Revised discussion paper on the Direct Taxes Code (DTC) has suggested that donations be made taxable in the hands of the donor. At present, 50 per cent deduction is allowed on the donations made to religious institutions. So, if you donate Rs 1,001 to, say Tirumala Tirupati Devasthanams, you can claim a deduction of Rs 500 from your income. The first draft of DTC had proposed this deduction be available only if the funds are used for renovation or repair of a religious body.

In the revised paper, donors will get 50 per cent deduction on donations made to wholly charitable institutions, whereas any contributions made to wholly religious or even partially religious and partially charitable bodies will be fully taxed in the hands of the donor.

“If the donation is for charity, it will get deduction. India is a secular country. No deductions will be allowed for making donations for religious purposes,” said a finance ministry official.

The revised code is silent on allowing deductions on donations to any temple, mosque, gurudwara, church or any other place notified by the Centre to be of historic, archaeological or artistic importance.

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“Under the existing law, donations to all approved religious trusts get exemptions. Deductions are also allowed for donations made for repair and renovations of religious bodies of historical importance. I do not see any reason why the donations for repair and renovations should not be allowed any deduction,” said Sunil D Shah, partner at consultancy firm Deloitte.

“The proposal is in line with the government’s efforts to minimise deductions and exemptions. From a conceptual perspective, the government is donating half the money by allowing 50 per cent deduction (on donations at present). In the past, concerns have been raised over black money and money laundering with regard to donations to non-profit organisations,” said Amitabh Singh, tax partner at Ernst & Young.

The proposal may affect donations to many religious institutions to the extent that those who donate to these institutions for getting tax benefits may now go for alternate options.

To offset this loss, the second discussion paper has proposed to give tax exemptions to religious institutions, subject to some conditions. In the first draft of DTC, the finance ministry had proposed to tax all religious trusts on their income, except for those bodies registered under any central or state law.

The proposal was found “politically inappropriate” and opposed by many within and outside the government. It was argued that religious trusts are not taxed in most countries, and levying tax on donations in a country like India could have a negative impact.

The move to allow deduction only in case of donations to charitable institutions is also going to affect the way Indian companies and their promoters make donations.

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Category : Income Tax (25146)
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Tags : Direct Tax Code (292)

0 responses to “Donation to wholly religious or partially religious trusts will be taxable in the hand of donor”

  1. iks says:

    tds on interest – from trust,temples ,ngo can be collected ? pls replay if any clauses /sections pls inform
    thanks & regards

  2. CA.M.Lakshmanan, Madurai says:

    Nowhere it has been stated that the donor has pay tax again if he is donationg to a religious trust out of his taxed income; he is not entitled to claim any deduction for the doations made to religious trusts,even if they are of historic, archaeological or artistic importance..

  3. MRK Gandhi says:

    This approach is unfortunate and no donor should be asked pay tax on the donation; even if to be taxed it should be in the hands of beneficiary. If the government wish to control money laundering, does i have guts to stop flow of money into share market through pnotes. Today we have politicians who think of only next election and have no statesmen. Our story of subsidies and cross subsidies is purely political; take the money spent on subsidies and invest on development of rural India and infrastructure.

  4. Veenod Revankar says:

    The current proposal of the Govt will adversely impact the donors to the religious institutions.
    Since the prime objective of this proposal is to curb the practice of Money Laundering, rather the govt may bring in stricter norms to monitor the malpractice of Money Laundring through religious donations.

  5. TDS says:

    Attacking religion may be very secular, but if the Church in Vatican can mandate its followers to donate to millions of Funds running for propagation of its Faith, there should be no particular reason why in India such “progressive and revolutionary” anti-religious stance must be taken.

  6. Sarvesh says:

    It appears that government is going to levy tax on every part of the source of the income of the assessee so that he is rest with the income for his bread and butter only.

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