TAX NEWS - 2010

Donation Tax Exemptions: No more tax exemptions for religious donations proposed

Donations made to religious bodies will no more enjoy any kind of tax exemptions as per the proposals made in the new Direct Tax Code. Earlier, the finance ministry had proposed to roll back the tax benefit given to the donors and now the recently revised discussion paper on Direct Tax Code (DTC) has proposed the implementation of taxation on religious donations.

At present donations made to religious bodies is subject to 50% tax deductions. The first draft of DTC instructed that deduction is only applicable if the donation is used for restoration and renovation purposes. But as per the revised paper says that a deduction of 50% is applicable only in the event of donations made to wholly charitable organizations and any kind of donations made to any religious or even partially religious establishment will fully come under the tax bracket.

This new proposal is very likely to impact the amount of donations that the religious bodies receive and divert some of the donations towards charitable trusts and bodies. As it was expected this new proposal was found to be politically incorrect and was strongly opposed by many political leaders, both from ruling and opposition party. They argued that in most of the countries of the world religious donations are tax free, so why not India? They also added that this decision can bring adverse impacts within the religiously sensitive social sphere of the nation.