Trust Audit Services | Savlana Init

Trust Compliance · Trust Audit

Trust Audit Services — Compliant. Transparent. Exempt.

Statutory audit of charitable trusts, religious institutions, and NGOs — ensuring income application compliance, accumulation limits, investment norms, and exemption conditions are fully met.

A trust’s exemption from income tax under Section 11 or Section 10(23C) is not unconditional. It depends on strict compliance with a set of ongoing obligations: applying at least 85% of income towards the trust’s stated objects, accumulating income only within prescribed limits and for specified purposes, investing funds in specified modes, avoiding transactions with related parties that are not at arm’s length, and maintaining proper books of account.

The statutory audit of a trust’s accounts — required when total income before exemption exceeds the basic exemption limit — is the mechanism by which these conditions are verified and reported to the Income Tax Department. The auditor’s certificate in Form 10B or Form 10BB is the key document linking the trust’s accounts to its exemption claim in the ITR-7.

Our trust audit goes beyond mere number-checking. We examine the trust’s legal compliance, advise on improving internal controls for fund management, identify transactions that could jeopardise the exemption, and provide a clean audit report where the accounts are in order. Where issues exist, we identify them in advance and advise on remedial steps before they become the subject of a notice or assessment.

Our Trust Audit Services

Statutory Trust Audit

Complete audit of the trust’s books of account, receipts and payments, income and expenditure, and balance sheet.

Income Application Review

Detailed verification of income application — confirming that at least 85% has been applied towards the stated charitable or religious objects.

Accumulation Compliance

Review of income accumulated under Section 11(2) — Form 10 filing compliance, 5-year utilisation plan, and specified mode investment.

Specified Investment Verification

Confirmation that the corpus and accumulated income are invested in modes specified under Section 11(5) — government securities, scheduled bank FDs, and other approved instruments.

Related-Party Transaction Review

Examination of transactions with settlors, trustees, and related parties to ensure they are at arm’s length and not in violation of Section 13.

Anonymous Donation Assessment

Identification of anonymous donations above the prescribed limit and assessment of tax liability under Section 115BBC.

Form 10B / 10BB Preparation

Preparation and e-filing of the prescribed audit report (Form 10B or Form 10BB as applicable) within the statutory deadline.

Exemption Condition Advisory

Comprehensive advice on the trust’s ongoing compliance with all conditions for continued exemption and registration.

Our Process

Books of Account Review

We review the trust’s financial records — cash book, ledgers, receipts and payments account, income and expenditure, and balance sheet.

Compliance Verification

Income application, accumulation limits, specified investments, and related-party transactions are each systematically verified.

Issue Identification

Any compliance gaps, potential Section 13 violations, or problematic transactions are identified and discussed with the trustee.

Audit Report Preparation

Form 10B or Form 10BB is prepared with all annexures and certifications based on the audit findings.

E-Filing & ITR Linkage

The audit report is filed on the e-filing portal and linked to the trust’s ITR-7 return.

Why It Matters

✓Comprehensive compliance check beyond routine bookkeeping

✓85% application rule rigorously verified

✓Accumulation, Form 10, and specified investment compliance

✓Related-party and Section 13 violations identified early

✓Anonymous donation tax exposure assessed

✓Clean audit report filed within due date

✓Exemption condition advisory to prevent future issues

✓Consistent audit report and ITR-7 linkage

Frequently Asked Questions

A trust registered under Section 12A/12AB or claiming exemption under Section 10(23C) must get its accounts audited for any year in which its total income before applying the Section 11 exemption exceeds the basic exemption limit (₹3 lakh for AY 2024–25). If income is below this limit, the audit is not mandatory but good governance suggests maintaining audited accounts.

Section 13 withdraws the exemption under Section 11 if the trust’s income or property is applied for the benefit of the settlor, a trustee, or their relatives in a non-arm’s-length transaction. The auditor examines all such transactions to identify any that could attract Section 13 consequences. A single related-party transaction at above-market rates can result in the entire year’s income being taxed.

Section 11(5) specifies the instruments in which a trust must invest its corpus and accumulated income. These include: investment in government savings certificates, units of the UTI, government and government-guaranteed securities, bank deposits with scheduled banks, and other prescribed instruments. Investments outside these modes can result in accumulated income losing its exempt status.

Donations received by certain trusts (other than religious trusts) where the donor’s identity and PAN are not maintained are treated as anonymous donations under Section 115BBC. The portion of anonymous donations exceeding 5% of total income or ₹1 lakh (whichever is higher) is taxed at 30% flat, regardless of the trust’s exempt status.

Yes. The Commissioner of Income Tax can cancel a Section 12AB registration if the trust’s activities are not genuine, if its income is not applied towards its stated objects, if the trust violates Section 13, or if it fails to comply with other conditions of registration. Cancellation results in the exemption being denied from the year of cancellation.

The auditor’s responsibility is limited to expressing an opinion on the financial statements and the compliance with statutory provisions based on the information and explanations provided. If incorrect information was provided to the auditor, the primary responsibility rests with the trustees. However, the auditor must exercise due professional scepticism and cannot blindly accept representations.

Trust audit due this year?

We audit thoroughly, advise on compliance gaps, and file Form 10B or 10BB before the return deadline — protecting exemption status and trustee accountability.