NGOs fear a hit

The move to withdraw specific tax exemptions to charitable organisation would have a negative impact on several non-government organizations (NGOs), experts speaking at a post-budget analysis session organised by the Bharat Chamber of Commerce, warned.

Sanjay Bhattacharya, chartered accountant and tax consultant, said NGOs were essentially charitable organisations, and their income through businesses meant for charity, might be subject to tax now.

According to Section 2(15) of the Income Tax Act is, "The expression "Charitable Purpose" includes the relief of the poor, education, medical relief, the advancement of any other object of general public utility."

"As per the existing laws, if charitable organisations carry out businesses, and they have separate books for it, and if their businesses is for charitable purposes, that is tax free. This will not be the case now. Hence, if certain organisations source handicrafts from villages, and sell them on behalf of the villagers, that would be taxable," he said.

Ajay Kumar Rungta, former president of the Federation of Indian Chamber of Commerce and Industries (FICCI) and honorary consul general of South Africa in Kolkata, said, "Most charitable trusts have to invest money to run the charity. This will definitely have a negative impact on their functioning," he said.

The move could also impact the functioning of the the chambers of commerce, which might have to pay taxes for holding business seminars and meets, said N G Khaitan, advocate in Khaitan and Co.