A Study on Representation of Civil Society Organization on Enabling Environment

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3 A Study on Representation of Civil Society Organization on Enabling Environment Voluntary Action Network India (VANI) VANI HOUSE, 7, PSP Pocket, Sector-8, Dwarka, New Delhi (INDIA) Phone: , Telefax: info@vaniindia.org Website:

4 CONTENTS Preface Introduction CHAPTER 1 Income Tax CHAPTER 2 Registration Laws CHAPTER 3 Foreign Contribution Regulation Acts

5 Governance and accountability has become an increasing focus of attention for the voluntary sector as well as other international donors in the development policies, strategies and programs. Efforts have been made to promote accountability which has traditionally focused on improving horizontal accountability between government and the voluntary sector. Thus by writing or printing the plea as petition has become a formal urge of the sector by sending it to the Parliament. Voluntary Action Network India has been sending this petition to the office bearers on behalf the sector as well as the members in order to make MPs aware of their opinion and/ or to request action. Through these petitions the voice of the voluntary sector has been heard in the parliament e specially by mentioning the plight of the sector towards FCRA, Income Tax and Registration Laws. There are numerous petitions which have been filed on the issue of Lokpal Bill, Goods and Service Act and registration laws by VANI as India s premier voluntary sector association, with a direct membership of 384 organizations from the national as well as all states of India, including networks, research groups, grass root organizations and community based organizations. VANI has been meeting most of the leaders of the voluntary sector and holding dialogue on the ongoing problems faced by the sector and seeking advice on possible implications of the new financial constraints. In the last few years the fiscal and financial environment in the country has changed substantially, along with it has als o changed the expectation from the voluntary development organizations. As most of the Voluntary Organization are either working on government projects or trying to raise resources within the country. The fiscal status of the voluntary sector is still very old and requires fresh thinking. It s been a long time that the government has been trying to reform the taxation regime governing the voluntary development organizations. Most of our members has expressed the existences of the voluntary organizations is at risks. The study Representations of the Civil Society Organization on Enabling Environment is an amalgamation of the legal petition that VANI has issued on behalf of the voluntary organizations by taking in consideration of the approach towards the plight of the voluntary sectors due to the sudden development of the sectors. The Study Representation of the Civil Society Organization on Enabling Environment has consolidate all the legal petitions which it has send out from 2012 to 2017 on the issue related to Income Tax, Foreign Contributions Regulations Act and Registration Laws. I would like give my thanks to Civic Engagement Alliances for financial supporting this study. Also extending my thanks to Ms. Panchali Sharma, Programme Officer, VANI for finalizing the study. These studies also showcase the continuing efforts of the Voluntary Sector to promote governance and effectiveness of the organizations through civic engagement and social accountability. Best Regards Harsh Jaitli Chief Executive Officer 3

6 Recently, efforts to improve governance have focused on the mechanisms of accountability to encourag e the participation of citizens, especially impoverished citizens, in promoting accountability and responsiveness among public officials and service providers. Such forms of accountability, commonly referred to as social accountability, promote transparency and responsiveness in public policy making and implementation and are increasingly regarded as an important means to improve governance and develop effectiveness. While this approach to accoun tability empowers citizens, it can also promote inclusive and accountable institutions and enhance the political legitimacy and stability of a government, thereby strengthening social cohesion and capacity for socioeconomic development. The study has prioritized areas for policy, legal, regulatory and institutional reforms to improve c onditions and identifying areas to promote enhance social accountability for improved governance, social and econo mic development. These studies also showcase petitioning as a form of political participations of the sector. Petitions are defined as requests to a public authority, usually a governmental institution or parliament. Petitions have the purpose to change public policy, call for an official statement, or evoke a certain act by a public institution. In this sense, petitions can be distinguished from mere expressions of opinion. In most liberal democracies, the citizen s right to petition government, parliament, and/or other public entities is codified in legal documents, in many instances even in constitutional law or practice. In most countries, submitting and supporting petitions is a legally codified and conventional form of political participation. This study has been divided into three sections: Income Tax Registration Laws Foreign Contributions Regulation Act 23 4

7 CHAPTER 1 Income Tax 23 5

8 March 05, 2012 New Delhi Shri Pranab Mukherjee Hon ble Union Minister of Finance Government of India North Block New Delhi Dear Sir, Appeal to consider the amendments in the Income Tax Act Greetings from Voluntary Action Network India (VANI)! VANI is a non-government, not-for-profit, apex body of voluntary organizations, playing a proactive role in India's development process. Founded 22 years ago, it is India's premier voluntary sector association, with a direct membership of 384 organizations from the national as well as all states of India, including networks, research groups, grass root organizations and community based organizations. Currently, VANI has an indirect membership of over 5000 organizations. Sir, we would like to share with you that presently many of us in the voluntary sector are facing difficulties owing to a sudden situation where a large number of Notices have been issued to the Voluntary Sector organisations by the Income Tax Department. The notices range from not only demanding taxes but also challenging the very basis of their non-profit character (i.e. registration under Section 12A). We believe this sudden change in Income Tax practices is impacting the sustenance of several organisations putting several of these non-profit organisations in state of uncertainty and ambiguity. Due to these developments, VANI had convened a meeting of various leaders from the voluntary sector and financial experts to seek their advice on possible implications of these steps taken by the Income Tax Department. We would like to share with you that great concern and anguish were expressed by all the participating members as the very existence of many voluntary organizations are seriously at risk now. Therefore we appeal to you Hon ble Sir to seriously consider the following amendments in the Income Tax Act ; 1. One of the reasons for the present situation is an inadequate understanding that sufficient amount of donations are not always available for a large number of Voluntary Organisations and they need to raise resources for their financial sustenance. This is well recognized by the Planning Commission in its National Policy on the Voluntary Sector In this regard current limit of receipts of Rs 25 lakhs 23 6

9 from businesses incidental to the attainment of the objectives of the Voluntary Organisation under the last proviso of the Section 2 (15) is not sufficient at all for a very large number of professional NGOs. We request you to amend this proviso to Section 2(15) of the Income Tax Act, 1961 so that the present limit of Rs. 25 lakhs is enhanced to Rs.1crore. It may be mentioned that there is a limit for the same amount under the current provisions of Sec.10 (23c) (iiiad),(iiiae) of the IT Act. 2. In case the Hon ble Minister finds that the above amendment is not feasible, we request you to at least consider that these VOs be taxed on their business activities without withdrawing their Non-Profit character. Accordingly it is requested that the Hon ble Finance Minister allow taxation of Business Activity where independently verifiable separate books of account are maintained with reference to organisations undertaking activity under the Section 2(15) of Income Tax Act, 1961 under the 6th arm of the Charitable purpose with reference to general public utility and allow such organisations to retain their registration under Section 2(15) of the Income Tax Act, We therefore place this request before you for your favourable consideration. We believe that you will be kind to take a considerate approach towards the plight of the Voluntary Sector due to these sudden developments. We would like to reiterate that your decision in this particular aspect will be very decisive for the sustenance of large of number of Voluntary Organizations in India. With Regards, Hash Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 23 7

10 Shri S. S. Palanimanickman, Union Minister of State Finance 7, Dr. Bishambar Das Marg, New Delhi March 05, 2012 New Delhi Appeal to consider the amendments in the Income Tax Act Dear Sir, Greetings from Voluntary Action Network India (VANI)! VANI is a non-government, not-for-profit, apex body of voluntary organizations, playing a proactive role in India's development process. Founded 22 years ago, it is India's premier voluntary sector association, with a direct membership of 384 organizations from the national as well as all states of India, including networks, research groups, grass root organizations and community based organizations. Currently, VANI has an indirect membership of over 5000 organizations. Sir, we would like to share with you that presently many of us in the voluntary sector are facing difficulties owing to a sudden situation where a large number of Notices have been issued to the Voluntary Sector organisations by the Income Tax Department. The notices range from not only demanding taxes but also challenging the very basis of their non-profit character (i.e. registration under Section 12A). We believe this sudden change in Income Tax practices is impacting the sustenance of several organisations putting several of these non-profit organisations in state of uncertainty and ambiguity. Due to these developments, VANI had convened a meeting of various leaders from the voluntary sector and financial experts to seek their advice on possible implications of these steps taken by the Income Tax Department. We would like to share with you that great concern and anguish were expressed by all the participating members as the very existence of many voluntary organizations are seriously at risk now. Therefore we appeal to you Hon ble Sir to seriously consider the following amendments in the Income Tax Act; 1. One of the reasons for the present situation is an inadequate understanding that sufficient amount of donations are not always available for a large number of Voluntary Organisations and they need to raise resources for their financial sustenance. This is well recognized by the Planning Commission in its National Policy on the Voluntary Sector In this regard current limit of receipts of Rs 25 lakhs from businesses incidental to the attainment of the objectives of the Voluntary Organisation under the last proviso of the Section 2 (15) is not sufficient at all for a very large number of professional NGOs. 23 8

11 We request you to amend this proviso to Section 2(15) of the Income Tax Act, 1961 so that the present limit of Rs. 25 lakhs is enhanced to Rs.1crore. It may be mentioned that there is a limit for the same amount under the current provisions of Sec.10 (23c) (iiiad),(iiiae) of the IT Act. 2. In case the Hon ble Minister finds that the above amendment is not feasible, we request you to at least consider that these VOs be taxed on their business activities without withdrawing their Non- Profit character. Accordingly it is requested that the Hon ble Finance Minister allow taxation of Business Activity where independently verifiable separate books of account are maintained with reference to organisations undertaking activity under the Section 2(15) of Income Tax Act, 1961 under the 6th arm of the Charitable purpose with reference to general public utility and allow such organisations to retain their registration under Section 2(15) of the Income Tax Act, We therefore place this request before you for your favourable consideration. We believe that you will be kind to take a considerate approach towards the plight of the Voluntary Sector due to these sudden developments. We would like to reiterate that your decision in this particular aspect will be very decisive for the sustenance of large of number of Voluntary Organizations in India. With Regards, Hash Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 23 9

12 March 05, 2012 New Delhi Shri S. S. Palanimanickman, Union Minister of State Finance 7, Dr. Bishambar Das Marg, New Delhi Appeal to consider the amendments in the Income Tax Act Dear Sir, Greetings from Voluntary Action Network India (VANI)! VANI is a non-government, not-for-profit, apex body of voluntary organizations, playing a proactive role in India's development process. Founded 22 years ago, it is India's premier voluntary sector association, with a direct membership of 384 organizations from the national as well as all states of India, including networks, research groups, grass root organizations and community based organizations. Currently, VANI has an indirect membership of over 5000 organizations. Sir, we would like to share with you that presently many of us in the voluntary sector are facing difficulties owing to a sudden situation where a large number of Notices have been issued to the Voluntary Sector organisations by the Income Tax Department. The notices range from not only demanding taxes but also challenging the very basis of their non-profit character (i.e. registration under Section 12A). We believe this sudden change in Income Tax practices is impacting the sustenance of several organisations putting several of these non-profit organisations in state of uncertainty and ambiguity. Due to these developments, VANI had convened a meeting of various leaders from the voluntary sector and financial experts to seek their advice on possible implications of these steps taken by the Income Tax Department. We would like to share with you that great concern and anguish were expressed by all the participating members as the very existence of many voluntary organizations are seriously at risk now. Therefore we appeal to you Hon ble Sir to seriously consider the following amendments in the Income Tax Act; 1. One of the reasons for the present situation is an inadequate understanding that sufficient amount of donations are not always available for a large number of Voluntary Organisations and they need to raise resources for their financial sustenance. This is well recognized by the Planning Commission in its National Policy on the Voluntary Sector In this regard current limit of receipts of Rs 25 lakhs from businesses incidental to the attainment of the objectives of the Voluntary Organisation under the last proviso of the Section 2 (15) is not sufficient at all for a very large number of professional NGOs

