Disclosure of specified person u/s 13(3)

Hey Vishnu! Here’s a simple guide for disclosure of specified persons under Section 13(3) of the Income Tax Act for a charitable trust’s ITR and audit report:

What is Section 13(3)?

• Section 13(3) deals with disclosure of details of specified persons (like trustees, their relatives, or other connected persons) who have received any benefit, directly or indirectly, from the trust.

Who is a "Specified Person"?

• Trustees, their relatives, or any other person connected with the trust who has received any benefit or income from the trust in any form (like salary, honorarium, rent, loans, etc.).

Disclosure requirements under Sec 13(3):

1. In ITR (Income Tax Return) of the Trust:

   • The trust must disclose details of any benefit given to specified persons in the Income & Expenditure Schedule or Audit Report, depending on the ITR form.

   • Mention the nature and amount of benefit.

2. In the Audit Report (Form 10B):

   • The auditor must verify if any specified person has received any income/benefit from the trust.

   • Auditor reports the details of such benefits in Form 10B, Schedule related to Section 13(3).

   • If any violation, it should be specifically reported.

Key Points:

• Any benefit given to specified persons must be reasonable and in compliance with trust objectives; otherwise, it may attract disallowance or penalty.

• Non-disclosure or incorrect disclosure can lead to penalties and loss of exemption under Section 11/12.

Practical steps:

• Maintain a register or record of all payments/benefits given to trustees or relatives.

• Ensure audit verification and disclosures are made properly in Form 10B.

• Attach audit report with the ITR filing.