Audit under Trust Act in India — BPT Act Schedule VIII Audit, Form 10B, FCRA Audit & Charity Commissioner Annual Accounts Submission

Audit under Trust Act in India

A charitable trust in Maharashtra operates under not one but multiple overlapping regulatory frameworks simultaneously — and each framework requires its own audit, its own report format, its own deadlines, and its own regulatory submission. The Bombay Public Trusts Act 1950 requires an annual audit in Schedule VIII format submitted to the Charity Commissioner. The Income Tax Act 1961 requires Form 10B or Form 10BB from the CA, submitted before the ITR-7 filing date. If the trust receives foreign funds, the FCRA requires a separate audit of the FCRA account and an annual return in Form FC-4. And for trusts with 80G approval, Form 10BD and Form 10BE must be filed for every eligible donation.

Missing any of these deadlines or filing any with errors creates consequences disproportionately severe for a charitable organisation — cancellation of 12A or 12AB registration (making all trust income taxable), suspension of 80G approval (removing donor deduction benefits), Charity Commissioner action, or FCRA cancellation. For an NGO that depends on donor trust and government approvals to operate, compliance failure is existential risk.

N D Savla & Associates provides complete audit under Trust Act services for charitable trusts, religious trusts, NGOs, and Section 8 companies across Mumbai and Maharashtra — covering BPT Act Schedule VIII audit and Charity Commissioner submission, Form 10B and Form 10BB income tax audit, FCRA audit and FC-4 filing, 12A and 80G compliance, and ITR-7 return filing — as a single integrated annual compliance engagement. For the FCRA portal, refer to fcraonline.nic.in.

Types of Trust Audits — The Complete Framework

What Is the Schedule VIII Audit — and What Does It Cover?

The Schedule VIII audit is a comprehensive examination of the trust's financial records for the financial year — covering both the financial statements and the trust's compliance with the BPT Act, the trust deed, and applicable regulations.

Financial Statements Examined

• Balance sheet: Assets (immovable property, investments, fixed assets, current assets) and liabilities (outstanding payables, loans, corpus fund, general fund). Every asset verified against supporting documents.
• Income and expenditure account: All income (donations, event income, interest income, rental income, grants) and all expenditure (charitable activities, administrative expenses, depreciation). Income verified against donation records, receipts, and bank statements.
• Receipts and payments account: A cash-basis summary of all receipts and payments — a mandatory disclosure under the BPT Act in addition to the accrual-basis income and expenditure account.

Specific BPT Act Compliance Checks

• Investment of trust funds: The BPT Act prescribes permitted investment modes — government securities, fixed deposits with scheduled banks, units of UTI/public sector mutual funds, post office savings. Investment in shares, equity mutual funds, or private company securities is generally not permitted. The Schedule VIII audit verifies all investments are in permitted modes.
• Alienation of trust property: Sale, mortgage, lease, or exchange of trust property requires prior sanction from the Charity Commissioner. The audit verifies no trust property has been alienated without required sanction.
• Transactions with trustees and related parties: The BPT Act restricts self-dealing by trustees — a trustee cannot benefit from trust transactions. The Schedule VIII audit specifically checks for payments to trustees, their relatives, or connected entities.
• Application of trust funds for stated purposes: The audit verifies that trust funds have been applied for the purposes stated in the trust deed. Diversion of funds to purposes outside the trust deed is a breach of trust.

The 85% Application Requirement — What It Is and How the CA Audits It

Section 11(1)(a) of the Income Tax Act grants tax exemption to a charitable trust on income that is applied for charitable or religious purposes in India — subject to the condition that at least 85% of the income derived during the year is so applied. Verifying this is the central task of the Form 10B audit.

• Step 1: Calculate the total income of the trust for the year using the income tax definition of income (accrual basis, after permitted deductions under Section 57).
• Step 2: Calculate the amount applied for charitable or religious purposes during the year — expenditure on the charitable activities specified in the trust deed.
• Step 3: Verify that Step 2 is at least 85% of Step 1. If it is, the unapplied 15% is still exempt as it is permitted to retain up to 15% without accumulation.
• Step 4: If applied amount is less than 85% — the trust must either accumulate the deficiency under Section 11(2) (by filing Form 9A and Form 10 before the due date) or accept that the deficiency is taxable income.

