Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
ITR-7 + 85% application
File ITR-7; apply 85%+ of income to objects, or accumulate properly to retain exemption.
Audit report where needed
File Form 10B/10BB if the trust’s income crosses the limit. Confirm which form.
The 85% rule, accumulation and the audit
A trust’s return is more than a form — it’s where the exemption is actually claimed and justified. A 12AB-registered trust files ITR-7 and must show that it applied at least 85% of its income to its charitable objects during the year. Income it genuinely couldn’t apply can be handled two ways without losing the exemption: a standard 15% can be accumulated indefinitely, and amounts beyond that can be set apart for a specific purpose for up to five years by filing Form 10 (and parking the funds in permitted modes), to be spent within that window. Where the trust’s total income before exemption exceeds the basic exemption limit, its accounts must be audited and the audit report filed in Form 10B or 10BB (the right form depending on the trust’s size, foreign-contribution status and whether it runs a business undertaking) at least a month before the return due date. The return also reports corpus donations, anonymous donations (which can be taxed), and the application of income head by head. Filing the audit report late, or in the wrong form, or missing the 85% application, can cost the exemption — so the computation of income applied is the part to get right. Confirm the current forms, the audit threshold and the due dates.