13 We request you to amend this proviso to Section 2(15) of the Income Tax Act, 1961 so that the present limit of Rs. 25 lakhs is enhanced to Rs.1crore. It may be mentioned that there is a limit for the same amount under the current provisions of Sec.10 (23c) (iiiad),(iiiae) of the IT Act. 2. In case the Hon ble Minister finds that the above amendment is not feasible, we request you to at least consider that these VOs be taxed on their business activities without withdrawing their Non-Profit character. Accordingly it is requested that the Hon ble Finance Minister allow taxation of Business Activity where independently verifiable separate books of account are maintained with reference to organisations undertaking activity under the Section 2(15) of Income Tax Act, 1961 under the 6th arm of the Charitable purpose with reference to general public utility and allow such organisations to retain their registration under Section 2(15) of the Income Tax Act, We therefore place this request before you for your favourable consideration. We believe that you will be kind to take a considerate approach towards the plight of the Voluntary Sector due to these sudden developments. We would like to reiterate that your decision in this particular aspect will be very decisive for the sustenance of large of number of Voluntary Organizations in India. With Regards, Hash Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 23 11

14 March 05, 2012 New Delhi Shri Namo Narain Meena Minister of State (E&FS) Ministry of Finance North Block New Delhi Appeal to consider the amendments in the Income Tax Act Dear Sir, Greetings from Voluntary Action Network India (VANI)! VANI is a non-government, not-for-profit, apex body of voluntary organizations, playing a proactive role in India's development process. Founded 22 years ago, it is India's premier voluntary sector association, with a direct membership of 384 organizations from the national as well as all states of India, including networks, research groups, grass root organizations and community based organizations. Currently, VANI has an indirect membership of over 5000 organizations. Sir, we would like to share with you that presently many of us in the voluntary sector are facing difficulties owing to a sudden situation where a large number of Notices have been issued to the Voluntary Sector organisations by the Income Tax Department. The notices range from not only demanding taxes but also challenging the very basis of their non-profit character (i.e. registration under Section 12A). We believe this sudden change in Income Tax practices is impacting the sustenance of several organisations putting several of these non-profit organisations in state of uncertainty and ambiguity. Due to these developments, VANI had convened a meeting of various leaders from the voluntary sector and financial experts to seek their advice on possible implications of these steps taken by the Income Tax Department. We would like to share with you that great concern and anguish were expressed by all the participating members as the very existence of many voluntary organizations are seriously at risk now. Therefore we appeal to you Hon ble Sir to seriously consider the following amendments in the Income Tax Act; 1. One of the reasons for the present situation is an inadequate understanding that sufficient amount of donations are not always available for a large number of Voluntary Organisations and they need to raise resources for their financial sustenance. This is well recognized by the Planning Commission in its National Policy on the Voluntary Sector In this regard current limit of receipts of Rs 25 lakhs from businesses incidental to the attainment of the objectives of the Voluntary Organization under the 23 12

15 last proviso of the Section 2 (15) is not sufficient at all for a very large number of professional NGOs. We request you to amend this proviso to Section 2(15) of the Income Tax Act, 1961 so that the present limit of Rs. 25 lakhs is enhanced to Rs.1crore. It may be mentioned that there is a limit for the same amount under the current provisions of Sec.10 (23c) (iiiad),(iiiae) of the IT Act. 2. In case the Hon ble Minister finds that the above amendment is not feasible, we request you to at least consider that these VOs be taxed on their business activities without withdrawing their Non-Profit character. Accordingly it is requested that the Hon ble Finance Minister allow taxation of Business Activity where independently verifiable separate books of account are maintained with reference to organisations undertaking activity under the Section 2(15) of Income Tax Act, 1961 under the 6th arm of the Charitable purpose with reference to general public utility and allow such organisations to retain their registration under Section 2(15) of the Income Tax Act, We therefore place this request before you for your favourable consideration. We believe that you will be kind to take a considerate approach towards the plight of the Voluntary Sector due to these sudden developments. We would like to reiterate that your decision in this particular aspect will be very decisive for the sustenance of large of number of Voluntary Organizations in India. With Regards, Hash Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 23 13

16 Shri R.S. Gujral Finance Secy. & Secy. (R) Ministry of Finance Department of Revenue Room No. 128-A North Block, New Delhi March 05, 2012 New Delhi Appeal to consider the amendments in the Income Tax Act Dear Sir, Greetings from Voluntary Action Network India (VANI)! VANI is a non-government, not-for-profit, apex body of voluntary organizations, playing a proactive role in India's development process. Founded 22 years ago, it is India's premier voluntary sector association, with a direct membership of 384 organizations from the national as well as all states of India, including networks, research, grass roots implementing organizations and Community Based Organizations, and an indirect membership of over 5000 organizations. Sir, we would like to share with you that presently many of us in the voluntary sector are facing difficulties owing to a sudden situation where a large number of Notices have been issued to the Voluntary Sector organizations by the Income Tax Department. The notices range from not only demanding taxes but also challenging the very basis of their non-profit character (i.e. registration under Section 12A). We believe this sudden change in Income Tax practices is impacting the sustenance of several organisations, putting several of these non-profit organizations in state of uncertainty and ambiguity. Due to these developments, VANI had convened a meeting of various leaders from the voluntary sector and financial experts to seek their advice on possible implications of these steps taken by the Income Tax Department. We would like to share with you that a great concern and anguish were expressed by all the participating members as the very existence of many voluntary organizations are seriously at risk now. Therefore we appeal to you to look into the following amendments in the Income Tax Act; 1. One of the reasons for the present situation is an inadequate understanding that sufficient amount of donations are not always available for a large number of Voluntary Organisations and they need to raise resources for their financial sustenance. This is well recognized by the Planning Commission in its National Policy on the Voluntary Sector In this regard current limit of receipts of Rs 25 lakhs from businesses incidental to the attainment of the objectives of the Voluntary Organisation under the last proviso of the Section 2 (15) is not sufficient at all for a very large number of professional NGOs

17 We request to amend this proviso to Section 2(15) of the Income Tax Act, 1961 so that the present limit of Rs. 25 lakhs is enhanced to Rs.1crore. It may be mentioned that there is a limit for the same amount under the current provisions of Sec.10 (23c) (iiiad),(iiiae) of the IT Act. 2 In case the above amendment is not feasible, we request that these VOs be taxed on their business activities without withdrawing their Non-Profit character. Accordingly it is requested that the taxation of Business Activity be allowed where independently verifiable separate books of account are maintained with reference to organisations undertaking activity under the Section 2(15) of Income Tax Act, 1961 under the 6th arm of the Charitable purpose with reference to general public utility and allow such organisations to retain their registration under Section 2(15) of the Income Tax Act, We therefore place this request before you for your favourable consideration. We believe that you will be kind to take a considerate approach towards the plight of the Voluntary Sector due to these sudden developments. We would like to reiterate that your decision in this particular aspect will be very decisive for the sustenance of large of number of Voluntary Organizations in India. With Regards, Hash Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 23 15

18 March 05, 2012 New Delhi Sh. Kaushik Basu Chief Economic Adviser Government of India Ministry of Finance North Block New Delhi - 1 Appeal to consider the amendments in the Income Tax Act Dear Sir, Greetings from Voluntary Action Network India (VANI)! VANI is a non-government, not-for-profit, apex body of voluntary organizations, playing a proactive role in India's development process. Founded 22 years ago, it is India's premier voluntary sector association, with a direct membership of 384 organizations from the national as well as all states of India, including networks, research, grass roots implementing organizations and Community Based Organizations, and an indirect membership of over 5000 organizations. Sir, we would like to share with you that presently many of us in the voluntary sector are facing difficulties owing to a sudden situation where a large number of Notices have been issued to the Voluntary Sector organizations by the Income Tax Department. The notices range from not only demanding taxes but also challenging the very basis of their non-profit character (i.e. registration under Section 12A). We believe this sudden change in Income Tax practices is impacting the sustenance of several organisations, putting several of these non-profit organizations in state of uncertainty and ambiguity. Due to these developments, VANI had convened a meeting of various leaders from the voluntary sector and financial experts to seek their advice on possible implications of these steps taken by the Income Tax Department. We would like to share with you that a great concern and anguish were expressed by all the participating members as the very existence of many voluntary organizations are seriously at risk now. Therefore we appeal to you to look into the following amendments in the Income Tax Act; 1. One of the reasons for the present situation is an inadequate understanding that sufficient amount of donations are not always available for a large number of Voluntary Organisations and they need to raise resources for their financial sustenance. This is well recognized by the Planning Commission in its National Policy on the Voluntary Sector In this regard current limit of receipts of Rs 25 lakhs from businesses incidental to the attainment of the objectives of the Voluntary Organ

19 isation under the last proviso of the Section 2 (15) is not sufficient at all for a very large number of professional NGOs. We request to amend this proviso to Section 2(15) of the Income Tax Act, 1961 so that the present limit of Rs. 25 lakhs is enhanced to Rs.1crore. It may be mentioned that there is a limit for the same amount under the current provisions of Sec.10 (23c) (iiiad),(iiiae) of the IT Act. 2. In case the above amendment is not feasible, we request that these VOs be taxed on their business activities without withdrawing their Non-Profit character. Accordingly it is requested that the taxation of Business Activity be allowed where independently verifiable separate books of account are maintained with reference to organisations undertaking activity under the Section 2(15) of Income Tax Act, 1961 under the 6th arm of the Charitable purpose with reference to general public utility and allow such organisations to retain their registration under Section 2(15) of the Income Tax Act, We therefore place this request before you for your favourable consideration. We believe that you will be kind to take a considerate approach towards the plight of the Voluntary Sector due to these sudden developments. We would like to reiterate that your decision in this particular aspect will be very decisive for the sustenance of large of number of Voluntary Organizations in India. With Regards, Hash Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 23 17

