Trust Audit Services

Q: What types of organisations require a trust audit?

Public charitable trusts, religious trusts, societies, educational institutions, and NGOs receiving donations or grants are subject to audit requirements. Trusts registered under Section 12AB must be audited if total income before exemption exceeds the basic exemption limit.

Q: What is the 85% application of income rule and how is it calculated?

A trust under Section 11 must apply at least 85% of its total income to charitable or religious objects in India during the year. The remaining 15% may be retained freely. Any accumulation beyond 15% requires written notice to the Assessing Officer and investment in specified modes.

Q: What happens if a trust's Section 12AB registration lapses or is cancelled?

If Section 12AB registration lapses or is cancelled, the trust's income becomes fully taxable and all receipts including corpus donations may be treated as income. The trust's 80G registration is also typically affected, preventing donors from claiming deductions.

Q: What are the FCRA audit requirements for trusts receiving foreign donations?

FCRA-registered trusts must maintain a separate SBI Main Branch New Delhi FCRA account, keep separate books, and file Form FC-4 by 31 December each year with a CA-certified statement of accounts. Non-compliance can result in cancellation of FCRA registration.

Q: Can a trust lose its tax exemption for activities outside its stated objects?

Yes. Income tax exemption under Section 11 applies only to income applied for the trust's stated charitable or religious objects. Expenditure outside these objects, or commercial activities beyond permissible limits, can result in denial of exemption for the relevant amount.

Specialised Audit Services for Charitable Trusts, NGOs, Religious Organisations, and Educational Institutions

Charitable trusts, public trusts, religious organisations, educational institutions, and NGOs have unique audit and compliance requirements arising from their registration under the Indian Trusts Act, applicable state public trust legislation, and the Income Tax Act. A trust audit is not merely a financial formality — it is the mechanism through which the organisation demonstrates to regulators, donors, and beneficiaries that its funds are being received and applied in accordance with its objects and the law.

Our trust audit services cover the full spectrum of trust compliance: statutory audit under state trust legislation, income tax audit and compliance under Sections 11, 12, 12AB and 80G, FCRA compliance for trusts receiving foreign contributions, and CSR fund utilisation reviews. For the statutory framework governing trust audits, see our audit under the Trust Act page. These services connect with our income tax audit and audit and assurance overview services for organisations with overlapping compliance obligations.

Our Trust Audit Services

Statutory Trust Audit

Mandatory audit of the trust's financial statements under applicable state public trust legislation, covering receipts, payments, assets, liabilities, and compliance with the trust deed.

Section 11/12AB Income Tax Audit

Audit and income tax compliance for trusts claiming exemption under Sections 11 and 12 of the Income Tax Act, verifying application of income, corpus fund treatment, and registration compliance.

80G Compliance Review

Verification of compliance with the conditions attached to the trust's 80G registration to protect its ability to issue valid deduction-eligible donation receipts to donors.

FCRA Audit & Compliance

Audit of foreign contribution receipts and expenditure under the Foreign Contribution Regulation Act (FCRA), including review of segregated FCRA accounts and annual return filing.

CSR Fund Utilisation Audit

Independent review and audit of CSR funds received and utilised by implementing trusts, verifying compliance with the Companies Act CSR provisions and grant conditions.

Application of Income Verification

Verification that the trust has applied at least 85% of its income to charitable or religious purposes in India, and that any accumulation is within the limits and conditions permitted by the Income Tax Act.

Benefits of Trust Audit Compliance

Maintains income tax exemption under Sections 11 and 12 of the Income Tax Act
Protects 80G registration, enabling donors to claim tax deductions on contributions
Ensures FCRA compliance for trusts receiving foreign contributions
Satisfies state public trust legislation audit requirements
Provides donors, beneficiaries, and grant-makers with credible, audited financials
Identifies misapplication of funds or non-compliance with trust deed provisions early

Frequently Asked Questions

What types of organisations require a trust audit?

Public charitable trusts registered under state public trust legislation, trusts registered under the Indian Trusts Act 1882, religious trusts, societies registered under the Societies Registration Act, educational institutions, and NGOs receiving donations or grants are all subject to audit requirements under their respective governing legislation. Additionally, any trust or institution registered under Section 12AB of the Income Tax Act must have its accounts audited if total income before the exemption exceeds the basic exemption limit.

What is the 85% application of income rule and how is it calculated?

A trust claiming income tax exemption under Section 11 must apply at least 85% of its total income — including both donations received and any other income — towards its charitable or religious objects in India during the financial year. The remaining 15% may be retained or accumulated freely. Any accumulation beyond 15% is subject to specific conditions under Section 11(2), including a written notice to the Assessing Officer and investment in specified modes. The auditor verifies the calculation and ensures the mandatory application test is satisfied.

What happens if a trust's Section 12AB registration lapses or is cancelled?

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If a trust's registration under Section 12AB lapses or is cancelled, its income ceases to be exempt under Section 11 and becomes fully taxable. All receipts — including corpus donations — may be treated as income in the year of cancellation. The trust's 80G registration, which allows donors to claim deductions, is also typically affected. It is therefore critical to renew registrations on time and maintain compliance with all registration conditions.

What are the FCRA audit requirements for trusts receiving foreign donations?

Trusts and NGOs registered under FCRA must maintain a separate designated FCRA bank account with the State Bank of India, New Delhi Main Branch, and keep separate books for foreign contribution receipts and expenditure. The FCRA annual return (Form FC-4) must be filed by 31 December each year and must be accompanied by a statement of accounts certified by a Chartered Accountant. Failure to comply can result in cancellation of FCRA registration, making the organisation ineligible to receive future foreign contributions.

Can a trust lose its tax exemption for activities outside its stated objects?

Yes. A trust's income tax exemption under Section 11 applies only to income applied for the specific charitable or religious objects stated in the trust deed. If the trust applies its income for purposes not covered by its objects, or if it carries on commercial activities beyond permissible limits, the exemption can be denied for the relevant amount. The auditor reviews expenditure against the trust's stated objects and flags any application of funds that may be outside the permitted scope.

Keep Your Trust Compliant, Credible, and Exempt

Specialised trust audit services for NGOs, charitable organisations, and religious trusts.

F.A.Q.

What is anti-bribery and corruption risk assessment?

It is the process of identifying and managing risks related to bribery, corruption, and unethical practices in a business.

Why is anti-bribery compliance important?

It helps prevent legal penalties, protects reputation, and ensures ethical business operations.

Which laws govern anti-bribery in India?

The Prevention of Corruption Act, 1988 and other regulatory frameworks govern anti-bribery compliance.

What are common corruption risks in businesses?

Unethical payments, vendor kickbacks, fraud, and lack of internal controls.

How can companies reduce bribery risks?

By implementing strong policies, conducting due diligence, and monitoring transactions.

What is third-party due diligence?

It involves evaluating vendors and partners to identify potential compliance and corruption risks.