NGO finances ‘throttled’ under new budget in India

February 5, 2017 by  
Filed under newsletter-india

New Delhi, February 3, 2017: India’s new budget, presented on Feb. 1, has removed a provision that offers complete tax exemption for donations made to projects run by volunteer organizations.

The provision was an incentive for people to donate to philanthropic projects, said Father Frederick D’Souza, who heads Caritas India, the social service wing of the Catholic Church.

Father D’Souza said that although the withdrawn provision was limited only to selected projects for a limited time, it was still “an opportunity for NGOs, which now stands lost.”

“The move is a depreciation in this regard,” he added.

Federal Finance Minister Arun Jaitley, who presented the budget for the next financial year ending March 2018, removed a provision called 35 AC. It makes money donated to approved projects tax free.

Under this, the government approves certain NGOs and makes them eligible to receive donations for specially listed social projects that improve drinking water, housing or healthcare. The new budget puts a stop to this.

The government did leave in a provision called 80G, which gives a 50 percent tax rebate to all donations given to government-approved NGOs.

The government move “is an attempt to throttle NGOs,” said Shabnam Hashmi, from an NGO called Act Now for Harmony and Democracy.

“They [the government] do not want any dissent and so they don’t want to encourage donations. They don’t want anything that can lead to people questioning and thinking,” she told

The move will cut off funding from the corporate sector who were often very interested in the tax exemption allowed for donations, she said.

The decision comes at a time when Caritas India has been working to generate more funds from within the country, said its spokesperson, Amrit Sangma. The agency has several projects that would have qualified for tax-exempt funding, he said.

Samuel Jaikumar of the National Council for Churches in India said that the government needs to encourage the corporate sector to contribute to the betterment of society.

“Instead of removing the provision, more should have been introduced because, at the end of the day, everything goes back to the society,” he said.

However, K.K. George, a chartered accountant, told that the removal of the provision “would not have any serious impact on church agencies” because they “rarely applied to become eligible to receive funds under this provision.”

“All registered NGOs, including church ones, can [still] continue to receive donations under the 80G provision which offers 50 percent tax benefit,” George said.

– ucan

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