20 March 05, 2012 New Delhi Shri Ashutosh Dikshit, Joint Secretary, Tax Policy and Legislation (TPL), CBDT Room No. -147, C, North Block New Delhi Appeal to consider the amendments in the Income Tax Act Dear Sir, Greetings from Voluntary Action Network India (VANI)! VANI is a non-government, not-for-profit, apex body of voluntary organizations, playing a proactive role in India's development process. Founded 22 years ago, it is India's premier voluntary sector association, with a direct membership of 384 organizations from the national as well as all states of India, including networks, research, grass roots implementing organizations and Community Based Organizations, and an indirect membership of over 5000 organizations. Sir, we would like to share with you that presently many of us in the voluntary sector are facing difficulties owing to a sudden situation where a large number of Notices have been issued to the Voluntary Sector organizations by the Income Tax Department. The notices range from not only demanding taxes but also challenging the very basis of their non-profit character (i.e. registration under Section 12A). We believe this sudden change in Income Tax practices is impacting the sustenance of several organisations, putting several of these non-profit organizations in state of uncertainty and ambiguity. Due to these developments, VANI had convened a meeting of various leaders from the voluntary sector and financial experts to seek their advice on possible implications of these steps taken by the Income Tax Department. We would like to share with you that a great concern and anguish were expressed by all the participating members as the very existence of many voluntary organizations are seriously at risk now. Therefore we appeal to you to look into the following amendments in the Income Tax Act; 1. One of the reasons for the present situation is an inadequate understanding that sufficient amount of donations are not always available for a large number of Voluntary Organisations and they need to raise resources for their financial sustenance. This is well recognized by the Planning Commission in its National Policy on the Voluntary Sector In this regard current limit of receipts of Rs 25 lakhs from businesses incidental to the attainment of the objectives of the Voluntary Organ

21 isation under the last proviso of the Section 2 (15) is not sufficient at all for a very large number of professional NGOs. We request to amend this proviso to Section 2(15) of the Income Tax Act, 1961 so that the present limit of Rs. 25 lakhs is enhanced to Rs.1crore. It may be mentioned that there is a limit for the same amount under the current provisions of Sec.10 (23c) (iiiad),(iiiae) of the IT Act. 2. In case the above amendment is not feasible, we request that these VOs be taxed on their business activities without withdrawing their Non-Profit character. Accordingly it is requested that the taxation of Business Activity be allowed where independently verifiable separate books of account are maintained with reference to organisations undertaking activity under the Section 2(15) of Income Tax Act, 1961 under the 6th arm of the Charitable purpose with reference to general public utility and allow such organisations to retain their registration under Section 2(15) of the Income Tax Act, We therefore place this request before you for your favourable consideration. We believe that you will be kind to take a considerate approach towards the plight of the Voluntary Sector due to these sudden developments. We would like to reiterate that your decision in this particular aspect will be very decisive for the sustenance of large of number of Voluntary Organizations in India. With Regards, Hash Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 23 19

22 March 05, 2012 New Delhi Mrs. Omita Paul Advisor to FM Ministry of Finance North Block New Delhi Appeal to consider the amendments in the Income Tax Act Dear Madam, Greetings from Voluntary Action Network India (VANI)! VANI is a non-government, not-for-profit, apex body of voluntary organizations, playing a proactive role in India's development process. Founded 22 years ago, it is India's premier voluntary sector association, with a direct membership of 384 organizations from the national as well as all states of India, including networks, research, grass roots implementing organizations and Community Based Organizations, and an indirect membership of over 5000 organizations. Madam, we would like to share with you that presently many of us in the voluntary sector are facing difficulties owing to a sudden situation where a large number of Notices have been issued to the Voluntary Sector organizations by the Income Tax Department. The notices range from not only demanding taxes but also challenging the very basis of their non-profit character (i.e. registration under Section 12A). We believe this sudden change in Income Tax practices is impacting the sustenance of several organisations, putting several of these non-profit organizations in state of uncertainty and ambiguity. Due to these developments, VANI had convened a meeting of various leaders from the voluntary sector and financial experts to seek their advice on possible implications of these steps taken by the Income Tax Department. We would like to share with you that a great concern and anguish were expressed by all the participating members as the very existence of many voluntary organizations are seriously at risk now. Therefore we appeal to you to look into the following amendments in the Income Tax Act; 1. One of the reasons for the present situation is an inadequate understanding that sufficient amount of donations are not always available for a large number of Voluntary Organisations and they need to raise resources for their financial sustenance. This is well recognized by the Planning Commission in its National Policy on the Voluntary Sector In this regard current limit of receipts of Rs 25 lakhs from businesses incidental to the attainment of the objectives of the Voluntary Organisation under the last proviso of the Section 2 (15) is not sufficient at all for a very large number of professional NGOs

23 We request to amend this proviso to Section 2(15) of the Income Tax Act, 1961 so that the present limit of Rs. 25 lakhs is enhanced to Rs.1crore. It may be mentioned that there is a limit for the same amount under the current provisions of Sec.10 (23c) (iiiad),(iiiae) of the IT Act. 2. In case the above amendment is not feasible, we request that these VOs be taxed on their business activities without withdrawing their Non-Profit character. Accordingly it is requested that the taxation of Business Activity be allowed where independently verifiable separate books of account are maintained with reference to organisations undertaking activity under the Section 2(15) of Income Tax Act, 1961 under the 6th arm of the Charitable purpose with reference to general public utility and allow such organisations to retain their registration under Section 2(15) of the Income Tax Act, We therefore place this request before you for your favourable consideration. We believe that you will be kind to take a considerate approach towards the plight of the Voluntary Sector due to these sudden developments. We would like to reiterate that your decision in this particular aspect will be very decisive for the sustenance of large of number of Voluntary Organizations in India. With Regards, Hash Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 23 21

24 December 27, 2012 Shri P. Chidambaram Hon ble Minister of Finance, Ministry of Finance Government of India Room No. 134, North Block New Delhi Sub.: Suggestion and Recommendations from Voluntary Development Organisations for the Budget FY Respected Sir, On behalf of voluntary development organizations, the Voluntary Action Network India (VANI), would humbly like to submit some suggestions for the budget FY VANI is an apex body with an outreach of more than 8000 voluntary organizations working in almost all parts of India. The recommendations given below are based on the consultation organized by VANI and HelpAge India on December 17, 2012 in New Delhi wherein more than 40 financial experts, officials and Chartered Accountants participated. The list is enclosed for your reference. Sir, in the last few years the fiscal and financial environment in the country has changed substantially, which requires alignment with operating environment for the Indian voluntary development organizations. Today, majority of voluntary development organizations are either working with government or trying to generate financial resources from within country. This is also in line with your statement in RajyaSabha on 19-Aug-10 that enough money can be raised within India for charitable causes, the social causes. Most of their activities, projects and focus area are in line with the national development targets identified by Indian government through various national schemes or the planning commission. The dream of addressing national issues with national resources is slowly taking shape and numerous voluntary development organizations are working in this direction. In order to make this transition smooth, we would like to suggest some amendments in the forthcoming financial bill. Section 2(15): The definition of Charitable Purpose under section 2(15) of the Income Tax Act, is the only and very important aspect for the voluntary development organizations. In fact, this could be an important step in defining and differentiating organizations engaged in developmental activities from other not-forprofit entities in the country. The economic growth and related development has seen sudden influx of entities in the ambient of NPO in the country. Many times we refer to the categorization under Section 2(15) to define the nature and scope of developmental organizations while dealing with related laws like FCRA and registration laws. Under the current provisions of Income Tax Act Charitable purpose includes relief of the poor, medical relief, preservation of environment (including watershed, forest and wildlife) and preservation of monuments 23 22

25 or places of or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce, or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is [twenty five lakh rupees] or less in the previous year. Ramification of the above on the voluntary development organizations: 1. As you are aware that thousands of genuine voluntary development organizations are working hand in hand with government under various developmental projects. Such organizations fall under the advancement of any other object of general public utility. Those addressing issues like: Women Empowerment Drinking water and sanitation, Livelihood and income generation, Housing for rural and urban poor, Empowering Panchayats and Municipalities, Youth leadership, Tribal and Dalit issues, Legal rights and aid, Self-help groups Working with Children Working with Aged population Basic and adult education Disaster Mitigation, And many others. 2. Voluntary Organizations also play a very important role in India for providing advice and support to various government departments, through their research and advocacy activities. Such organizations also fall under the above stated 6th limb of section 2(15). 3. During the last few years the voluntary sector in India is passing through very critical phase wherein we are trying to generate resources domestically and reduce the dependency on the foreign aid. Unfortunately, the current treatment of sector 2(15) puts many such initiatives under taxable category, as illustrated below: Collaboration and partnership has been an important aspect of voluntary sector in India. Since most of the government projects are available through tendering system such financial aid from government for development work are also placed under business like activity. The process of tendering and open bidding system attracts tax deduction. Unfortunately, even if these projects are 23

26 in line with the main objective of the organization and fall under charitable purpose they are considered as trade, business and commercial activity. For example, a Gandhian organization which has been working with panchayats since independence now if works with government on same issue will be liable for taxation. Under the new companies Act, the Indian government has rightly so, added a proviso to motivate Indian companies to spend on corporate social responsibility. Many companies do want to work with Indian voluntary organizations in realizing the dream of holistic growth of the country. But we all fear that such financial collaborations will attract taxation, if solicited through open tendering processes. Various studies have shown that India has the high potential of individual philanthropy and giving. Indian voluntary development organization solicits financial support from such individual organizations through selling of greeting cards, or momentous, but these also attract taxation. Sir, many voluntary organizations also fix a minimum and nominal charge on the services, to develop a sense of co-ownership of the beneficiaries. Even these nominal charges which are much less than the actual cost is considered as the trading or business activities. The way forward: Sir, the voluntary sector understands and appreciates the need for legal provisions for controlling commercial activities by misuse of the charity exemptions. Such need essentially arose after the Supreme Court ruling in the case Addl. CIT v. Thanthi Trust [2001] 247 ITR 785 where it was ruled that even unrelated business activities shall also be considered as incidental to charitable purpose provided the entire amount is applied towards charitable or religious purposes. This significant Supreme Court ruling, in effect, nullified the purpose of section 11(4A), (Section 11(4A) provides that only incidental business activities are permissible). The misuse of the Supreme Court ruling should be corrected by amending Section 11(4A). This issue can be easily resolved by categorically stating under Section 11(4A) that business income shall not be treated as incidental if it is unrelated and only the revenue generated is used for charitable purposes. The suggested changes in Section 11(4A) are as under: Option 1: Bring sec. 2(15) closer to actual activities of the sector: The definition of Charitable Purpose be made more specific and in tune with current nature of activities undertaken by the voluntary sector, while retaining the bar on commercial activities. However, providing services or goods at significantly lower prices will not attract the disqualification. The proposed revised section 2(15) is given below: Charitable purpose includes (a) the prevention or relief of poverty; (b) the advancement of education; 23 24

27 (c) the advancement of health or the saving of lives, including the prevention or relief of sickness, disease or human suffering; (d) the prevention and mitigation of disasters; (e) the advancement of citizenship or community development, including rural or urban regeneration, empowerment of Panchayats and Municipalities, and the promotion of civic responsibility, volunteering, the voluntary sector or the effectiveness or efficiency of charitable or religious organizations; (f) the advancement of the arts, culture, heritage or science; (g) the preservation of monuments or places of or objects of artistic or historic interest, (h) the advancement of amateur sport meaning thereby sports or games which promote health by involving physical or mental skill or exertion; (i) the advancement of human rights, rights of the disadvantaged or marginalized persons; (j) the advancement of conflict-resolution or reconciliation or the promotion of religious, communal, gender, tribal, caste harmony or equality and diversity; (k) the advancement of environmental protection or improvement (including watershed, forest and wildlife); (m) the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage, including relief given by the provision of accommodation or care to such persons; (n) the advancement of animal welfare; (o) the promotion of the efficiency of the armed forces of India, or of the efficiency of the police, fire and rescue services, or ambulance services; (p) the advancement of any other object of general public benefit; Provided that the advancement of any other object of general public benefit shall not be a charitabl e purpose, if it involves carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce, or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; Provided however that, for the purpose of this clause, any amounts collected by a trust from purchasers or users of such services or goods shall not constitute trading, commercial or business receipts if such services or goods are provided at prices substantially below the market rates for comparable services or goods; Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty five lakh rupees or less in the previous year. 25

