A. CONSTITUTION OF THE FUND

‘Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund’ (PM CARES Fund)’ has been set up as a public  charitable trust.  It is a dedicated national fund with the primary objective of dealing with any kind of emergency or distress situation, like posed by the COVID-19 pandemic, and to provide relief to the affected. Prime Minister is the ex-officio Chairman of the PM CARES Fund and Minister of Defence, Minister of Home Affairs and Minister of Finance, Government of India are ex-officio Trustees of the Fund.  The Chairperson of the Board of Trustees (Prime Minister) shall have the power to nominate three trustees to the Board of Trustees who shall be eminent persons in the field of research, health, science, social work, law, public administration and philanthropy.

B. OBJECTS OF THE FUND:

a) To undertake and support relief or assistance of any kind relating to a public health emergency or any other kind of emergency, calamity or distress, either man-made or natural, including the creation or upgradation of healthcare or pharmaceutical facilities, other necessary infrastructure, funding relevant research or any other type of support.

b) To render financial assistance, provide grants of payments of money or take such other steps as may be deemed necessary by the Board of Trustees to the affected population.

c) To undertake any other activity, which is not inconsistent with the above Objects.

C. DONATIONS TO THE FUND 

a) Any resident Indian/entity can make donations to the fund which would qualify for 80G benefit (100%) under the Income Tax Act, 1961.

b) The fund is one which is recognised under the Corporate Social Responsibility (CSR) under the Companies Act, 2013. Hence any contribution to this fund would qualify as a CSR expenditure of the entity.

c) Overseas persons can also contribute to the fund, as it has the required approvals.

D. TAX BENEFITS

a) The Taxation and other laws (Relaxation of certain provisions) Ordinance , 2020 has made amendments to section 80G of the Income tax act, 1961 thereby making contributions to this PM Cares fund eligible for 100% deduction under Section 80G(1) read with clause (iiia) of section 80G(2). Thus, the entire amount of contribution can be reduced from Income in order to arrive at Gross total income. This means that there is no 10 % restrictions as is there for few other contributions.

b) Further the 50 % restriction is also not there for contributions made to this fund.

c) Contributions can be made upto 30th June 2020 and such contributions so made will be eligible for deduction from income for the fy 2019-20.

d) Any person (including a company which has opted in to avail the benefits under section 115BAA – concessional tax at 22%) can make this contribution before 30th June 2020 and claim deduction from income for the fy 2019-20.

e) It is to be noted that such contribution will not be allowed as a deduction from income for the fy 2020-21, once it is allowed as a deduction in fy 2019-20.

f) Companies claiming benefit u/s 115BAA may make contribution before 30th June 2020 without having to fear that they may lose the benefit under this section as the deduction can be claimed for fy 2019-20. If such deduction is claimed for fy 2020-21, then they may be disentitled to claim benefit under section 115BAA for life.

E. NOTE OF CAUTION ON TAX FRONT

a) Deduction u/s 80G of the Act cannot be claimed from income in the form of Long-Term Capital gains as there is a restriction in section 112 & 112A of the Act.

OTHER ASPECTS 

a) Once corporates start contributing to this fund under the CSR then contributions to other non-profit organisations will dry up;

b) Concerns have been raised on the need for another fund when there is already a PM National relief fund which has an unspent amount of close to 500 Mln USD

c) An Individual in the highest tax bracket, who is paying tax at 42.744 % on income above Rs. 5 cr will actually be contributing Rs.57.256 (effectively) while making an actual contribution of Rs. 100, tax saved is contribution made which will help the nation in arresting spread of the virus. Thus, instead of collecting money as income tax, the Government would be collecting as contribution to this fund.

d) It would be good to have the accounts of the fund audited and its financial results made public so that it would instil confidence in the minds of the public and bring about the much-needed transparency.

e) For tax payers with carry forward business losses (depending on the amount of such carry forward loss and amount of income for the current year) may not be able to take benefit under this section. An amendment could have been provided to enable contributions to the fund to be carried forward and being claimed in a subsequent year.

f) While making the contribution there is no field asking the donor to specify in which year the contribution is being claimed as a deduction. Only if this has been obtained, such contributions will appear as a deduction in the pre filled ITR of the tax payer for the appropriate year. With the government’s move to bring in pre-filled ITR and asking non profit organisations to file returns giving details of donation and donors, the government could have filled this gap by taking the data at the time of making the contribution.

Lets contribute to the fund, help in fighting the deadly Covid-19 and build our nation. Sharing is caring!

(Compiled by CA J Narasimhan – jn@ksj.co.in)

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Qualification: CA in Practice
Company: K S JAGANNATHAN & CO
Location: Chennai, Tamil Nadu, IN
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I am a 3rd Generation Chartered Account and Partner of K S Jagannathan & Co. Have been in continuous practice for the pas 29 years. Focussed on taxation, audits and corporate consulting View Full Profile

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