Charitable organisations collect a substantial proportion of funds through donors who prefer not to reveal their identities—the government’s ban is eliminating their sources for finance
Non-governmental Organisations (NGOs) have been crying out against the government's diktat on taxing anonymous donations for some time now. The finance ministry had clamped down on anonymous donations to (non-religious) charitable organisations to prevent money laundering. However, a number of NGOs say that because of a few isolated incidents, many charitable entities have been affected.
Noshir Dadarwala, chief executive, Centre for Advancement of Philanthropy, has sent a petition to the Parliament of India Committee on Petitions (dated 29 June 2010), asking for the curbs on anonymous donations to be repealed.
Section 115BBC was introduced for the first time in the Finance Act, 2006, to tax anonymous donations to charitable organisations at the maximum marginal rate of 30%. Subsequently, a degree of relief was granted under the Finance (No 2) Act, 2009, that such anonymous donations aggregating up to five years of the total income of an organisation or a sum of Rs1,00,000-whichever is higher-will not be taxed.
"We are of the view that Section 115BBC, even after the amendment made by Finance (No 2) Act 2009, is a deterrent for genuine charitable organisations to mobilise funds for welfare and developmental work from the general public or ordinary citizens who are motivated to give for altruistic and not money laundering reasons," said the petition sent by Mr Dadarwala.
Mr Dadarwala, along with other NGOs, has met members of the Parliament of India Committee on Petitions in Mumbai to discuss the scrapping of taxes on anonymous donations.
NGOs argue that a number of leading charitable organisations mobilise their funds by placing their donations in collection boxes at shopping malls, airports, hotels and other public places where a number of ordinary citizens feel motivated to contribute money for a good charitable cause, be it for senior citizens, the
visually-impaired, impoverished street children or cancer patients.
"We are however of the view that a very large number of genuine charitable organisations and NGOs raise funds through collection boxes and people who put money into these boxes mainly comprise children and ordinary citizens of this country who may have heard about 'black money' but don't have any and contribute to charitable institutions only out of a genuine charitable impulse," added Mr Dadarwala.
Schools and colleges also raise money for various charitable causes with students going from door to door or requesting ordinary citizens in the streets to put money in collection boxes. According to Mr Dadarwala, NGOs which cater to orphans, cancer patients, and the mentally disabled are the ones who are most affected, as these organisations get nearly 30% of their annual donations from charity boxes.
"Leading NGOs collect lakhs of rupees annually through such collection boxes. Now, thanks to Section 115BBC of the Income-Tax Act, several NGOS have been forced to pull out these collection boxes," he added.
According to Shailesh Mishra, the founder of Silver Lining, an NGO which looks after senior citizens larger NGOs are affected by the provisions as they receive more anonymous donations, while smaller NGOs may not be affected.
The change of rules regarding anonymous donations had come about in 2006, when the then finance minister P Chidambaram made anonymous donations taxable by framing a new law under Section 115BBC of the I-T Act. At that time, he had said that anonymous donations to wholly charitable institutions needed to be taxed at the highest marginal rate, whereas donations to partly religious and partly charitable institutions or trusts could be taxed only if the donation is specifically for an educational or medical purpose. However, donations to wholly religious institutions and religious trusts were not to be taxed.
"Since the advent (of the new provisions) to the I-T Act in 2006, we have raised very limited funds through anonymous donations," said Kreeanne Rabadi, regional director, Child Rights and You (CRY).
Before the regulation was passed, charitable institutions and organisations were exempt from paying any tax if they claimed in their I-T returns that they had received secret donations. According to some, this allowed people to donate black money to a trust and then take grants against it, thereby making their black money legitimate.
In January 2008, various NGOs-which included HelpAge India, AccountAid, Oxfam Trust and the National Foundation for India-had sent a letter to Mr Chidambaram, Montek Singh Ahluwalia (deputy chairman, Planning Commission) and Indira Bhargava (chairperson, Central Board of Direct Taxes).
In these letters, these NGOs made the recommendation that the I-T authorities can get details of the anonymous donor from his banker and anonymous donations should not be made taxable as there are a lot of individuals and organisations who would like to remain anonymous while giving for charity.
"The government is trying to curtail crime, but it is a huge problem for people who want to remain anonymous," Mr Mishra said.
