ICAI releases Technical Guide on Audit Reports under Section 12A/ 10(23C) of Income Tax Act

The Institute of Chartered Accountants of India (ICAI) has released the Technical Guide on Reports of Audit under section 12A/ 10(23C) of the Income Tax Act 1961.

Every charitable or religious trust or institution claiming income not includible in total income under Section 11 and Section 12 or any fund or institution or trust or any university or other educational institution or any hospital or other medical institution claiming income not includible in total income under sub-clauses (iv)/(v)/(vi)/(via) of clause (23C) of section 10 (and the total income without giving effect to the beneficial/exemption provisions exceeds the maximum amount which is not chargeable to income-tax in any previous year) needs to keep and maintain the books of account and other
documents as per Rule 17AA of the Income-tax Rules, 1962 and also get its books of account audited mandatorily under the Income-tax Act, 1961.

Rule 16CC and Rule 17B of the Income-tax Rules 1962 as amended by the Income-tax Amendment (3rd Amendment) Rules, 2023 govern the provisions related to the audit of assessees mentioned above. Rule 17AA provides the particulars of books of account and documents to be maintained by the Trust or Institutions, as the case may be.

The audit report in respect of the same is required to be furnished one month prior to the due date of furnishing the return of income u/s 139(1) of the Act. As per the Notification No. 7/2023, dated 21.02.2023, CBDT has issued new (re-notified) Audit Report Form No. 10B and Form No. 10BB by the Income Tax Amendment (3rd Amendment) Rules,2023 which has come into effect from 01.04.2023 applicable for assessment year 2023-24 onwards.

This Technical Guide covers the provisions of section 10(23C) (iv)/(v)/(vi)/(via), sections 11 and 12 along with its allied rules. Along with audit reports in relation to Charitable Trusts and institutions. The object of this Technical Guide is to provide guidance to the auditors for the conduct of audit under sections 12A and 10(23C). This Technical Guide will also be useful for those in charge of the governance of charitable institutions for discharging their respective responsibilities towards the audit of accounts of charitable institutions under clause (b) of the tenth proviso to section 10(23C) and 12A(1)(b)(ii) of the Act. For the purpose of brevity in this Technical Guide such entities are referred to as “Institutions/ Auditee” without going into the fine distinction that may exist between a ‘trust’ and an “institution”.

Objective of this Technical Guide

This Technical Guide intends to,

(i) assist in understanding the respective responsibilities of the institution and the auditor.

(ii) guide the auditor as to the nature and scope of information to be obtained by him from the institution to enable him to conduct the audit.

(iii) provide guidance on the verification procedures to be adopted by the auditor for giving the audit report and the necessary information in the annexure thereto.

(iv) give an idea about the various aspects including issues relating to the law of taxation of trusts/institutions

(v) explain the circumstances where a disclosure or qualification or disclaimer may be required from the auditor while giving his audit report.

(vi) provide guidance in ensuring compliance with the Accounting Standards issued, prescribed and made mandatory by the Institute of Chartered Auditors of India.

(vii) facilitate compliance of Standards on Auditing (SAs) issued, prescribed and made mandatory by the Institute of Chartered Accountants of India.

To Read More – Click Here