28 Option 2: Exclude recoveries for concessionally priced goods and services from first proviso to sec. 2(15) The present proviso to sec. 2(15) covers even nominal recoveries made from beneficiaries. These are not made for profit but to ensure efficient use of material, and to give more control to beneficiaries. This creates hardship for a large number of NGOs. Inserting a clarification after first proviso will help achieve the desired relief without diluting the purpose of the section: Charitable purpose includes relief of the poor, medical relief, preservation of environment (including watershed, forest and wildlife) and preservation of monuments or places of or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade,commerce or business, or any activity of rendering any service in relation to any trade, commerce, or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; Provided however that, for the purpose of this clause, any amounts collected by a trust from purchasers or users of such services or goods shall not constitute trading, commercial or business receipts if such services or goods are provided at prices substantially below the market rates for comparable services or goods; Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is [twenty five lakh rupees] or less in the previous year. If amending the definition of Charitable Purpose is not the appropriate way at this stage, shall we humbly request to take corrective measures. The current amended provisions have changed the definition of charitable purpose, as a result any the voluntary organization will lose its charitable status even if its object clause permit certain incidental business activities. In other words without doing any business activity also the exemptions will be lost. Secondly, by virtue of the current amended provisions the entire income of a charitable organization shall be subjected to tax even if a very small negligible activity is towards incidental business activities. In the interest of natural justice, all the voluntary organization should be permitted incidental business activities. And no voluntary organization should be permitted to do unrelated commercial activities. Option 3: The voluntary sector appreciates the changes suggested in section 2 (15) provided further that the first proviso shall not apply if the aggregate value of the receipt from the activities referred to therein is twenty five lakh rupees or less in the previous year. We would further urge to at least treat NPO as a small business category (as done in section 47) where the presumptive taxation limit could be raised to Rs. 10 Crore. Option 4: A new proviso may be added to section 11(4A). The suggested proviso is as under: Provided that the business or any commercial activity should be integrally related to the charitable or religious activity of the organization and any income of a trust or an institution, being profits 23 26

29 and gains of business shall not be considered as incidental to the attainment of the objectives of the trust only because the entire income is applied for charitable purposes or religious purposes,. The recently passed Companies bill as well as the proposed next five year plan, underscores the need of very vibrant and active voluntary development organizations in the country. Unfortunately, this potential is restricted by the current provisions of the Income Tax Act. We do understand that due some bad apples in the sector, there has been the misuse of provisions of the charitable status. But equally important is to provide enabling environment to the genuine development organizations in the country. We need to generate as much financial resources from within the country to address the local issues. On behalf of thousands of small and medium sized voluntary development organizations active in the remotest areas of the country and working with most marginalized communities, we would appeal to the finance minister to look into the matter as they are on the verge of extinction. Recognizing the statements made by the leaders of the country that a vibrant voluntary sector is as important for the country as the strong private sector and government, we appeal you to rescue us from the doom. Towards the end, we would urge you to recall your promise to the nation at the time of introducing this amendment in sec. 2(15) that genuine voluntary organisations will not suffer due to this amendment. Unfortunately, the spirit of the amendment is lost during assessment proceedings as the Assessing Officers feel bound by the words of the Act rather than the spirit. Your timely action in this regard will make sure that your promise is fulfilled in both letter and spirit. Sir, we would also like to thank you for inviting representatives of voluntary development organizations for pre-budget consultations. We sincerely hope that close collaboration between voluntary sector an d government will definitely help all of us in achieving the national development targets. Thanking you Sincerely, Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 23 27

30 March 4, 2013 Shri P. Chidambaram Hon ble Minister of Finance, Ministry of Finance Government of India Room No. 134, North Block New Delhi Sub.: Humble Suggestion from Voluntary Development Organizations for the Budget FY Respected Sir, On behalf of voluntary development organizations of India and its national apex body, Voluntary Action Network India (VANI), we would like to congratulate for presenting well balanced budget for FY We do recognize that in spite of pressure of global economic crisis and domestic realities, you have drafted a budget which takes care of the economically marginalized masses. The increased allocation with focus on delivery is clear indication of the priority of the government in coming months. Sir, in the last appeal to you on some important concerns from the voluntary sector we had highlighted the change in the fiscal and financial environment in which we operate. Today, majority of voluntary organizations are working in hand with the government projects which are also major source of their revenue. As you have rightly pointed out in your previous addresses, the Indian Voluntary Sector is also trying to generate resource from local sources with less and less dependency on foreign funding sources. In order to strengthen Indian voluntary development organizations further to contribute in nation building we would like to request few changes: Option 1: Bring sec. 2(15) closer to actual activities of the sector: The definition of Charitable Purpose be made more specific and in tune with current nature of activities undertaken by the voluntary sector, while retaining the bar on commercial activities. However, providing services or goods at significantly lower prices will not attract the disqualification. The proposed revised section 2(15) is given below: Charitable purpose includes (a) the prevention or relief of poverty; (b) the advancement of education; (c) the advancement of health or the saving of lives, including the prevention or relief of sickness, disease or human suffering; 23 28

31 (d) the prevention and mitigation of disasters; (e) the advancement of citizenship or community development, including rural or urban regeneration, empowerment of Panchayats and Municipalities, and the promotion of civic responsibility, volunteering, the voluntary sector or the effectiveness or efficiency of charitable or religious organizations; (f) the advancement of the arts, culture, heritage or science; (g) the preservation of monuments or places of or objects of artistic or historic interest, (h) the advancement of amateur sport meaning thereby sports or games which promote health by involving physical or mental skill or exertion; (i) the advancement of human rights, rights of the disadvantaged or marginalized persons; (j) the advancement of conflict-resolution or reconciliation or the promotion of religious, communal, gender, tribal, caste harmony or equality and diversity; (k) the advancement of environmental protection or improvement (including watershed, forest and wildlife); (m) the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage, including relief given by the provision of accommodation or care to such persons; (n)the advancement of animal welfare; (m) the promotion of the efficiency of the armed forces of India, or of the efficiency of the police, fire and rescue services, or ambulance services; (o) the advancement of any other object of general public benefit; Provided that the advancement of any other object of general public benefit shall not be a charitabl e purpose, if it involves carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce, or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; Provided however that, for the purpose of this clause, any amounts collected by a trust from purchasers or users of such services or goods shall not constitute trading, commercial or business receipts if such services or goods are provided at prices substantially below the market rates for comparable services or goods; Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty five lakh rupees or less in the previous year

32 Option 2: Exclude recoveries for concessional priced goods and services from first proviso to sec. 2(15) The present proviso to sec. 2(15) covers even nominal recoveries made from beneficiaries. These are not made for profit but to ensure efficient use of material, and to give more control to beneficiaries. This creates hardship for a large number of NGOs. Inserting a clarification after first proviso will help achieve the desired relief without diluting the purpose of the section: Charitable purpose includes relief of the poor, medical relief, preservation of environment (including watershed, forest and wildlife) and preservation of monuments or places of or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce, or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; Provided however that, for the purpose of this clause, any amounts collected by a trust from purchasers or users of such services or goods shall not constitute trading, commercial or business receipts if such services or goods are provided at prices substantially below the market rates for comparable services or goods; Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is [twenty five lakh rupees] or less in the previous year. If amending the definition of Charitable Purpose is not the appropriate way at this stage, shall we humbly request to take corrective measures. The current amended provisions have changed the definition of charitable purpose, as a result any the voluntary organization will lose its charitable status even if its object clause permit certain incidental business activities. In other words without doing any business activity also the exemptions will be lost. Secondly, by virtue of the current amended provisions the entire income of a charitable organization shall be subjected to tax even if a very small negligible activity is towards incidental business activities. In the interest of natural justice, all the voluntary organization should be permitted incidental business activities. And no voluntary organization should be permitted to do unrelated commercial activities. Option 3: The voluntary sector appreciates the changes suggested in section 2 (15) provided further that the first proviso shall not apply if the aggregate value of the receipt from the activities referred to therein is twenty five lakh rupees or less in the previous year. We would further urge to at least treat NPO as a small business category (as done in section 47) where the presumptive taxation limit could be raised to Rs. 10 Crore. Option 4: A new proviso may be added to section 11(4A). The suggested proviso is as under: 23 30

33 Provided that the business or any commercial activity should be integrally related to the charitable or religious activity of the organization and any income of a trust or an institution, being profits and gains of business shall not be considered as incidental to the attainment of the objectives of the trust only because the entire income is applied for charitable purposes or religious purposes,. The recently passed Companies bill as well as the proposed next five year plan, underscores the need of very vibrant and active voluntary development organizations in the country. Unfortunately, this potential is restricted by the current provisions of the Income Tax Act. We do understand that due some bad apples in the sector, there has been the misuse of provisions of the charitable status. But equally important is to provide enabling environment to the genuine development organizations in the country. We need to generate as much financial resources from within the country to address the local issues. On behalf of thousands of small and medium sized voluntary development organizations active in the remotest areas of the country and working with most marginalized communities, we would appeal to the finance minister to look into the matter as they are on the verge of extinction. Recognizing the statements made by the leaders of the country that a vibrant voluntary sector is as important for the country as the strong private sector and government, we appeal you to rescue us from the doom. Towards the end, we would urge you to recall your promise to the nation at the time of introducing this amendment in sec. 2(15) that genuine voluntary organisations will not suffer due to this amendment. Unfortunately, the spirit of the amendment is lost during assessment proceedings as the Assessing Officers feel bound by the words of the Act rather than the spirit. Your timely action in this regard will make sure that your promise is fulfilled in both letter and spirit. Sir, we would also like to thank you for inviting representatives of voluntary development organizations for pre-budget consultations. We sincerely hope that close collaboration between voluntary sector an d government will definitely help all of us in achieving the national development targets. Thanking you Sincerely, Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 23 31

34 March 11, 2013 Shri P. Chidambaram Hon ble Minister of Finance, Ministry of Finance Government of India Room No. 134, North Block New Delhi Sub.: Humble Suggestion from Voluntary Development Organizations for the Budget FY Respected Sir, On behalf of voluntary development organizations, VANI would like to request you to kindly make the following changes in the budget for FY In the Section 2(15) : Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten crore rupees or less in the previous year. In the Section 11(4A): Provided that the business or any commercial activity should be integrally related to the charitable or religious activity of the organization and any income of a trust or an institution, being profits and gains of business shall not be considered as incidental to the attainment of the objectives of the trust only because the entire income is applied for charitable purposes or religious purposes. Sir, the above stated small changes will contribute a lot in making the enabling environment favourable for the development organisations in India. We have given detailed explanation on the above in our earlier appeals to you. Thanking you in anticipation. Sincerely, Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 23 32

