Direct Tax Code Bill : Some Questions
The Direct Taxes Code is being proposed as a replacement to the Income Tax Act 1961. It seeks to bring all Direct Taxes under one code for providing a single tax reporting system. It has been stated that the new code is drafted by taking into account the internationally accepted principles and their best practices to make it at par with world practices.
However, there are some fundamental issues that call for clarification especially with regard to the Not-for Profit sector. To begin with, the phrase “charitable purpose” in the Income Tax Act has been replaced by the phrase “permitted welfare activities” and the emphasis of the law would shift from ‘Purpose’ to ‘Activities’.
An organization shall be treated as a non-profit organization if
It is established for the benefit of the general public
The onus will now be on the organization to demonstrate, that the benefit has actually reached the general public. The amount of documentation to be maintained to demonstrate this may be, in certain cases, impractical. Thus it seems that rather than simplify matters, the code might be creating additional complications.
It is not established for the benefit of any particular caste
This is also open to question as caste remains a significant determinant of development. What about organizations those work for the Dalits, indisputably one of the most disadvantaged sections and also a caste groups? Apparently, such organization would not be excluded so long as it did not speak of itself as an organization dedicated to dalits, but talking in broader terms such as social justice etc. However, these only make things less direct.
It is not established for the benefit of any of its members
Once again, the issue is open to debate? What qualifies as the benefit of any of its members? What about rights based organizations such as organizations for the Persons with Disabilities (PWDs) represented by PWDs themselves? What about organizations working such as Positive Peoples Network working on HIV and AIDS issues. Will such organization be excluded as the members are benefited by its activities?
Does the new direct tax code bill belie an understanding of the nature of work of the Non-profit sector?
For more information on Direct Tax Code Bill and its implication on Indian NGO sector read http://bit.ly/5wbzKw
- Ipsita Basu
However, there are some fundamental issues that call for clarification especially with regard to the Not-for Profit sector. To begin with, the phrase “charitable purpose” in the Income Tax Act has been replaced by the phrase “permitted welfare activities” and the emphasis of the law would shift from ‘Purpose’ to ‘Activities’.
An organization shall be treated as a non-profit organization if
It is established for the benefit of the general public
The onus will now be on the organization to demonstrate, that the benefit has actually reached the general public. The amount of documentation to be maintained to demonstrate this may be, in certain cases, impractical. Thus it seems that rather than simplify matters, the code might be creating additional complications.
It is not established for the benefit of any particular caste
This is also open to question as caste remains a significant determinant of development. What about organizations those work for the Dalits, indisputably one of the most disadvantaged sections and also a caste groups? Apparently, such organization would not be excluded so long as it did not speak of itself as an organization dedicated to dalits, but talking in broader terms such as social justice etc. However, these only make things less direct.
It is not established for the benefit of any of its members
Once again, the issue is open to debate? What qualifies as the benefit of any of its members? What about rights based organizations such as organizations for the Persons with Disabilities (PWDs) represented by PWDs themselves? What about organizations working such as Positive Peoples Network working on HIV and AIDS issues. Will such organization be excluded as the members are benefited by its activities?
Does the new direct tax code bill belie an understanding of the nature of work of the Non-profit sector?
For more information on Direct Tax Code Bill and its implication on Indian NGO sector read http://bit.ly/5wbzKw
- Ipsita Basu
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