Friday, July 2, 2010

NGOs ask for ban on anonymous donations to be repealed

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the Parliament of India Committee on Petitions (dated 29 June 2010), asking for the curbs on anonymous donations to be repealed.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.

Read more: NGOs ask for ban on anonymous donations to be repealed - Moneylife: Personal Finance Magazine

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