Tax audit of ngo under sec 44ab
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
10 September 2013
Is Tax audit under sec 44AB is necessary for NGO registered under sec 12A, grant received Rs 2 crores
Ajay Mishra
(Expert)
10 September 2013
Refer to below link:
https://www.kcjm.in/mandatory-to-file-e-return-of-trust-ngo/
https://www.kcjm.in/mandatory-to-file-e-return-of-trust-ngo/
Message likes :
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Querist : Anonymous
Querist :
Anonymous
(Querist)
10 September 2013
My question is tax audit under section 44AB is mandatory for NGO registered U/S 12 (Total Grant Received during FY 2012-13 Rs 2 Crores)
26 July 2025
Great question.
Let’s directly address the query: **Is tax audit under Section 44AB applicable to an NGO (charitable trust) registered under Section 12A, receiving ₹2 crores in grants during FY 2012–13?**
---
### ✅ **Short Answer:**
**No**, \*\*Section 44AB tax audit is generally ***not applicable*** to NGOs or trusts registered under **Section 12A/12AA**, **if they are not carrying on any business**.
---
### 🧾 **Detailed Explanation:**
#### 🔹 1. **Applicability of Section 44AB:**
Section 44AB applies to:
* **Businesses** with **turnover > ₹1 crore (or ₹10 crore)** (based on mode of receipts/payments), or
* **Professions** with **gross receipts > ₹50 lakhs**.
👉 This section is meant for **business or professional income**.
---
#### 🔹 2. **NGOs Registered under Section 12A/12AA:**
* These are **charitable or religious institutions**.
* Their **main source of income** is typically **donations, grants, or corpus contributions** — **not business receipts**.
* **Grants** and **donations** are **not considered business income**.
* Their accounts are governed by **Section 11 to 13**, and **not under normal business income provisions**.
---
#### 🔹 3. **When Can 44AB Apply to a Trust/NGO?**
Only if:
* The NGO/trust **engages in business activities**, and
* Such business activity is **not incidental to the object** of the trust, or
* Business income is **not applied as per Section 11**, or
* **Exemption under Section 11/12 is not available** for any reason (e.g., not filing audit under 12A(b)).
👉 In such cases, the trust will be **taxed as a business entity**, and **44AB audit may apply**.
---
### 📌 **Section 12A(b): Audit Requirement for Trusts**
Under **Section 12A(b)**:
* If the total income of the trust **before claiming exemption u/s 11/12 exceeds the basic exemption limit**, it **must get its accounts audited** by a **CA** and file **Form 10B**.
* This is **not a Section 44AB audit** — it’s a **special audit under 12A(b)**.
---
### 🔍 **Your Case:**
* NGO is **registered under 12A**.
* Received **grants of ₹2 crores**.
* Presumably **not carrying on any business**.
* Hence:
* **Section 44AB does NOT apply**.
* But **audit under Section 12A(b)** ***is mandatory*** (since income exceeds the basic exemption limit — ₹2.5 lakhs or ₹1 lakh in 2012-13 depending on trust type).
---
### ✅ **Conclusion:**
| **Audit Type** | **Applicable?** | **Reason** |
| ----------------------------------- | --------------- | ---------------------------------- |
| **Section 44AB Tax Audit** | ❌ No | NGO is not a business entity |
| **Section 12A(b) Audit (Form 10B)** | ✅ Yes | Income exceeds exemption threshold |
---
Let me know if you want a checklist or format for **Form 10B** filing or compliance for trusts.
Let’s directly address the query: **Is tax audit under Section 44AB applicable to an NGO (charitable trust) registered under Section 12A, receiving ₹2 crores in grants during FY 2012–13?**
---
### ✅ **Short Answer:**
**No**, \*\*Section 44AB tax audit is generally ***not applicable*** to NGOs or trusts registered under **Section 12A/12AA**, **if they are not carrying on any business**.
---
### 🧾 **Detailed Explanation:**
#### 🔹 1. **Applicability of Section 44AB:**
Section 44AB applies to:
* **Businesses** with **turnover > ₹1 crore (or ₹10 crore)** (based on mode of receipts/payments), or
* **Professions** with **gross receipts > ₹50 lakhs**.
👉 This section is meant for **business or professional income**.
---
#### 🔹 2. **NGOs Registered under Section 12A/12AA:**
* These are **charitable or religious institutions**.
* Their **main source of income** is typically **donations, grants, or corpus contributions** — **not business receipts**.
* **Grants** and **donations** are **not considered business income**.
* Their accounts are governed by **Section 11 to 13**, and **not under normal business income provisions**.
---
#### 🔹 3. **When Can 44AB Apply to a Trust/NGO?**
Only if:
* The NGO/trust **engages in business activities**, and
* Such business activity is **not incidental to the object** of the trust, or
* Business income is **not applied as per Section 11**, or
* **Exemption under Section 11/12 is not available** for any reason (e.g., not filing audit under 12A(b)).
👉 In such cases, the trust will be **taxed as a business entity**, and **44AB audit may apply**.
---
### 📌 **Section 12A(b): Audit Requirement for Trusts**
Under **Section 12A(b)**:
* If the total income of the trust **before claiming exemption u/s 11/12 exceeds the basic exemption limit**, it **must get its accounts audited** by a **CA** and file **Form 10B**.
* This is **not a Section 44AB audit** — it’s a **special audit under 12A(b)**.
---
### 🔍 **Your Case:**
* NGO is **registered under 12A**.
* Received **grants of ₹2 crores**.
* Presumably **not carrying on any business**.
* Hence:
* **Section 44AB does NOT apply**.
* But **audit under Section 12A(b)** ***is mandatory*** (since income exceeds the basic exemption limit — ₹2.5 lakhs or ₹1 lakh in 2012-13 depending on trust type).
---
### ✅ **Conclusion:**
| **Audit Type** | **Applicable?** | **Reason** |
| ----------------------------------- | --------------- | ---------------------------------- |
| **Section 44AB Tax Audit** | ❌ No | NGO is not a business entity |
| **Section 12A(b) Audit (Form 10B)** | ✅ Yes | Income exceeds exemption threshold |
---
Let me know if you want a checklist or format for **Form 10B** filing or compliance for trusts.
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