Published on August 8, 2026
A trust's 12AB or 80G file is only as strong as the books that separate corpus, earmarked grants, and general donations.
Registration under section 12AB and approval under section 80G are not only filing events. They are conditions that the trust must continue to satisfy: objects that remain charitable, income that is applied to those objects, and records that can show how each class of receipt was used. When the registration is renewed, or when a donor asks for confirmation, the department and the donor both look at the same thing — the books.
Three kinds of money commonly sit in one bank account if the ledgers are not split. Corpus donations are capital. They are not income of the year and they cannot be treated as application of income. Earmarked grants are restricted. They may be income, but they can be spent only on the project named in the sanction letter. General voluntary contributions are income that the trustees may apply to any object in the deed, subject to the Act. If all three are posted to a single "Donations" ledger, the year-end working that tries to compute application of income is an estimate, not a statement of fact.
A donation register with date, donor, PAN where required, mode of receipt, amount, and whether the amount is corpus, earmarked, or general. A grants register that repeats the sanction reference and the closing unspent balance of each grant. Separate ledgers for each restricted fund. Bank reconciliation on every account, including project-specific savings accounts. A monthly application working that maps expenses to objects in the deed, not only to account heads such as "programme cost" or "admin".
Cash collections need a receipt book that is used in number order and banked promptly. Related-party payments — rent to a trustee, contracts with a relative, or interest-free use of trust property by a specified person — should be flagged when they are booked. Those payments are examined both under the deed and under the conditions attached to 12AB. Finding them in the audit week is late.
Form 10A or 10AB asks for the instrument, the list of trustees, financial statements, and a note of activities. If the activity note says the trust ran a particular programme, the ledgers should show the cost of that programme. If the statements show a large closing bank balance, the notes should say how much of that balance is unspent grant, how much is corpus, and how much is unrestricted. A single cash figure without that split invites a query on accumulation and on whether income was applied.
Section 80G approval allows donors to claim deduction on qualifying donations. The trust then has to issue certificates that match the books and the registration that was in force on the date of the donation. Certificates issued from a receipt book that was never posted, or issued after the approval period expired, create a problem for the donor and for the trust's next renewal.
The audit of the institution tests the same split. Completeness of donations against bank credits, utilisation of grants against the sanctioned budget, and classification of corpus versus income are ordinary audit tests. They are faster when the classification was made at the time of receipt.
Trustees need more than a profit-and-loss account. A receipts-and-payments account, an income-and-expenditure account, a balance sheet with fund-wise reserves, and a one-page activity note give the board something they can sign. That pack then supports the tax filings, any state charity filing, and the papers that go with a 12AB or 80G renewal. The quality of those filings is decided months earlier, when the first restricted receipt of the year is posted to the correct ledger.
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