How a new tax law has stumped Tata Trusts and top corporate donors By Dev Chatterjee February 24, 2023 https://www.rediff.com/business/report/how-a-new-tax-law-has-stumped-tata-trusts-and-top-corporate-donors/20230224.htm
In the Budget memorandum, the government said several instances have come to its notice that certain trusts or institutions are trying to defeat the intention of the legislature by forming multiple trusts and accumulating 15 per cent at each layer.
HP Ranina, a senior tax expert, said the government was trying to plug the loophole as several trusts were opening multiple trusts to save on taxes.
“The government may agree to help those trusts such as Tata Trusts, which work with government organisations to do social work,” Ranina said.
Tata Trusts, which earns dividend income from its 66 per cent stake in Tata Sons, works alongwith several other non-government organisations in the fields of education, healthcare and environment protection.
"Disallowing 15 per cent of the expenditure, if donations are made to another charitable organization, clearly means suffocating small charities of funds and curbing its resources and networks,” Merchant said.
Trusts are planning to appeal to the Indian government to repeal the proposed amendment or modify it in such a way that it should not impact their work at the grassroots level.
Devastating Effects of Proposed Amendments of Union Budget 2023 on Trusts and Charities https://www.change.org/p/nsitharaman-finminindia-union-budget-2023-amendments-will-have-devastating-effects-on-trusts-and-charities-noeaseofdoingcharity
Comment on Whatsapp: It is like round tripping general donations as corpus. So the first part of the 23-24 finance bill says...only those where donors have given specifically as corpus would qualify to enter as corpus in the first place. The old five year accumulation even after changing to just 15 percent was round tripped using the first in first out principle..could not apparently stop these guys from getting corpus in under tax exemption to both donor and receiver, which after liberalisation of approved securities went partially into their own corporate linked MFs. Then withdrawn when needed and then brought back. But the problem is that genuine ngos who do get windfall incomes are in deep trouble.
The issue of double tax deduction is created because they grant exemption at the income stage. What they should do is apply the exemption either only at the income stage or after computing excess of income over expenditure.. either as 80g or ccc or application of funds. Since both ways are available to round trippers they will use it..
My main issue is that this system generates much paper work that only adanigiri can manage.
That is why they now ask for 10 year records. As they did in the last finance act.