What the audit covers
An NGO audit covers more than whether the accounts balance. The income-tax audit report asks specific questions: how much income was applied to the objects, what was accumulated and why, whether funds were invested in permitted modes, whether anyone connected with the organisation benefited, and how donations — including anonymous and corpus donations — were treated.
An error in those answers can cost the exemption for the year, so we treat the audit report as the start of the tax compliance, not a formality after it.
Which audits apply to your organisation
| Organisation | Income-tax audit | Own-law audit | FCRA audit |
|---|---|---|---|
| Trust | If income before exemption exceeds the basic exemption limit | Only if the deed or a grant requires it | If it receives foreign contributions |
| Society | As above | Where the state's societies law requires it | If it receives foreign contributions |
| Section 8 company | As above | Statutory audit under the Companies Act, every year | If it receives foreign contributions |
For AY 2026-27, the income-tax audit report is in Form 10B for larger organisations — those with total income before exemption above ₹5 crore, or receiving foreign contributions, or applying income outside India — and Form 10BB for others.
Documents required
- Books of account and bank statements for every account, including FCRA accounts.
- Donation receipts with donor details, and the donor statement filed.
- Grant agreements, sanction letters and reports sent to grant-givers.
- Fixed asset and investment registers.
- Minutes approving budgets, accumulation and significant expenditure.
- Registration orders — income-tax, 80G, FCRA, CSR-1 — and the constitutional documents.
The audit process
Plan
We confirm which audits apply, the forms and due dates, and any grant-specific audit requirements.
Test receipts
Donations and grants are traced to receipts and bank statements, with donor details checked for the donor statement.
Test application of income
Spending is checked against the objects, and the 85% calculation prepared, including any accumulation or deemed application.
Review compliance
Investments, related-party payments, FCRA rules and TDS are reviewed.
Report
The audit reports are issued with a UDIN, and the income-tax report is filed ahead of the return.
Practical notes from our engagements
- Capital expenditure double-counted. Buying an asset counts as application of income; depreciation on the same asset can't be claimed again. Both entries in the same year are a common error.
- Corpus donations without written direction. A donation is corpus only if the donor says so in writing. Without that, it's ordinary income.
- Payments to trustees' relatives not disclosed. Payments to related persons have to be disclosed and must be reasonable. Undisclosed ones are a serious audit finding.
- Grant conditions ignored. Some grants require their own audit or a certificate in the grant-giver's format. We read the sanction letter at planning.
How we handle NGO audits
We plan every audit that applies to the organisation together, so the income-tax, FCRA and Societies or Companies Act reports are based on one set of reconciled accounts. The reports are signed by a partner with a UDIN, and we file the income-tax report in time for the return.
Related services
Frequently asked questions
Is audit compulsory for every trust?
The income-tax audit is required once the trust's income before exemption exceeds the basic exemption limit. The deed, a grant or FCRA can require an audit regardless.
What is the difference between Form 10B and Form 10BB?
For AY 2026-27, Form 10B applies to larger organisations — total income before exemption above ₹5 crore, foreign contributions received, or income applied outside India — and Form 10BB to others. The forms are renumbered under the Income-tax Rules, 2026 for later years.
When is the audit report due?
One month before the due date of the income-tax return.
Does FCRA need a separate audit?
Yes. The foreign contribution accounts are audited and the audited statements are filed with the FC-4 return.
Can the same firm do all the audits?
Yes, and it's usually better: one set of reconciled accounts behind every report.
Do NGO audit reports carry a UDIN?
Yes. Every audit report and certificate we sign carries a UDIN, which anyone can verify with ICAI.