35 29th December 2014 Dr. H.A.C Prasad Senior Economic Advisor (Additional Secretary) Ministry of Finance Department of Economic Affairs North Block, New Delhi Sub. : Suggestions and Recommendation from Voluntary Sector for forthcoming Union Budget Dear Dr. Prasad, Greetings from VANI! I am writing this appeal on behalf of members of Voluntary Action Network India (VANI). VANI is the national apex body of the voluntary organizations engaged in Development initiatives. Being a membership organization we have outreach of almost 10,000 voluntary organizations all over India. The primary mandate of VANI along with strengthening and capacity building of the sector is also to facilitate research based advocacy with the government on enabling environment. VANI has been partnering with Ministry of Finance on its dialogue with civil society organisations on Direct Taxes Code and Income Tax etc. First of all I would like to thank Hon ble Finance Minister, Shri Arun Jaitley and you for continuing the tradition of pre-budget consultation with civil society. Sir, in the last few years the fiscal and financial environment in the country has changed substanti ally, along with also have changed the expectation from the voluntary development organisations. Today, most of the VO s are either working on government projects or trying to raise resources form within the country. There is also very specific focus of the current government to engage private sector and VOs to projects related to national priority. However, the fiscal status of the voluntary sector is still very old and requires a fresh thinking. In the last almost ten years the government has not thought of reforming the taxation regime governing the voluntary development organisations. Keeping this in mind we would like to humbly put forward the following suggestions: 1. Realignment of Section2 (15) of Income Tax Act: The definition of Charitable purpose under section 2 (15) of the Income tax act, the only and very important section which defines the sector. Reforming this section will also help in defining and differentiating organizations engaged in development activities from other non-for-profit entities. Today, sports clubs, resident welfare associations, corporate hospitals, private schools etc. are clubbed under same section. The economic growth and related development has seen influx of the entities under NPO category. This increase of numbers again reiterates the need of proper differentiation under Income Tax. Charitable purpose includes (a) the prevention or relief of poverty; 23 33

36 (b) the advancement of education; (c) the advancement of health or the saving of lives, including the prevention or relief of sickness, disease or human suffering; (d) the prevention and mitigation of disasters; (e) the advancement of citizenship or community development, including rural or urban regeneration, empowerment of Panchayats and Municipalities, and the promotion of civic responsibility, volunteering, the voluntary sector or the effectiveness or efficiency of charitable or religious organizations; (f) the advancement of the arts, culture, heritage or science; (g) the preservation of monuments or places of or objects of artistic or historic interest, (h) the advancement of amateur sport meaning thereby sports or games which promote health by involving physical or mental skill or exertion; (i) the advancement of human rights, rights of the disadvantaged or marginalized persons; (j) the advancement of conflict-resolution or reconciliation or the promotion of religious, communal, gender, tribal, caste harmony or equality and diversity; (k) the advancement of environmental protection or improvement (including watershed, forest and wildlife); (m) the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage, including relief given by the provision of accommodation or care to such persons; (n) the advancement of animal welfare; (m) the promotion of the efficiency of the armed forces of India, or of the efficiency of the police, fire and rescue services, or ambulance services; (o) the advancement of any other object of general public benefit; Provided that the advancement of any other object of general public benefit shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce, or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; 2. Ramification of the above on the voluntary development organizations: a) The nature of the sector has changed in the last couple of decades, but Income Tax Act not looked into this factor. The sector has moved from charity and relief to the education, empowerment and development. Such organizations come under the advancement of any other object of general public utility. Majority of the flagship programmes of the government come under this category, but organizations working on these themes do not get any tax relief to generate resources. 3. During the last few years the voluntary sector in India is passing through very critical phase wherein we are trying to generate resources domestically and reduce the dependency on the foreign aid. Unfortunately, the current treatment of sector 2(15) puts many such initiatives under taxable category, as illustrated below: 23 34

37 4. Collaboration and partnership has been an important aspect of voluntary sector in India. Since most of the government projects are available through tendering system such financial aid from government for development work are also placed under business like activity. The process of tendering and open bidding system attracts tax deduction. Unfortunately, even if these projects are in line with the main objective of the organization and fall under charitable purpose they are considered as trade, business and commercial activity. For example a welfare organization which has been working with panchayats since independence now if works with government on same issue will be liable for taxation. Under the new companies Act, the Indian government has rightly so, added a proviso to motivate Indian companies to spend on corporate social responsibility. Many companies do want to work with Indian voluntary organizations in realizing the dream of holistic growth of the country. But we all fear that such financial collaborations will attract taxation, if solicited through open tendering processes. Various studies have shown that India has the high potential of individual philanthropy and giving. Indian voluntary development organization solicits financial support from such individual organizations through selling of greeting cards, or momentous, but these also attract taxation. Sir, many voluntary organizations also fix a minimum and nominal charge on the services, to develop a sense of co-ownership of the beneficiaries. Even these nominal charges which are much less than the actual cost is considered as the trading or business activities. Sir, the voluntary sector understands and appreciates the need for legal provisions for controlling commercial activities by misuse of the charity exemptions. Such need essentially arose after the Supreme Court ruling in the case Addl. CIT v. Thanthi Trust [2001] 247 ITR 785 where it was ruled that even unrelated business activities shall also be considered as incidental to charitable purpose provided the entire amount is applied towards charitable or religious purposes. This significant Supreme Court ruling, in effect, nullified the purpose of section 11(4A), (Section 11(4A) provides that only incidental business activities are permissible). The misuse of the Supreme Court ruling should be corrected by amending Section 11(4A). This issue can be easily resolved by categorically stating under Section 11(4A) that business income shall not be treated as incidental if it is unrelated and only the revenue generated is used for charitable purposes. Looking forward of meeting you at your convenience, to explain the spirit behind the suggestion. Thanking you, Sincerely Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 23 35

38 30th December 2014 Shri Arvind Subramanian Chief Economic Adviser Ministry of Finance Department of Economic Affairs North Block, New Delhi Sub. : Suggestions and Recommendation from Voluntary Sector for forthcoming Union Budget Dear Shri Arvind Subramanian, Greetings from VANI! I am writing this appeal on behalf of members of Voluntary Action Network India (VANI). VANI is the national apex body of the voluntary organizations engaged in Development initiatives. Being a membership organization we have outreach of almost 10,000 voluntary organizations all over India. The primary mandate of VANI along with strengthening and capacity building of the sector is also to facilitate research based advocacy with the government on enabling environment. VANI has been partnering with Ministry of Finance on its dialogue with civil society organisations on Direct Taxes Code and Income Tax etc. First of all I would like to thank Hon ble Finance Minister, Shri Arun Jaitley and yourself for continuing the tradition of pre-budget consultation with civil society. We would be highly obliged if VANI can also get invite for the said pre-budget consultation on January 08, Sir, in the last few years the fiscal and financial environment in the country has changed substantially, along with also have changed the expectation from the voluntary development organisations. Today, most of the VO s are either working on government projects or trying to raise resources form within the country. There is also very specific focus of the current government to engage private sector and VOs to projects related to national priority. However, the fiscal status of the voluntary sector is still very old and requires a fresh thinking. In the last almost ten years the government has not thought of reforming the taxation regime governing the voluntary development organisations. Keeping this in mind we would like to humbly put forward the following suggestions: 1. Realignment of Section2 (15) of Income Tax Act: The definition of Charitable purpose under section 2 (15) of the Income tax act, the only and very important section which defines the sector. Reforming this section will also help in defining and differentiating organizations engaged in development activities from other non-for-profit entities. Today, sports clubs, resident welfare associations, corporate hospitals, private schools etc. are clubbed under same section. The economic growth and related development has seen influx of the entities under NPO category. This increase of numbers again reiterates the need of proper differentiation under Income Tax. 36

39 Charitable purpose includes (a) the prevention or relief of poverty; (b) the advancement of education; (c) the advancement of health or the saving of lives, including the prevention or relief of sickness, disease or human suffering; (d) the prevention and mitigation of disasters; (e) the advancement of citizenship or community development, including rural or urban regeneration, empowerment of Panchayats and Municipalities, and the promotion of civic responsibility, volunteering, the voluntary sector or the effectiveness or efficiency of charitable or religious organizations; (f) the advancement of the arts, culture, heritage or science; (g) the preservation of monuments or places of or objects of artistic or historic interest, (h) the advancement of amateur sport meaning thereby sports or games which promote health by involving physical or mental skill or exertion; (i) the advancement of human rights, rights of the disadvantaged or marginalized persons; (j) the advancement of conflict-resolution or reconciliation or the promotion of religious, communal, gender, tribal, caste harmony or equality and diversity; (k) the advancement of environmental protection or improvement (including watershed, forest and wildlife); (m) the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage, including relief given by the provision of accommodation or care to such persons; (n) the advancement of animal welfare; (m) the promotion of the efficiency of the armed forces of India, or of the efficiency of the police, fire and rescue services, or ambulance services; (o) the advancement of any other object of general public benefit; Provided that the advancement of any other object of general public benefit shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce, or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; 2. Ramification of the above on the voluntary development organizations: b) The nature of the sector has changed in the last couple of decades, but Income Tax Act not looked into this factor. The sector has moved from charity and relief to the education, empowerment and development. Such organizations come under the advancement of any other object of general public utility. Majority of the flagship programmer of the government come under this category, but organizations working on these themes do not get any tax relief to generate resources. 3. During the last few years the voluntary sector in India is passing through very critical phase wherein we are trying to generate resources domestically and reduce the dependency on the foreign aid. Unfortunately, the current treatment of sector 2(15) puts many such initiatives under taxable 37

40 category, as illustrated below: Collaboration and partnership has been an important aspect of voluntary sector in India. Since most of the government projects are available through tendering system such financial aid from government for development work are also placed under business like activity. The process of tendering and open bidding system attracts tax deduction. Unfortunately, even if these projects are in line with the main objective of the organization and fall under charitable purpose they are considered as trade, business and commercial activity. For example a welfare organization which has been working with panchayats since independence now if works with government on same issue will be liable for taxation. Under the new companies Act, the Indian government has rightly so, added a proviso to motivate Indian companies to spend on corporate social responsibility. Many companies do want to work with Indian voluntary organizations in realizing the dream of holistic growth of the country. But we all fear that such financial collaborations will attract taxation, if solicited through open tendering processes. Various studies have shown that India has the high potential of individual philanthropy and giving. Indian voluntary development organization solicits financial support from such individual organizations through selling of greeting cards, or momentous, but these also attract taxation. Sir, many voluntary organizations also fix a minimum and nominal charge on the services, to develop a sense of co-ownership of the beneficiaries. Even these nominal charges which are much less than the actual cost is considered as the trading or business activities. Sir, the voluntary sector understands and appreciates the need for legal provisions for controlling commercial activities by misuse of the charity exemptions. Such need essentially arose after the Supreme Court ruling in the case Addl. CIT v. Thanthi Trust [2001] 247 ITR 785 where it was ruled that even unrelated business activities shall also be considered as incidental to charitable purpose provided the entire amount is applied towards charitable or religious purposes. This significant Supreme Court ruling, in effect, nullified the purpose of section 11(4A), (Section 11(4A) provides that only incidental business activities are permissible). The misuse of the Supreme Court ruling should be corrected by amending Section 11(4A). This issue can be easily resolved by categorically stating under Section 11(4A) that business income shall not be treated as incidental if it is unrelated and only the revenue generated is used for charitable purposes. Looking forward of meeting you at your convenience, to explain the spirit behind the suggestion. Thanking you, Sincerely Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 38

