Technical Guide on Audit of Charitable Institutions
Technical Guide on Audit of Charitable Institutions under Section 12A of the Income-tax Act, 1961
Introduction
Under section 11 of the Income-tax Act, 1961 certain incomes derived from property held under trust for charitable or religious purposes specified thereunder shall not be included in the total income of the previous year subject to the conditions prescribed by the Act The person entitled to get exemption under section 11 of the Income-tax Act, 1961 may be a trust, society, company registered under section 8 of
Companies Act, 2013 (earlier it was section 25 of the Companies Act, 1956) or any other legal obligation. For the purpose of brevity, in this Technical Guide such entities are referred to by the term “institution”, without going into the fine distinctions that may exist between a “trust” and an “institution”.
The Institution, in order to qualify for exemption under section 11 of the Income-tax Act, 1961 :-
I. Property of such institution should be held wholly for charitable or religious purpose and,
II. It should be registered with the Principal Commissioner of Income Tax (PCIT) or Commissioner of Income Tax (CIT) Certain old institutions created before Commencement of Income-tax Act, 1961 even if they are partly for charitable or religious purposes, they also qualify for exemption.
The term Charitable purpose has been defined under section 2(15) of the Income-tax Act, 1961. The definition reads as under :-
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