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12A AUDIT

A 12A audit plays a crucial role in ensuring that charitable trusts and non-profit organisations maintain transparency, accountability, and compliance with the Income Tax Act, 1961. Once an organisation is registered under Section 12A, it becomes eligible for income tax exemption, provided it adheres to all the rules and regulations set forth by the Income Tax Department. The audit process verifies that the organisation’s income is used solely for charitable or religious purposes and not for personal or commercial gain. Under this audit, all financial records, books of accounts, receipts, and expenditures are thoroughly examined by a qualified Chartered Accountant (CA). The auditor ensures that donations and grants received are properly accounted for and utilised in accordance with the organisation’s objectives. This includes verifying expenditures related to welfare programs, education, healthcare, religious activities, or other approved purposes. Additionally, the audit checks compliance with other statutory requirements, such as the timely filing of returns, maintenance of books of accounts as per Section 11(5), and adherence to the prescribed investment norms for surplus funds. The audit report is prepared in Form 10B and must be submitted along with the organisation’s income tax return to claim tax exemption benefits.

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Description

Here's an overview of the audit requirements for organizations registered under Section 12A: 

Mandatory Audit: Organizations registered under Section 12A are generally required to undergo an annual audit of their accounts. This audit is conducted to ensure that the organization's financial statements accurately reflect its financial position and comply with relevant laws and regulations.

Chartered Accountant (CA) Audit: The audit of organizations registered under Section 12A must be conducted by a practicing Chartered Accountant (CA) in India. The CA examines the organization's financial records, transactions, and internal controls to express an opinion on the fairness and accuracy of the financial statements.

Income Tax Return Filing: Following the completion of the audit, the organization must file its income tax return with the Income Tax Department. The audit report prepared by the CA is typically submitted along with the income tax return.

Due Date for Audit and Filing: The due date for conducting the audit and filing the income tax return varies depending on the organization's structure and other factors. Generally, the audit must be completed and the income tax return must be filed within a specified period after the end of the financial year.

Compliance and Penalties: Non-compliance with the audit requirements under Section 12A can result in penalties and other consequences imposed by the Income Tax Department. It's crucial for organizations registered under Section 12A to adhere to the audit requirements and maintain proper financial records to ensure compliance with the law.

Overall, the "12A audit" refers to the audit process conducted for organizations registered under Section 12A of the Income Tax Act, 1961, to ensure compliance swith income tax laws and regulations and maintain the organization's tax-exempt status for its charitable activities. 


Frequently Asked Questions

Browse practical answers curated by our CA and CS desks for 12A AUDIT.

Basics of 12A Audit
Process & Documentation
Compliance & Reporting
Advanced Queries & Updates

Basics of 12A Audit

A 12A audit is a mandatory examination of accounts for charitable trusts or NGOs registered under Section 12A of the Income Tax Act to ensure their income and funds are used for charitable purposes.

Any trust or NGO whose total income (before exemptions) exceeds the basic exemption limit must get its accounts audited under Section 12A(1)(b).

 It helps maintain tax-exempt status, ensures compliance, and builds donor confidence by confirming transparency in financial operations.

Only a qualified Chartered Accountant (CA) registered with ICAI can conduct and certify a 12A audit.

Process & Documentation

You’ll need trust registration certificates, income & expenditure statements, donor lists, bank statements, and fund utilisation records.

Form 10B is the mandatory audit report form submitted by the auditor to the Income Tax Department, verifying that your accounts comply with 12A rules.

Typically 7–15 days, depending on your organisation’s size and record accuracy.

Yes, BizPriest and its partners can manage the entire audit process remotely through digital document sharing and virtual meetings.

Compliance & Reporting

The Form 10B audit report must be filed at least one month before your income tax return due date—usually by 30 September.

Late filing may lead to loss of exemption benefits under Sections 11 and 12, and your organisation could become taxable.

Yes, if your income exceeds the exemption limit, you must file a 12A audit report annually.

 Absolutely — BizPriest handles audit documentation, connects you with certified CAs, and ensures timely filing and compliance.

Advanced Queries & Updates

12AB is the updated registration system replacing 12A/12AA, but the same audit rules under Section 12A(1)(b) still apply.

Yes, organisations receiving foreign funds must also comply with FCRA audit requirements along with the 12A audit.

Yes, audits for previous years can be filed retrospectively, but penalties may apply for late compliance.

 BizPriest provides end-to-end audit support, document preparation, auditor coordination, and accurate filing, ensuring you stay 100% compliant without stress.

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