How We Handle Trust Act Audit Engagements — Our 7-Step Process

1. Trust Profile and Compliance Calendar Setup
   We begin every trust audit engagement by mapping the complete regulatory landscape — BPT Act registration status, Section 12A/12AB registration, 80G approval, FCRA registration, and any other specific registrations (NITI Aayog Darpan, state-specific approvals). We build a compliance calendar covering all audit deadlines, filing deadlines, and regulatory submission deadlines for the financial year.
2. Books of Accounts and Financial Statement Preparation
   We assist the trust in preparing properly formatted financial statements — balance sheet, income and expenditure account, and receipts and payments account — in the formats required by both the BPT Act and the income tax audit. Where the trust's internal bookkeeping requires reconstruction or correction, we assist before the audit begins.
3. BPT Act Schedule VIII Audit
   We conduct the Schedule VIII audit — examining income (donations, grants, investment income), expenditure (charitable activities, administration), balance sheet items (investments in permitted modes, trust property), trustee transactions (conflict of interest compliance), and utilisation of trust funds for stated purposes. We prepare the Schedule VIII audit report in the prescribed format for submission to the Charity Commissioner.
4. Form 10B or Form 10BB Income Tax Audit
   We conduct the income tax audit — verifying the 85% application of income, checking accumulations under Section 11(2), reviewing anonymous donations, verifying investment compliance, and completing all Annexures in Form 10B or Form 10BB as applicable. We submit the completed audit report on the income tax e-filing portal before the ITR-7 due date.
5. FCRA Audit (Where Applicable)
   For FCRA-registered trusts, we audit the separate FCRA accounts — verifying foreign contributions received against bank statements and donor documentation, reviewing purpose-wise utilisation, checking the 20% administrative expense limit, and preparing the CA's certificate for attachment to Form FC-4. We assist with the FC-4 filing on the FCRA portal at fcraonline.nic.in by the 31 December deadline.
6. Form 10BD, Form 10BE and 80G Compliance
   For trusts with 80G approval, we prepare Form 10BD — the statement of donations received (donor-wise, for donations eligible for 80G deduction) — and file it on the income tax portal by 31 May each year. We assist with the generation of Form 10BE donation certificates for each eligible donor — the certificate the donor needs to claim the 80G deduction in their own income tax return.
7. ITR-7 Return Filing
   After the Form 10B/10BB audit is complete, we prepare and file the ITR-7 return for the trust — covering income and expenditure, the exemption claimed under Section 11, any taxable income (where the 85% application requirement was not met), and all statutory disclosures required by the return.

Why N D Savla & Associates for Trust Act Audit Services

• All three audits under one roof. We handle the BPT Act Schedule VIII audit, Form 10B/10BB income tax audit, and FCRA audit as a single integrated annual engagement — ensuring consistency across all three reports and managing different deadlines as a coordinated compliance calendar. Trusts using separate CAs for each audit frequently experience inconsistencies that create Charity Commissioner and income tax queries.
• Deep trust compliance expertise. Trust accounting, the BPT Act framework, the Section 11 application conditions, and the FCRA utilisation rules are specialist areas of practice. Our CA team has conducted trust audits across charitable, religious, medical, educational, and social service trusts — from single-object trusts to complex multi-activity NGOs. Our 12A and 80G registration advisory practice ensures trusts are correctly structured for maximum exemption before the audit begins.
• Charity Commissioner submission managed end-to-end. We do not just prepare the audit report — we manage the complete Charity Commissioner annual accounts submission, including physical or online submission at the relevant Charity Commissioner office, tracking acknowledgement, and responding to any queries raised on the accounts submitted.
• Deadlines managed proactively. Trust audit failures are almost always deadline failures. We plan the engagement calendar at the start of the financial year and track every milestone to ensure no deadline is missed. The four deadlines — 30 September (Form 10B), 31 October (ITR-7), 31 December (FC-4), and 31 May (Form 10BD) — are managed as a single coordinated calendar.

Frequently Asked Questions — Audit under Trust Act in India