41 To, Sh. Arun Jaitley Hon ble Finance Minister Government of India New Delhi Subject: Representation of VANI towards Strengthening and enabling changes in the current taxation regime for voluntary development Organizations: Dear Sir, On behalf of members of VANI, we would like to thank you for opportunity given to us to submit our representation for consideration on Income Tax and Goods & Services Tax. Being an apex body of Voluntary Development Organizations, VANI represents 12,000 voluntary organizations from all over India. These organizations are engaged in developmental initiatives, li ke, health, education, water & sanitation, old age care, child and women development. We along with our members pride ourselves in contributing the growth and development of India. VANI has longstanding relationship with government in not only representing Voluntary Sector but also providing necessary input and support as and when required. Sir, we deeply appreciate efforts of your ministry to streamline and rationalizing taxation system in India. VANI has conducted series of consultations with voluntary organizations on the issue of taxation regime applicable to voluntary development organizations in India. We have consulted finance officers, Chartered Accountants, Sector leaders and experts from grass roots to national level. Sir, humbly we would like to submit following suggestions for your consideration. The first section addresses the issue of overall fiscal and taxation issue related to the voluntary development sector, the second section we have forwarded some suggestions on the GST. Income Tax related: The Section 2(15): The definition of Charitable Purpose under section 2(15) of the Income Tax Act, is the only and very important aspect for the voluntary development organizations. In fact, this could be an important step in defining and differentiating organizations engaged in developmental activities from other not-for- profit entities in the country. The economic growth and related development has seen sudden influx of entities in the ambient of NPO in the country. Many times we refer to the categorization under Section 2(15) to define the nature and scope of developmental organizations while dealing with related laws like FCRA and registration laws. Under the current provisions of Income Tax Act Charitable purpose includes relief of the poor, medical relief, preservation of environment (including watershed, forest and wildlife) and preservation of 39

42 monuments or places of or objects of artistic or historic interest, Yoga and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce, or business, for a cess or fee or any othe r consideration, irrespective of the nature of use or application, or retention, of the income from such activity; Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty percent or more in the previous year. Ramification of the above on the voluntary development organizations: 1. As you are aware that thousands of genuine voluntary development organizations are working hand in hand with government under various developmental projects. Such organizations fall under the advancement of any other object of general public utility. Those addressing issues like: - Women Empowerment and Participation - Drinking water and sanitation, - Livelihood and income generation, - Housing for rural and urban poor, - Empowering Panchayats and Municipalities, - Youth leadership, - Tribal and Dalit issues, - Self-help groups - Working with Children - Working with Aged population - Basic and adult education - Disaster Mitigation, - And many others. 2 Voluntary Organizations also play a very important role in India for providing advice and support to various government departments, through their research and advocacy activities. Such organizations also fall under the above stated 6th limb of section 2(15). 3. During the last few years the voluntary sector in India is passing through very critical phase wherein we are trying to generate resources domestically and reduce the dependency on the foreign aid. Unfortunately, the current treatment of sector 2(15) puts many such initiatives under taxable category, as illustrated below: - Collaboration and partnership has been an important aspect of voluntary sector in India. Since most of the government projects are available through tendering system such financial aid from government for development work are also placed under business like activity. The process of tendering and open bidding system attracts tax deduction. Unfortunately, even if these projects are in line with the main objective of the organization and fall under charitable purpose they are considered as trade, business and commercial activity. For example, an organization working with panchayats,in collaboration with government will be liable for taxation. 40

43 Second key feature relates to treatment of voluntary organizations in tax regimes. Much of that treatment derives from the definition of charitable purpose in Section 2(15) of the Income Tax Act. In spite of the promises by the government that genuine organizations will not suffer, hundreds of voluntary organizations receiving funds from the government have been sent tax notices. The source of the problem is that only five purposes have been listed in Section 2(15), which provide safeguard to voluntary organizations. In the process, hundreds of other purposes for which voluntary organizations contribute to national development goals attract tax notices. Thus, the non-profit nature of voluntary organizations remains in jeopardy. There are two simple ways to address this situation in the short run. First, link the definition of charitable purposes to the national development priorities and plans as relevant charitable purposes. Second, activities incidental to the core purpose of the voluntary organization alone should be treated as non-profit, irrespective of the source and manner of receipts of revenues. This will enable voluntary organizations to access funds from various government agencies and domestic private sector, even if they have invited proposals through a tender or bidding process. Clarification on tenderizations, consultancy and contributions As per the instructions of the Finance Ministry the open tenders decide almost all engagements and partnerships of voluntary organizations with the government. Unfortunately, these processes are seen as the business activities even if they are in line with the charitable purpose of the organization. Even the projects of the World Bank, its affiliates or projects funded by the World Bank through government agencies are implemented through consultancy contracts with the NGOs, due to the internal policies of the World Bank. These contracts are basically grants and budget based. However due to the nomenclature being consultancy and the TDS it is subject to, the Income Tax Department tends to look at these as commercial ventures. Consequent to this adverse view of the Income Tax Department, the NGOs face considerable problems in registration under Section 12AA, recognition under Section 80G and assessment proceedings. Registrations under Section 80G and 12AA have been rejected on this basis. Tax demands are sought to be raised too. A relevant circular needs to be issued to the assessing officers clarifying this matter appropriately. Tax deduction at Source Where tax demands are unlikely to arise, TDS results in needless paperwork and locking up of funds.tax is deducted at source on interest and other receipts. Exemption orders are dismissed on irrelevant grounds without a proper hearing. Refunds are not issued with assessment orders. As long as registration under 12AA continues, tax should not be deducted at source. Suitable changes must be made in Section 197/197A. Section 12 AA (3) Under Section 12 AA (3) a trust's registration can be cancelled by the CIT if the activities are not genuine or are not as per the objects of the trust. The CIT has to pass a written order of cancellation. 41

44 a) The CITs issue notices under section 12 AA (3) and after hearing the matter the proceedings are dropped but no written order to that effect is given. Therefore both the orders of cancellation and the orders dropping proceedings are to be in writing and served on the assess. b) Any order under this section should be passed within a definite time limit to avoid un-certainty. Section 11 (2) Under section 11 (2) where there is a delay in filing form 10, condonation by the CIT is possible subject to fulfillment of conditions. The CIT should pass a speaking order within a definite time limit on whether the condonation is accepted or rejected. Some futuristic changes in the Taxation regime: Sir, we would also like bring to your attention a number of regulatory issues related to Finance Ministry which is severely restricting the space and capacity of voluntary organizations to contribute to national development plans. This should be viewed in light of the National Policy on Voluntary Sector of Government of India since 2007.This policy invited the voluntary sector in India to contribute more actively to national development. It also promised to make the regulatory system more transparent and accountable, thereby enabling healthy development of the voluntary sector in India. Two key features of this regulatory environment are incorporation and non-profit status. The Government had promised to bring in a modern legislation, in line with enlightened global practices, to enable flexible and easy incorporation of voluntary organizations. That promise has not been delivered, and voluntary organizations continue to be governed by colonial era laws, rules and procedures. As your ministry moves towards refocusing reforms in tax regime, we would like to bring to your attention several ways in which greater domestic resources can be attracted towards the work of voluntary organizations in the country. These include incentivizing individual giving, creating incentives for domestic foundations, enabling CSR funds to be made available to voluntary organizations, creating enabling provisions for Indian voluntary sector to contribute to international development plans of the government and private sector, and improving the transparency and accountability of this sector s contributions to national development. During the last few years the fiscal and financial environment in the country has changed substantially, which requires alignment with operating environment for the Indian voluntary development organizations. Today, majority of voluntary development organizations are either working with government or trying to generate financial resources from within country. Most of their activities, projects and focus area are in line with the national development targets identified by Indian government through various national schemes or the planning commission. The dream of addressing national issues with national resources is slowly taking shape and numerous voluntary development organizations are working in this direction. In order to make this transition smooth, we would like to suggest some amendments in the forthcoming financial bill. 42

45 - Under the companies Act, the Indian government has rightly so, added a proviso to motivate Indian companies to spend on corporate social responsibility. Many companies do want to work with Indian voluntary organizations in realizing the dream of holistic growth of the country. But we all fear that such financial collaborations will attract taxation, if solicited through open tendering processes. - Various studies have shown that India has the high potential of individual philanthropy and giving. Indian voluntary development organization solicits financial support from such individual organizations through selling of greeting cards, or momentous, but these also attract taxation. The way forward: Option 1: Bring sec. 2(15) closer to actual activities of the sector: The definition of Charitable Purpose be made more specific and in tune with current nature of activities undertaken by the voluntary sector, while retaining the bar on commercial activities. However, providing services or goods at significantly lower prices will not attract the disqualification. The proposed revised section 2(15) is given below: Charitable purpose includes (a) the prevention or relief of poverty; (b) the advancement of education; (c) the advancement of health or the saving of lives, including the prevention or relief of sickness, disease or human suffering; (d) the prevention and mitigation of disasters; (e) the advancement of citizenship or community development, including rural or urban regeneration, empowerment of Panchayats and Municipalities, and the promotion of civic responsibility, volunteering, the voluntary sector or the effectiveness or efficiency of charitable or religious organizations; (f) the advancement of the arts, culture, heritage or science; (g) the preservation of monuments or places of or objects of artistic or historic interest, (h) the advancement of amateur sport meaning thereby sports or games which promote health by involving physical or mental skill or exertion; (i) the advancement of human rights, rights of the disadvantaged or marginalized persons; (j) the advancement of conflict-resolution or reconciliation or the promotion of religious, communal, gender, tribal, caste harmony or equality and diversity; (k) the advancement of environmental protection or improvement (including watershed, forest and wildlife); (m) the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage, including relief given by the provision of accommodation or care to such persons; (n) the advancement of animal welfare; (m) the promotion of the efficiency of the armed forces of India, or of the efficiency of the police, fire and rescue services, or ambulance services; (o) the advancement of any other object of general public benefit; 43

