A Charitable Trust Audit is required if the total income of a trust or institution (excluding the provisions of Section 11 and 12) exceeds the non-taxable limit in any given year. This audit must be conducted by a Chartered Accountant. The audit report for charitable trusts needs to be prepared in Form 10B as prescribed by Rule 17B of the Income Tax Act, 1961. Chartered Accountants performing Charitable Trust Audits are responsible for verifying the trust’s books of accounts, preparing the audit report, and submitting it accordingly.
The advantages of Trust Audit are:
- Registration of Section 12AA: Trust Audit assists in obtaining registration under Section 12AA of the Income Tax Act, which is necessary for availing tax exemptions as a charitable trust.
- Verification of Trust’s Books of Account: Trust Audit ensures a thorough examination of the trust’s books of account to verify the accuracy and reliability of financial transactions and records.
- Mandatory Compliance: Trust Audit helps in fulfilling the mandatory compliance requirements imposed by the Trust Act, ensuring that the trust is operating in accordance with the legal framework.
In simpler terms, Trust Audit helps in getting tax exemptions by registering under Section 12AA, checks and verifies the trust’s financial records, and ensures compliance with the necessary legal requirements for trusts.
The process for conducting a Trust Audit:
- Gather relevant information and documents.
- Review the trust’s financial records.
- Verify assets and liabilities.
- Check compliance with Trust Act and legal requirements.
- Assess internal controls.
- Analyze financial transactions.
- Prepare the audit report.
- Submit the audit report and required forms to the authorities.
This simplified list outlines the main steps involved in a Trust Audit, including gathering information, reviewing records, verifying assets and liabilities, checking compliance, assessing internal controls, analyzing transactions, preparing the audit report, and submitting it to the authorities.
Key deliverables for a Trust Audit in simpler terms:
- Book of Account Audit: Get the trust’s books of account audited by a Chartered Accountant before 30th September. This ensures a thorough review of financial records for accuracy and compliance.
- Income Tax Return Filing: File the trust’s income tax return before 31st July (if the trust is not required to undergo a tax audit) or before 30th September (if a tax audit is required). This ensures timely submission of tax-related information to the tax authorities.
- Online Submission of Trust Report: Submit the trust report online at the Charity Commission’s website. This involves providing the necessary details and information about the trust’s activities, finances, and compliance with charitable regulations.
- Physical Copies Submission: Additionally, submit physical copies of the trust report at the Charity Commission’s office. This ensures that the necessary documentation is provided to the regulatory authority in a tangible format.
In simpler words, the key deliverables for a Trust Audit include getting the books of account audited by a Chartered Accountant, filing the income tax return on time, submitting the trust report online and physically to the Charity Commission. These deliverables help ensure compliance with financial and regulatory requirements for trusts.