CBDT Notification on Books of account & other documents to be maintained by charitable institutions

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New Rule in Brief:

The Finance Act 2022 amended the enabling provisions for the charitable institutions to maintain books of account and other documents, and it is one of the pre-conditions for availing exemption under the Act. Prior to the amendment, there was no specific provision under the Act for maintenance of books of account by charitable institutions and is over and above the obligation to get the accounts audited by Chartered Accountant and furnishing a report in a prescribed form. The amendment is effective from financial year 2022-23.

The Central Board of Direct Taxes (CBDT), vide Notification No. 94/2022 dated 10 August 2022 has notified a new rule to maintain books of account and other documents for availing exemption under the Income Tax Act, 1961 read with Rules (“the Act”). The new rule provides that the charitable trust and other eligible institutions (charitable institutions) are required to maintain books of account and other documents. 

The documents prescribed require maintenance of exhaustive records in respect of different segments like sources of income, application, investment or loans, deposit of money etc. It also includes maintenance of details such as name, address, PAN, Aadhar number of every donor, as also of every person in respect of whom application is made. 

The books of account and other documents are to be maintained at the registered office for a period of ten years from the end of the relevant tax year. It may be kept at any other place as decided by the management by way of a resolution. It may be maintained in written or electronic form. Furthermore, if the charitable institutions are subjected to reassessment for any year, the books of account are to be maintained till the reopened assessment is finalized.

Notification:

The new rule prescribes the books of account required to be maintained by charitable institutions which include cash books, ledger, journal, bills issued to / issued by the charitable institutions or any other book which explains the transactions and gives a true and fair view. Same set of books of accounts are prescribed even for charitable institutions which carry on business.

In addition to the above, the new rule also requires charitable institutions to maintain documents for maintaining records of on certain aspects including of income, application of income and details of specified persons. The Key highlights of the requirements prescribed by the new rule are as under:

1. In relation to income of charitable Institutions:

1. Details of donors i.e. name, address, PAN (if available) and Aadhar number (if available) in respect of voluntary contribution, corpus donations and contribution received for renovation or repair of places of worship / other notified places;
2. Income from property held under trust along with list of such properties.

2. In relation to application of Income:

1. Details of the amount of application, name and address of person to whom any amount is paid or credited and the object of such application. Further, these records have to be maintained for application of the income in India or outside India.
2. In respect of amount paid or credited to other charitable institutions – name, address, PAN of such entity and object for such application.
3. Where application is out of income of any preceding year, whether application is out of accumulated income or from different sources and where it is out of accumulated income, year of such accumulation.
4. Details of money invested or deposited in the specified forms or mode and also other than specified forms or modes including details about whether such investment or deposit is from relevant tax year or any preceding year.

3. Records of loans and borrowings taken by charitable institution: 

1. Details like name, address, PAN and Aadhar number (in case available) of the lender
2. Amount and date of borrowing / repayment including details of application of such loan in preceding year but not claimed as application.
3. Application made out of borrowed funds during the tax year or any preceding year with name and address of person to whom any amount is paid or credited out of such loan or borrowing and object for which such application is made.

4. Record of properties held by the charitable institutions: 

1. In respect of immovable properties – details of it’s nature, address, cost of acquisition and registration documents 
2. In case of transfer of such properties, the net consideration utilized in acquiring new capital asset 
3. In respect of movable properties, details of it’s nature as well as its cost of acquisition 

5. Record of specified persons: 

1. Details like name, address, PAN and Aadhar (if available)
2. Details of transactions undertaken by charitable institutions with such specified persons – date, amount and nature of transaction

6. Others

1. Record of all projects undertaken and institutions run by the charitable institutions, including details such as their name, address and objectives.
2. The books of account are to be maintained at the registered office or at any other place in India as decided by the management of the charitable institutions by way of a resolution (which is to be intimated to the income tax authorities) for a period of ten years. Further they may be kept in written and / or in electronic / digital form.
3. In case the charitable institutions are subjected to reassessment for any year, the books of account are to be maintained till the reopened assessment of that year is finalized