46 Provided that the advancement of any other object of general public benefit shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce, or business, for a cess or fee or any othe r consideration, irrespective of the nature of use or application, or retention, of the income from such activity; Provided however that, for the purpose of this clause, any amounts collected by a trust from purchasers or users of such services or goods shall not constitute trading, commercial or business receipts if such services or goods are provided at prices substantially below the market rates for comparable services or goods; Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year. Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is 20 % or less in the previous year. If amending the definition of Charitable Purpose is not the appropriate way at this stage, shall we humbly request to take corrective measures. The current amended provisions have changed the definition of charitable purpose, as a result any the voluntary organization will lose its charitable status even if its object clause permit certain incidental business activities. In other words without doing any business activity also the exemptions will be lost. Secondly, by virtue of the current amended provisions the entire income of a charitable organization shall be subjected to tax even if a very small negligible activity is towards incidental business activities. In the interest of natural justice, all the voluntary organization should be permitted incidental business activities. And no voluntary organization should be permitted to do unrelated commercial activities. Option 2: The voluntary sector appreciates the changes suggested in section 2 (15) provided further that the first proviso shall not apply if the aggregate value of the receipt from the activities referred to therein is twenty five lakh rupees or less in the previous year. We would further urge to at least treat NPO as a small business category (as done in section 47) where the presumptive taxation limit could be raised to 50% andrs. 10 Crore. Option 3: A new proviso may be added to section 11(4A). The suggested proviso is as under: Provided that the business or any commercial activity should be integrally related to the charitable or religious activity of the organization and any income of a trust or an institution, being profits and gains of business shall not be considered as incidental to the attainment of the objectives of the trust only because the entire income is applied for charitable purposes or religious purposes,. Two things can encourage such scope of channelizing private wealth of the nation for public service, arising out of an unprecedented GDP growth. (i) If there is a high inheritance tax that can only be avoided by giving endowments, high net-worth individuals would be stimulated to donate. Philanthropy in US is partly motivated by such laws. 44

47 (ii) Shares are important source of wealth in the nation today. I request the government to introduce and increase tax concessions so that corporate entities are encouraged to donate in form of shares and other assets and allow charitable organizations to hold these assets to enhance their endowment through appropriate tax code. Similar recommendation is mentioned in the Planning Commission s document on National Policy on Voluntary Sector-2007, in section 4.6 D) Further sir the definition of various financial terms like- what is an income? How is depreciation accounted? Cash basis of accounting and similar other matters, are not at par with the accounting practices in vogue and discriminates NPOs from other assesses. There is a need to relook at the question of Business Income where the business is in the nature of promoting a development activity. Sl. No. 1. Interpretation of Provisions of the CGST Act When a NPO sells goods and services to anyone outside its state, the NPO must register for GST. In such circumstances, aggregate turnover with the threshold of Rs. 10/ 20 lakhfor exemption does not apply. An individual / institution dealing only in exempted goods and Services Or where the aggregate turnover is below Rs 20 lakh( Rs. 10 Lakh in hill states) in the financial year, but not engaged in interstate supplies, is not required to register under GST. Concern Suggestion/ Recommendation For simple operating requirement Extend the existing threshold limit (such as distribution of to Inter-state supplies too so that publications, purchases of small NPOs and other small organization supplies, recoveries from produce (whose aggregate turnover is less supplied to communities across than Rs. 10 / 20 lakhs) interest is state boundaries etc.) of not for protected and encouraged to expand profit organisations the their operations / develop implications are far and complex businesses outside their States. even a transaction of INR 1 would be liable to GST and will require them to register under GST this will have cascading effect in terms of need to adhere to the compliance requirement of report and return filing etc under GST. 2. The definition of aggregate turnover under revised GST Draft Law is under section 2(6) which states that the aggregate turnover shall include all taxable supplies, exempt supplies, exports of goods and/or services and inter-state supplies of a person having the same PAN. The turnover is to be computed on all India basis and it shall exclude taxes, charged under the CGST Act, SGST Act and the IGST Act. Further an explanation has been provided which states that payments made under reverse charge mechanism shall not be included in computation of aggregate turnover. The definition visibly states that while computing aggregate turnover the assessee shall have to include exempted turnover also. That said will grants and donations received by not for profit organisations be included to calculate aggregate turnover The grants and donations received by NPOs that are applied for Charitable Purpose is exemptedunder enlisted category of services and hence outside the purview of GST. We recommend to officially notify this for clarification and practice while computation of Aggregate Turnover. 45

48 Sl. No. Interpretation of Provisions of the CGST Act 3. Charitable Activities as defined under GST : as per notification No. 25/2012-ST. Charitable activities" means activities relating to - (i) public health by way of - (a) (b) care or counseling of (i) terminally ill persons or persons with severe physical or mental disability, (ii) persons afflicted with HIV or AIDS, or (iii) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or public awareness of preventive health, family planning or prevention of HIV infection; (ii) advancement of religion or spirituality; (iii) advancement of educational programmes or skill development relating to,- (a) (b) (c) (d) abandoned, orphaned or homeless children; physically or mentally abused and traumatized persons; prisoners; or persons over the age of 65 years residing in a rural area; (iv) preservation of environment including watershed, forests and wildlife; or (v) advancement of any other object of general public utility up to a value of,- (a) eighteen lakh and seventy five thousand rupees for the year subject to the condition that total value of such activities had not exceeded twenty five lakhs rupees during ; (b) twenty five lakh rupees in any other financial year subject to the condition that total value of such activities had not exceeded twenty five lakhs rupees during the preceding financial year; Concern The activities included under Charitable Purpose in GST Act ( as per notification) does not cover all the activities as recognized under Sec 2(15) of Income Tax Act. The activities covered under 2(15) as Charitable Purpose meaningfully qualifies for exemption under GST Act too. Suggestion/ Recommendation We recommend that the definition of Charitable activities for exemptions notified (seem to be ones which are listed from Service Tax Act) be same as defined for the purpose of Income Tax Act U/s 2(15). This will bring out uniformity in the definition of charitable activities. The defined Charitable Purpose U/s 2(15)includes the following; relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility 46

49 Sl. No. Interpretation of Provisions of the CGST Act 4. Section 9(4): In case of any taxable supply to registered individual / institution from unregistered individual / institution, GST on the same shall be paid by recipient. It is provided that Rs 5000/- per day exemption is allowed in respect of small miscellaneous transactions made from unregistered person / institution. This exemption is provided only for Intra-state supplies. Concern Per day exemption of Rs. 5000/- is very low and requires review for enhancement considering the current market cost for specialized professional and expert services. The provision is extended only for Intra-state supplies. Suggestion/ Recommendation We recommend increasing this limit to a reasonable amount considering the current indicative cost for specialized services. Extend this provision both for Inter-state and Intra-state supplies to encourage individuals and institutions to procure goods and services to the threshold limit seamlessly. Sir, we would again like to thank you for providing this valuable opportunity to give suggestions on Taxation Regime for Voluntary Sector. Thanking you Sincerely Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 47

50 CHAPTER 2 Registrations Law 48

51 October 1, 2012 Dr. Manmohan Singh Hon able Prime Minister South Block, Raisina Hill, New Delhi Respected Hon ble Prime Minister Greetings from Voluntary Action Network India! I am writing this letter on behalf of Voluntary Action Network India (VANI) which is an apex body of Voluntary Development Organizations. We agree with the sentiments that you shared with the nation that our country is passing through a very crucial phase. On one hand, we have the challenge of keeping the pace of economic growth and on the other side we need to ensure that we continue to work towards the empowerment of the poor and marginalized by providing socio-economic justice to them. I am sharing this appeal with you as your government is seriously considering the possibility of forming a separate Ministry for Voluntary Affairs. We wholeheartedly appreciate and welcome any such move from your side as the time is ripe to take a step in this direction along with other reforms which you have initiated few days back. As far as the socio-economic growth of the country is concerned, we are at a critical juncture as the country is in the process of formulating its National Development Goals through 12th Five Year Plan. At global level these goals have to be in sync with the Millennium Development Goals. We appreciate your perspective that India can only develop if all engines of growth namely, government, voluntary sector and private sector work collectively. Against this background, we would humbly appeal to you to speed up the formation of a separate and exclusive Ministry of Voluntary Affairs. We feel that creation of such a mechanism will help in the following ways: 1. It will help synchronize the initiatives and programmes of Government and voluntary organisations working for similar cause from national, state, district and block level. 2. It will be a major step towards actualizing the National Policy on Voluntary Sector, adopted by the Union Cabinet under your leadership in It will systemize the reporting, registration and promotion of voluntary sector in India, as the Ministry of Corporate Sector does for Indian Corporate Sector. 4. It will systematize the dialogue and help strengthening the monitoring and implementation of Foreign Contribution Regulation Act through Ministry of Home Affairs. 49

52 5. Such a Ministry will also help cleaning up the sector from unwanted and fly by night players in the voluntary sector. 6. Such Ministry can also help formulation of National Registration Law for incorporation of voluntary development organisations in India. 7. Such ministry will also demonstrate the maturity of India in dealing with Voluntary Organisations while playing its role as the emerging leader in global development forums like G20, BRICS, IBSA, UN systems, etc. Sir, it has been two years that we were trying to get an audience with you to share the ideas of mutual collaboration between Government and Voluntary sector. We humbly request a hearing from you at your convenience and your office can always reach me at harsh@vaniindia.org for any further details. Looking forward to a favorable response from your side. Thanking you Sincerely, Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 50

53 Dr.Jitendra Singh Hon bleminister of State Ministry of Personnel, Public Grievances and Pensions Government of India Subject: Referral of The Lokpal&Lokayuktas (Amendment) Act, 2016 to the relevant Parliamentary Standing Committee Dear Dr. Jitendra Singh, I am writing this appeal on behalf of Voluntary Action Network India (VANI), which is the apex body of Indian Voluntary Development Organisations. We have outreach of organisations all over India. Most of our member organisations are involved in supporting and implementing development projects on the priority area of Indian government. Being an apex body the role of VANI is to work towards strengthening the voluntary sector in India, through internal capacity building as well as evidence based advocacy with the government. We are proud of working with Ministry of Home Affairs, Finance Ministry, NITI and Ministry of Corporate Affairs. We do provide input on the relevant policy areas of the government. Sir, we are writing to you with reference to the Lokpal&Lokayuktas (Amendment) Act, During the debate in Parliament on this legislation on the 27th& 28th of July, 2016, you had given an assurance that the Act will be referred to the Standing Committee. The relevant extract of your speech is pasted below: "DR. JITENDRA SINGH: Sir, that is why we are sending it back to the Standing Committee and keeping up the spirit of the House, we expect that it will be done expeditiously, possibly before the next Session of Parliament. (Ends) MR. DEPUTY CHAIRMAN: Yes; that is the only point. It should come back before the next Session..." (Source: As per information available on the websites of the Rajya Sabha and Lok Sabha, it appears that the Lokpal&Lokayuktas (Amendment) Act, 2016 has not yet been referred to any Parliamentary Standing Committees. We urge you to kindly take appropriate steps and ensure that the Lokpal&Lokayuktas (Amendment) Act, 2016 is immediately referred to the relevant Parliamentary Standing Committee, as per the assurance given by you in Parliament. Referring the legislation to a Parliamentary committee will provide an opportunity for concerned citizens and groups to send suggestions on the provisions of this important Act, which fundamentally amends the Lokpal and Lokayuktas Act (L&L Act) Thank you, Best wishes and regards Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 51

