More disclosure in audit reports for educational institutions, hospitals, charitable/religious trusts required from FY24

Educational institutions, hospitals and charitable or religious trusts may face wider review and scrutiny by the regulators as the Income Tax Department has made significant changes in audit forms seeking more disclosures.

Based on the changes, educational institutions, hospitals and charitable or religious trusts will need to furnish the audit report in revised forms 10B and 10BB with effect from April 1.  Audit reports aim to ensure funds are used in proper manner and exemptions given to them have proved their utility.

The Income Tax Department has made changes in the rule through a notification. Now, a fund or institution or trust or any university, educational institution, hospital or other medical institution will be categorised based on these. If total income of these entities exceeds ₹5 crore during the previous year, or if they have received any foreign contribution; or they have applied any part of their income outside India they will be required to give the audit report in Form 10B. For entities, not fulfilling any of these conditions, audit reports need to be given in Form No 10BB. Similar conditions will be applied in case of charitable or religious trusts.

In line with ITR forms

Experts say there are significant changes in the new audit form, with the disclosure requirement significantly increased and mostly in line with the ITR forms. The previous form was only four pages long, whereas the new form is over 17 pages long.

Vikram Pratap Singh, Partner (Audit & Assurance) with Nangia & Co LLP, says the scope of reporting annexures to Auditor’s Report under Form 10B/10BB in terms of section 10(23C)(b) and section 12A(1)(b)(ii) of the Income-Tax Act, 1961 has been significantly enhanced. The report now requires the auditor to certify information that was previously only limited to reporting in the income tax return. Further, various standard reporting clauses, applicable to other assessees under tax audit regime, have now been made part of the Form 10B auditor’s report.

The new reporting requirements cast a much larger obligation on the auditor who is now required to report on the objects and operations of the institution, including detailed reporting on contributions, application of income, taxability under Section 115BBI of the ITA, 1961, capital asset transfers, transactions with specified persons and violations. “The amendments are directed to regulate and monitor these institutions and organisations to ensure fulfilment of objectives and adherence to law and shall result in the auditee being subject to a much wider review and scrutiny by the regulators,” he said.

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