The Sensex is trapped between 17,700 and 17,400. The bias, however, is to the downside
The market, which began the session on a weak note, following negative cues from across the globe, tumbled over 1% at the end of trade. While Wall Street ended lower on Wednesday, lower manufacturing growth in China in June dragged the Asian markets lower. This apart, a 16% deficit in the monsoon rains in June also weighed on the sentiments. The Sensex ended at 17,509, down 191 points (1.08%) and the Nifty tanked 61 points (1.15%) to shut at 5,251.
Asian markets finished in the red on Thursday as investors stayed on the sidelines on worries over disappointing Chinese economic data. The HSBC Holdings' Purchasing Managers' Index (PMI) for manufacturing activity showed a more-than-expected fall in China's manufacturing growth in June. The index slipped to its 14-month low of 52.1 in June 2010 from 53.9 in May 2010.
The Shanghai Composite was down 24.58 points (1.02%) to 2,373.79; the Hang Seng was down 119.91 points (0.59%) to 20,128.99; the Nikkei 225 ended lower by 191.04 points (2.04%) to 9,191.60; the Straits Times was down 15.16 points (0.53%) to 2,820.35; the Seoul Composite was down 12.05 points (0.71%) to 1,686.24 and the Taiwan Weighted was down 75.31 points or 1.03% to 7,254.06.
US markets continued their downward journey for yet another day as the weak jobs report dragged down the markets into the red again. Private employers added just 13,000 jobs in June, lower than expectations.
The Dow was down 96.28 points (0.98%) to 9,774.02. The S&P 500 was down 10.53 points (1.01%) to 1,030.71, while the Nasdaq fell by 25.94 points (1.21%) to 2,109.24.
Back home, the monsoon rains were 16% below the long term average (LTA) in June, as per the India Meteorological Department (IMD) data. The Met in an update last month had said that the monsoon this season would be 102% of the LPA. However, the IMD added that there is still no cause for worry.
HSBC's PMI, based on a survey of 500 companies, was down to 57.3 in June from 59.0 in May, which was the highest in more than two years. However, the June PMI was the 15th consecutive month that the index has been above the 50 mark.
Food inflation declined by 3.98 percentage points to 12.92% for the week ended 19th June, as the rate of price rise in cereals and vegetables showed a remarkable drop due to a high base effect. The fall in food inflation would provide some breather to the government, which is struggling hard to control prices of essential items that may again rise due to the cascading effect of the diesel price hike last week.
India's exports rose 35.1% in May to $16.1 billion year-on-year, but the trouble brewing in some European economies may weigh on future demand. The seventh straight month of rise was registered on a low export base of $11.95 billion in May 2009, when shipments had plunged by over 29% from the previous fiscal under the impact of the recession in the US and several other advanced economies. For the April-May 2010-11 period, exports grew by 35.7% to $33 billion against the year-ago period.
Foreign institutional investors were net buyers on Wednesday, purchasing equities worth Rs589 crore. Domestic institutional investors were net sellers, offloading stocks worth Rs151 crore.
The country's largest carmaker, Maruti Suzuki India (down 1.7%) reported a 17.28% jump in June sales to 88,091 units over 75,109 units in the same month last year. In the domestic market, Maruti sold 72,812 units against 61,773 units in June 2009, an increase of 17.87%. Exports surged 14.57% to 15,279 units from 13,336 units in the year-ago period.
Reversing its earlier decision, the US Exim Bank has agreed to provide $600 million in loan guarantees to suppliers for Reliance Power's (RPL) (down 1%) coal-fired project and a mine in Sasan, Madhya Pradesh. Wednesday's announcement would help preserve 1,000 jobs in Wisconsin and 13 other states.
Last Thursday, the Export-Import Bank of the United States had rejected a request from RPL to finance the projects on environmental grounds.
India's Fortis Healthcare Ltd (up 1.2%) today responded to Malaysian sovereign wealth fund Khazanah's bid to control Singapore-based Parkway Holdings by offering to acquire all the shares of the company. Fortis has made an offer of S$3.80 per piece to acquire Parkway against Khazanah's offer of S$3.78 a share.
The country's largest private sector lender ICICI Bank (down 2.3%) on Wednesday pegged its minimum lending rate at 7.5%, the same as State Bank of India's (SBI) rate. The existing benchmark prime lending rate of ICICI Bank stood at 15.75 per cent. As per the RBI directive, the base rate system, which aims at introducing transparency in lending operations, will replace the existing BPLR from Thursday.
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