Chartered Accountant · ICAI M.No. 153926 · FRN 136869W · Reviewed on 12 October 2026
The sequence that actually matters
Audit first: trusts whose income (before sections 11/12 exemption) exceeds the basic exemption need the audit report in Form 10B or 10BB (which one depends on size and foreign-contribution/business receipts — broadly 10B for the larger/complex cases). It is due one month before the return. Then ITR-7 by 31 October, disclosing registration details, application of income, accumulated amounts and specified-person transactions. A return filed without the audit report in place is where most exemption denials begin.
The 85% rule and its two escape valves
To keep the exemption, 85% of income must be applied to charitable/religious objects in the year. Fell short because income arrived late or wasn’t received? Form 9A (deemed application). Deliberately setting money aside for a project? Form 10 — accumulation for up to five years, with a stated purpose. Both now must be filed at least two months before the ITR due date — effectively 31 August — so the decision belongs to July, not October.
What trips trusts in practice
Corpus donations parked in the wrong account (corpus must sit in specified modes under section 11(5) to stay exempt); inter-trust donations (only 85% counts as application); anonymous donations crossing the 115BBC buffer; related-party payments breaching section 13; and lapsed 12AB renewals — registration now runs in five-year blocks, and an expired registration can invite the section 115TD exit tax. Our trust compliance practice runs the 10B–9A/10–ITR-7 calendar as one job.