Audit Under the Trust Act

Q: Is an audit mandatory for all registered trusts?

Trusts registered under state public trust legislation must be audited under applicable state law. Trusts under Section 12A/12AB of the Income Tax Act must be audited if total income before exemptions exceeds the basic exemption limit.

Q: What is the application of income requirement for tax-exempt trusts?

A trust under Section 11 must apply at least 85% of its income to charitable or religious purposes in India during the year. Failure to meet this threshold can result in the excess being taxed as income of the trust.

Q: What happens if a trust loses its 12AB registration?

If Section 12AB registration is cancelled, the trust loses its income tax exemption and all income becomes taxable. Donors can no longer claim Section 80G deductions if the corresponding 80G registration is also cancelled.

Q: Are corpus donations treated differently from regular donations for audit purposes?

Yes. Corpus donations are not included in income for the 85% application requirement but must be invested in specified modes. The auditor verifies correct identification, recording, and investment of corpus contributions.

Q: Does a trust need a separate audit for FCRA and income tax purposes?

FCRA requires separate books for foreign contributions and a separate income and expenditure account. While the same auditor may handle both, FCRA accounts must be maintained independently from domestic fund accounts.

Charitable Trust Audit Services for NGOs, Public Trusts, and Religious Organisations

Trusts registered under the Indian Trusts Act or applicable state public trust legislation are required to have their accounts audited annually. This audit is essential not only for regulatory compliance but also for maintaining the exemption status under the Income Tax Act for trusts registered under Section 12AA or Section 12AB.

A trust audit verifies that donations and receipts have been correctly recorded, that expenditure is consistent with the trust's stated objects, and that the application of income meets the prescribed thresholds. Our trust audit services cover public charitable trusts, religious trusts, educational institutions, and NGOs. This integrates with our tax audit under the Income Tax Act and broader audit and assurance services for entities with multiple compliance obligations.

Our Trust Audit Services

Public Trust Audit

Statutory audit of public trusts as required under the applicable state public trust legislation, including verification of donations, expenditure, and asset records.

Income Tax Audit for Trusts

Audit under Section 12A/12AA/12AB of the Income Tax Act to support exemption claims on income applied to charitable or religious objects.

Application of Income Verification

Verification that the trust has applied at least 85% of its income towards its charitable or religious objects in the relevant financial year as required for income tax exemption.

Donation & Receipt Verification

Reconciliation and verification of donations received — including corpus donations, general donations, and grants — against receipt records and bank statements.

FCRA Compliance Review

Review of Foreign Contribution Regulation Act (FCRA) receipts and expenditure for trusts receiving foreign donations, ensuring proper segregation and reporting.

80G Compliance Audit

Verification of compliance with conditions attached to 80G registration, supporting the trust's ability to issue valid donation receipts to donors.

Why Trust Audit Compliance Matters

Maintains income tax exemption under Section 11 and 12 of the Income Tax Act
Satisfies mandatory audit requirements under state public trust legislation
Protects 80G registration, enabling donors to claim deductions on contributions
Provides transparency to donors, beneficiaries, and regulatory authorities
Supports FCRA compliance for trusts receiving foreign contributions
Identifies misapplication of funds or non-compliance with trust deed provisions

Frequently Asked Questions

Is an audit mandatory for all registered trusts?

Trusts registered under state public trust legislation are required to have their accounts audited under the applicable state law. Additionally, trusts registered under Section 12A/12AB of the Income Tax Act must have their accounts audited if their total income before applying exemptions exceeds the basic exemption limit. It is advisable for all registered trusts to conduct an annual audit regardless of threshold.

What is the application of income requirement for tax-exempt trusts?

A trust enjoying exemption under Section 11 of the Income Tax Act must apply at least 85% of its income to charitable or religious purposes in India during the year. The remaining 15% may be accumulated without restriction. Failure to meet this threshold can result in the excess being taxed as income of the trust.

What happens if a trust loses its 12AB registration?

If a trust's registration under Section 12AB is cancelled or not renewed, the trust loses its income tax exemption. All income, including corpus donations received, becomes taxable. Additionally, donors can no longer claim deductions under Section 80G if the trust's corresponding 80G registration is also cancelled.

Are corpus donations treated differently from regular donations for audit purposes?

Yes. Corpus donations — contributions specifically designated for the corpus fund of the trust — are not included in the income of the trust for the purpose of the 85% application requirement. They must, however, be invested in specified modes. The auditor verifies that corpus contributions are correctly identified, recorded, and invested as required.

Does a trust need a separate audit for FCRA and income tax purposes?

FCRA regulations require separate books of accounts for foreign contributions, and the FCRA annual return requires a separate income and expenditure account and balance sheet. While the same auditor may conduct both the FCRA review and the general trust audit, the reporting is separate and the FCRA accounts must be maintained independently from domestic fund accounts.

Protect Your Trust's Exempt Status

Thorough, compliant trust audit services for charitable organisations and NGOs.