NGOs ask FinMin to widen definition of charity in I-T Act

Non-government organisations (NGOs) have asked for a review of the definition of charity in the Income Tax Act. They said an amendment to the Act in 2008 had added to the woes of the sector.

This was one of the requests made by a team of 18 NGOs, which met Finance Minister P Chidambaram today, on his invitation for a pre-Budget consultation.

Under the current provisions, the charitable nature of an NGO’s activities would not fetch it I-T exemption, if it engages in any activity in the nature of trade, commerce or business. Says Rajesh Tandon founder of PRIA: “I told the minister that he should fix the trouble he himself created as finance minister when he amended Section 2 (15) of the Income Tax Act in 2008, when he changed the definition of charity.”

 

The sweeping definition of business activity leads to a loss in tax exemptions for irrational reasons, the NGOs contend. And, the entire income of a charitable organisation is subjected to tax even if there is a negligible amount of incidental business activity.

The NGOs wanted this addressed, while saying no voluntary body should be permitted to do unrelated commercial activity.

Other suggestions included rules to aid engagement of qualified professionals at the grassroots, tax exemptions of amounts donated to non-profits, recognition of legitimately profit-making NGOs for banking loans and financing and the use of NGO services for financial inclusion schemes. Some participants suggested empowerment of panchayats to strengthen their implementing capacity and linking of the Aam Aadmi Bima Yojana with the rural jobs guarantee scheme.

Some wanted more allocation for rehabilitation of disabled people, whose number is estimated at 25 million, early disbursement of grants to NGOs and funds allocated to be made non-lapsable, plus tax concessions for micro financing institutions. Some wanted renewable energy to declared eligible for priority sector lending, more tax on high-energy consumables, a target for replacing chemical fertilisers with organic fertilisers, and creation of fund for setting up schools of ecology in all state agricultural universities.

Other requests included exemption of charitable institutions from service tax, more allocation for alleviating urban poverty, recognition of workers in the informal sector, linking of planning and allocation to specific outcomes and results, higher allocations for the welfare of scheduled castes and tribes, a national policy for public and private use of groundwater and, in urban areas, bank linkages for self-help groups.

Also higher investment in education and in gender equality.

Among the NGOs represented at today’s meet were Pradan, SEWA Academy, the Ramakrishna Mission, ASHA, Care India, Dhan, Grameen Koota, Development Alternatives, PRIA, Pratham, Sa-Dhan, Arghyam, CUTS and Greenpeace.