The government has proposed to exempt income of charitable and not-for-profit organisations up to Rs. 1 lakh from tax and levy a tax of 15 per cent on all income above that ceiling. The Direct Taxes Code (DTC) Bill introduced in Parliament on Monday said the provisions would not apply to specified organisations. Charitable activity does not include the carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service for a fee except where the gross receipts during the financial year from such activity exceed R10 lakhs.
It has also dropped the earlier controversial proposal to enforce a compulsory registration of such institutions with the income tax department.
The Bill specifies that fresh registration would not be required for such organisations having existing income tax registration.
At present trusts and institutions established for charitable purposes enjoy a slew of tax exemptions.
The changes on the taxability of non-profit organisations (NPO’s) brought in the revised DTC as were promised by the Finance Minister in the Revised Discussion Paper (RDP) released in June this year.
The Bill also proposes to tax anonymous donations at the rate of 30 per cent as against the rate of 15 per cent applicable to other donations.
“No donor gives you money to pay taxes. How is it possible that we spend everything by March 31? Even government funds come in March,” said HelpAge director Mathew Cherian.
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Tightening the screws on abuse of donations
- The Bill has dropped the earlier controversial proposal to enforce a compulsory registration of such institutions with the income tax department.
- The Bill also specifies that fresh registration would not be required for such organisations having existing income tax registration.
- The Bill proposes to tax anonymous donations at the rate of 30% as against 15% applicable to other donations.
- The changes on the taxability of non-profit organisations (NPO’s) brought in the revised DTC were promised by the Finance Minister in the Revised Discussion Paper (RDP) released in June this year.
