NGOs cry 'witch-hunt' after tax
notices
Business Standard, February
21, 2012
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Non-government organisations
(NGOs) are reeling from the shock of notices from the
income-tax department.
Some of the notices are not only
for taxes but for cancellation of the NGOs’ registration as
non-profit entities under the Income Tax Act. Some NGOs have
reported that their accounts have also been frozen. “The
government seems to be trying to destroy the best things
India has. It is ridiculous,” says Maja Daruwala of the
Commonwealth Human Rights Initiative, after hearing the
development.
“... They (the I-T department)
are on a witch hunt, I feel,” said Mathew Cherian, who heads
Helpage India, one of the NGOs that have received notices.
It all started along the time the Anna Hazare movement was
at its peak, says Cherian, who on Monday participated in a
meeting of about 15 NGOs trying to chalk out an action plan.
NGOs that receive funds from
abroad and are registered under the Foreign Contribution
Regulation Act have been receiving these notices since
August after a 2008 amendment to Section 2(15) of the Income
Tax Act.
Helpage India, which helps set
up and run old-age homes, has been given a notice of
scrutiny. Development Alternatives, which works on
sustainable development models, has been slapped a tax
notice of Rs 5 crore. PRIYA, which works with huge networks
of grassroots organisations for rural development, for
instance, has been asked to pay Rs 42 lakh.
Give India, which raises funds
for charities, and CUTS, which raises awareness on consumer
issues, have also received notices. About 125,000
organisations classified as “development NGOs”, which
receive foreign funding, have been the main target of these
notices, says Rajesh Tandon, founder of PRIYA.
Helpage’s Cherian said the tax
department had merely said the notice was sent on the basis
of last year’s returns. “We have not violated any law. It is
only harassment.” The 2008 amendment narrowed the definition
of charitable activity exempted from tax. What was included
was mostly service-oriented work, leaving out all other
fields, including advocacy, human rights, which defines the
work of most NGOs, including government-funded ones.
Even NGOs that receive grants
for HIV/AIDS advocacy from the health ministry would not be
eligible for tax exemption under this criterion. Only
education, medical care, and poverty alleviation have been
mentioned as activities exempt from tax, explains Tandon.
“So not only are others forced
pay taxes, their very identity as non-profit organisations
is also being questioned, as the notices are for
cancellation of registration as non-profit bodies under the
Income-Tax Act,” says Tandon, a veteran of 50 years in the
sector. “Who will fund us if those funds are going to be
used to pay taxes rather than doing work. At my age, I am
thinking of winding up PRIYA and doing something else. That
is the extent to which we are impacted. We are spending our
energy trying to prove we fall under one of the activities
that the Income-Tax Act considers as charitable. If we are
training women sarpanches or are running a literacy centre,
we are not eligible for an exemption,” he says.
Deep Joshi, member of the
National Advisory Council and founder of Pradan, said he was
not aware of the notices received by the NGOs. “As far as I
know, the law taxes only income from any kind of business
activity. Earlier, if the income was put into charitable
activity, it was exempt,” he said.
President of the Udaipur-based
Seva Mandir, Ajay Singh Mehta, who was part of the NGO
conclave that met to decide on a plan of action, said the
narrowing of the definition of charitable purposes had led
to exclusion of many activities that NGOs did. Mostly
service-oriented activities were included while others were
left open to interpretation by officials.
The NGOs are also bracing
themselves with an action plan to deal with what they see as
anomalies in the Direct Taxes Code, which will be in force
from next year. It requires that NGOs spend their entire
funds for a year within the given year and not carry
anything forward to the next year, or pay 15 per cent as
income tax.
NGOs consider this interference
in the way they function and an ignorance of the way civil
society bodies function. “We get grants usually after
October or November and we get it for two or three years,
say, for building houses, or carrying out some work. How can
we finish it in a year,” asks Arun Talwar of CUTS.
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