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Journalism of Courage
If the finance ministry implements the Vijay Kelkar report on direct taxes, charitable trusts across the country will end up paying taxes, and could actually be queuing up outside the offices of credit-rating agencies like Crisil and ICRA!
While charitable trusts are today fully exempted from paying income tax under Section 10 of the Income Tax Act (this is for trusts engaged in running schools, universities and hospitals), the Kelkar Task Force has recommended that Section 10 be deleted and the trusts be brought under Sections 11 to 13 of the Income Tax Act of 1961. In which case, they will end up paying taxes on upto 85 percent of their incomes every year.
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PANEL TO STUDY KELKAR
REPORT ON TAXES |
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New Delhi: WITH the recommendations of the Kelkar committee on tax reforms coming under attack, BJP has set up a seven-member committee headed by party general secretary Rajnath Singh to study the recommendations and submit its suggestions within a month. Party President M Venkaiah Naidu, in a press statement, said the committee would comprise of V K Malhotra, MP; member of the party’s national executive Jagadish Shettigar; convener of the party’s economic cell, P N Vijay; BJP leader from Bihar, Sushil Kumar Modi and Prof Y R K Reddy. PTI |
To take an example, let’s say a trust which runs schools for the poor earns an income of Rs 3 lakh each year. Under Section 10, it pays no taxes on this income today. If, however, it is brought under Sections 11 to 13, the trust will be allowed to keep Rs 45,000 of its income for spending next year—it will, however, has to pay income tax on the balance Rs 2,55,000.
Of course, it’s after the trusts have filed their income tax returns that the real fun begins. Today, under the current law, all trusts have to file their returns as well, but the assessing officer has only the power to make a limited scrutiny of the trust’s operations to verify that it meets the conditions laid down in the Income Tax Act.
Under the Task Forces’ recommendations, once the trusts have filed their tax returns, these will be chosen for scrutiny through a computerised risk assessment system. And, in case, the assessing officer is of the view that the activities of the trust are not charitable in nature, a rating agency will be brought into the picture.
‘‘Such a case’’, the Task Force’s consultation paper says, ‘‘will be referred to a rating agency’’ which will be drawn up ‘‘from amongst the panel drawn up by the Comptroller & Auditor General.’’ An ‘A+’ rating for the trust will mean that it is indeed a charitable trust, and a ‘B’ rating will disqualify it from any tax exemption. And, just to ensure the trust has to remain at the mercy of the tax-man and the rating agency, there’s an additional clause in the Task Force’s recommendations. ‘‘An ‘A’ rating’’, says the Kelkar panel, ‘‘for the trust will mean that it will enjoy exemption (only) during the current year and will be subjected to review again in the following year.’’
