Saturday, June 26, 2010

Under the table beneath a wrap: See who's lobbying for anonymous donations - Moneylife

The law taxes anonymous donations. But a number of recipients of such grants don't want the spigot to be turned off, for obvious reasons

For the past three days, a group of seven Members of Parliament (MPs) along with a few chartered accountants, who are in charge of several charities, have been making the rounds of the Income-Tax (I-T) Department in Mumbai, to lobby against the scrapping of tax exemptions on anonymous donations. The MPs have been in touch with various charitable organisations and have already canvassed their support in Gujarat, before making their trip to Mumbai.

They have formed a 10-member petition committee headed by Bharatiya Janata Party's Bhagat Singh Koshyari for the restoration of tax exemption on anonymous donations. Besides Mr Koshyari, other MPs include BJP's Lalit Kishore Chaturvedi, Samajwadi Party's Bhagwati Singh, Indian National Congress' Thakur Viplove & Nandi Yellaiah and Ali Sabir from Lok Janshakti Party (LJP).

Currently there are only seven members who have been present to meet the officials but some more MPs will be flying in today to have a word with I-T officials, reliable sources confirm.

In Mumbai, there have been quiet meetings at the luxurious five-star InterContinental The LaLiT Hotel, with an objective to lobby for the scraping of tax exemptions on anonymous donations. The busy MPs and chartered accountants have been meeting senior I-T commissioners and officers in charge of tax exemptions to make them change their stance on the matter.

The MPs will be making further trips to various parts of the country in the next few days. They would be visiting various charitable organisations, like institutions for the blind & deaf, orphanages and destitute & widow homes, to garner support for their cause.

This comes at a time when the government is proposing to make donors pay tax for any donations they offer to religious bodies, while at the same time the income of these religious entities will continue to get tax breaks, subject to certain exceptions. Clearly this should be worrisome for these MPs.

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 in the rule books 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.

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 have 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.

But the Opposition, as usual, was the first to criticise the amendment. The BJP, even in difficult times, has always enjoyed the support of some well-known spiritual figures and self-styled godmen, many of whom head such trusts. Former BJP president M Venkaiah Naidu headed the Rajya Sabha committee on the petitions and had asked the government not to impose any tax on secret donations to charitable organisations. He had said, "The committee has noticed that people donate for noble causes without divulging their names, irrespective of the source of the donations and it therefore cannot be concluded that every anonymous donation is from unaccounted sources. It is also quite likely that people may donate from their regular income and yet not disclose their identity."

While the lobbying has been going on ever since the 2006 announcement, NGOs and MPs have sent letters to various entities on this matter. In January 2008, various NGOs-which included HelpAge India, AccountAid, Oxfam Trust and 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. Again, a lot of charitable organisations collect donations through charity boxes at public places where it is not possible to trace every individual donor.

All said and done, the lobbying of the 10-member petition committee has been gaining momentum over the past few days.

Published on 24th June in Moneylife

Source: Under the table beneath a wrap: See who's lobbying for anonymous donations - Moneylife: Personal Finance Magazine

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