution be maintained for a period of 6 years from the date of the last entry. For Section 8 Companies, the Companies Act 2013 (Section 128) requires books of account to be maintained for 8 years immediately preceding the current year. In practice, PNPC recommends maintaining records for at least 10 years — particularly for organisations facing potential FCRA inquiries or income-tax scrutiny.

NGO compliance spans four distinct regulatory domains simultaneously: income-tax (12AB, 80G, Form 10B, ITR-7), FCRA (FC-4, FCRA audit, prior permissions), company law (MCA filings for Section 8 entities), and state charity law (Maharashtra, Gujarat, Karnataka). A general CA who handles corporate tax returns but has no specific FCRA or charity compliance experience will handle three of these four domains inadequately. PNPC has specialised NGO compliance practitioners who work exclusively with charitable entities, manage the full calendar as a unified engagement rather than discrete filings, and have direct familiarity with both the income-tax portal and the FCRA Online portal — both of which are significantly more complex and error-prone than general business portals.