54 May 08, 2012 Dr. Manmohan Singh Hon able Prime Minister South Block, Raisina Hill, New Delhi Respected Greetings from Voluntary Action Network India! I am writing this letter on behalf of VANI, which is in continuation of my earlier letter dated March 23, I would like to refer to certain unfortunate instances occurred in the past few months which had a bearing on the decades-old partnership between the voluntary sector and the government. This partnership, irrespective of the ebbs and flows, has been a critical factor towards taking the wings of developments to the far flung areas and marginalized communities in the country. Presently, the voluntary sector is poised at a critical stage requiring concrete policy measures to safeguard its fundamentals. Therefore, through this letter, I would like to draw your kind attention to some suggestions to create an enabling environment for voluntary action in the country. Sir, the suggestions below are in line with the recommendations of the National Policy for Voluntary Sector adopted by Indian Government in 2007 (prepared by the Planning commission), the recommendations of 2nd Administrative Reforms Commission and draft recommendations submitted to Planning Commission on the role of Voluntary Sector in implementing the 12th Five Year Plan. These recommendations are also outcomes of Conclave of voluntary Sector Leaders Organised by VANI on February 20th as well as National Convention on March 27-28, Formation of Nodal Ministry/Department for Voluntary Sector: Today the Voluntary Organisations do not have any nodal ministry or even a department which can be a sounding board for the sector as well as to coordinate the affairs of the sector. In the absence of such a mechanism, there are no uniform reporting guidelines, systematic facilitative efforts, and it also prevents from developing productive partnerships between various development initiatives of the government and contribution of voluntary organisations. Today, a typical medium sized organisation has to report to more than 10 ministries with varying reporting requirements and no reliable data about the sector is available leading to ambiguity. In such a situation a well-coordinated mechanism of communication between the government and the voluntary organizations will remain a distant dream. Therefore, we suggest that an exclusive Ministry for the voluntary sector, in the lines of Ministry of Corporate Affairs, can be carved out by the Union 52

55 Government. 2. A National Registration Law for the Voluntary Development Organisations: Today the registration laws for the voluntary sector are not only more than 150 years old but are being misused by the fly-by-night players. Any Non-for Profit entity ranging from large private hospitals to private corporate schools, foundations and even small voluntary development organisations are registered under same act. This has not only created ambiguity of the nature, scope and scale of the voluntary sector but also created question of identity of each set of entity. Today, the voluntary development organisations are working in hand to hand with the government on various flagship projects of the government and greater role is envisaged in the next Five Year Plan. The study conducted by Central Statistical Organisations and Participatory Research in Asia (PRIA) has recommended an updated regulatory mechanism for Indian Voluntary Organisations. This will also help in professionalising the voluntary sector in the country. Already, most of the organisations report online their Income Tax returns as well as FCRA. With the component of online reporting of each VO it will also improve the data and reporting of the sector. Such National Registration Law will provide uniformity of regulatory and reporting mechanism as well as exclusive identity to the voluntary development organisations. 3. National tripartite Apex Body for self-regulation and Accreditation of Voluntary Development organisations: One of the major recommendations of National Policy for Voluntary Sector was to have transparent, accountable and participatory apex body for accreditation agency on the lines of Press Council or Bar Council. Unfortunately, due to absence of nodal ministry (as both the comparable agencies are anchored in their respective nodal ministries) this could not move ahead. Today, the formation of such a system is a pre-requisite as the focus to generate resources is not just from the government projects but also from the private and individual donors within the country. VANI being the apex body of the voluntary development organisations has already initiated discussions and basic research on the indicators. To make it more inclusive and participatory from the size, nature and scope of the sector, we are planning to conduct outreach workshops in coming year. We humbly request the partnership of the Indian government in these efforts. As written previously, we feel the need to protect and promote the genuine and law abiding voluntary development organisations, because along with the government and private sector, the voluntary development sector is the important pillar for nation building. Such accreditation and certification criteria developed and evolved by active engagement of wider voluntary development organisations will protect and promote genuine organisations and help government identify suitable partners. 4. A Permanent Mechanism for sharing the concerns of Government and Voluntary Organisations in development issues and enabling environment: During the last few months there has been lot of misunderstanding between government and the voluntary sector. On the one hand government accused voluntary organisations with allegations of money-laundering, misuse of foreign money and on the 53

56 other Voluntary Sector accused various government departments for harassments and shrinking of space for voluntary action in the country. India has not witnessed such break of communication between the two effective partners since independence. We would like to humbly request the government to create a permanent mechanism of regular dialogue between leaders of voluntary sector and the nodal/ concern ministries of the government. VANI will be pleased to anchor this process. Such permanent mechanism of dialogue will help building enabling environment as well as sounding board for both the partners. The issue could be related to FCRA, Income Tax, national security and sharing of contribution towards national development goals. Sir, we deeply appreciate your unique efforts of engaging voluntary development organisations in Pre- Budget Consultations and various policy making consultations. We would humbly request a suitable appointment from you to meet the delegation of senior leaders of the sector. This could be in line with your initiative of meeting business leaders through CII and FICCI. I can understand that you have a very busy schedule but such small meeting will reinforce the commitment of the government towards voluntary sector under your leadership as well as motivate genuine voluntary development organisations to work towards common goal with Indian government. Thanking you Sincerely, Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 54

57 CHAPTER 3 FCRA Laws 55

58 May 14, 2013 Shri Mullappally Ramachandran Hon ble Union Minister of State for Home Affairs Ministry of Home Affairs Room No. 101, North Block, New Delhi Respected Greetings from VANI! I am writing this appeal on behalf of members and associates of VANI, to draw your attention on the rampant misuse of Foreign Contribution Regulation Act against genuine voluntary development organisations of India. Needless to say here that voluntary sector has been partnering with the Indi an government and marginalised communities to create a prosperous society. However, since last two years i.e. after the implementation FCRA (2010), it is being used as a tool of silencing and demining the society movements in the country. I would like to draw you re your attention to certain facts which need proper investigation: 1. Last year almost 4000 registrations were cancelled without informing the organisations. It was from the website that we came to know about this action. Eventually it came out that nearly 200 cases were represented with the department where the records of FCRA department were not updated. These 200 organisations then again submitted their proof of returns and addresses to plead for their case of innocence. Even today all of such cases are not settled by the FCRA department where all proof of due diligence by the visits have been submitted to the department, rather new investigations are initiated to delay the reversal. 2. As per the provisions of FCRA, if bank accounts of any registered organisation are freezed or suspended, then investigations have to be completed in 80 days. These investigations have to be conducted by following the laws of natural justice, i.e. it has to be timely, with fair chance of listening to other party, but unfortunately, none of these provisions are being followed. We have cases where investigations are being carried out since two years. In such cases neither victim can appeal nor can go to court of law and is kept under permanent suspension. 3. Surprisingly, there are some provisions which are left unexplained and unspecified which are being used against voluntary sector. One line notices are being issues by sighting such provisions which are neither explained nor proved by investigations. The case to sight is working against national interest. Even if organization is working in partnership with Indian government, within the provisions of national plan of any flag ship project of national government, above stated reasons 56

59 are given to freeze their accounts. Consequently, the victim never gets answer to the crime for which he is being punished. In fact, victim is neither punished to declare innocent as investigations are not taken to logical end. 4. Unfortunately, selective leaks are being made in media about the misuse of foreign funds by the voluntary sector; on the contrary there is not a single case to prove this point. We see this as an attempt not only to tarnish the image of the voluntary sector but also to create fear among the minds of voluntary sector. No such leaks or accusations are proved ever. 5. Even, international development agencies are not spared. Some of them are being put under prior permission category without giving any chance of hearing or event informing them. Victims of such actions only get to know about the action of the department through information from the banks. 6. Misguiding figures about the funds received under FCRA by the voluntary sector is put in the public domain, whereas the latest annual report of FCRA department itself indicates that it is only marginal money out of total funds transferred in the country is for voluntary sector. The major beneficiaries under FCRA are not voluntary sector but the religious institutions and corporate academic institutions registered as Not for Profit Institutions under age old Societies Registration Act, Sir, being the partner in the development and nation building and on behalf of all genuine voluntary development organisations we request following steps: 1. There is an urgent need to inculcate the accountability on the actions of the FCRA department, by time bound investigations. We only request that provisions of the FCRA is respected and adhered to. We request that investigations are completed within the stipulated timeframe under the law. 2. Unexplained provisions which are used as the weapon to punish the innocents should be clearly defined. The terms like national interest, Dharna, agitations, and political interest need clear definition as today they are used as one-liners to freeze and suspend the registrations. Even giving information to people on national schemes like NREGS or SSA is considered as working against the national interest in some cases. We feel that making people aware about their entitlements under the law of the land should not be seen as any activity against national interest. Peaceful demonstration like satyagraha or taking small delegation to district collector is not a violent activity. We urge the proper notification to be issues by the Ministry of Home Affairs on theses definitions. 3. No certificate or document is issued by the FCRA department after receiving annual returns from the registered organisations. The liability always remains with the registered organization to beg in front of department to get their records updated. The case of cancellation of

60 organisations has shown that. Being managed by Home Ministry, the voluntary organisations do not have physical access to the officials in the building and there is no provision of getting acknowledgement or certification. This not only makes voluntary organisations vulnerable due to uncertainty but also helps touts to misguide and exploit innocent and law abiding citizens. 4. There is needed to make the FCRA department more accessible to the voluntary organisations by having structured interface. VANI along with FCRA department planned five regional outreach workshops, but the process was stopped after two namely South and West. We request you to restart the process and organize the remaining outreach workshops for North-East, North, and Eastern Region of the country. Such step not only gives chance to voluntary sector and officials to understand each other but also builds a relationship of trust. 5. Last but not lease we request a joint mechanism between voluntary sector and official of Ministry of Home Affairs to discuss issues related to not only to FCRA and other issues of mutual concerns. This is in line with the National Policy for Voluntary Sector prepared and endorsed by the Government of India in Such joint mechanism will also help in developing white paper on the foreign funding into India, which can clear lots of misconception in the minds of common people. Sir, being a leader of the democratic movement in the country we hope that you will do justice and take suitable action on the points raised. We would be happy to meet you any time to explain the details of the above points. Thanking you Sincerely, Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 58

61 May 14, 2013 Shri Pranab Mukherjee Hon ble President of India Rashtrapati Bhavan, New Delhi, India Respected Greetings from VANI! I am writing this appeal on behalf of members and associates of VANI, to draw your attention on the rampant misuse of Foreign Contribution Regulation Act against genuine voluntary development organisations of India. Needless to say here that voluntary sector has been partnering with the Indi an government and marginalised communities to create a prosperous society. However, since last two years i.e. after the implementation FCRA (2010), it is being used as a tool of silencing and demining the society movements in the country. I would like to draw you re your attention to certain facts which need proper investigation: 1. Last year almost 4000 registrations were cancelled withokut informing the organisations. It was from the website that we came to know about this action. Eventually it came out that nearly 200 cases were represented with the department where the records of FCRA department were not updated. These 200 organisations then again submitted their proof of returns and addresses to plead for their case of innocence. Even today all of such cases are not settled by the FCRA department where all proof of due diligence by the visits have been submitted to the department, rather new investigations are initiated to delay the reversal. 2. As per the provisions of FCRA, if bank accounts of any registered organization are freeze or suspended, then investigations have to be completed in 80 days. These investigations have to be conducted by following the laws of natural justice, i.e. it has to be timely, with fair chance of listening to other party, but unfortunately, none of these provisions are being followed. We have cases where investigations are being carried out since two years. In such cases neither victim can appeal nor can go to court of law and is kept under permanent suspension. 3. Surprisingly, there are some provisions which are left unexplained and unspecified which are being used against voluntary sector. One line notices are being issues by sighting such provisions which are neither explained nor proved by investigations. The case to sight is working against national interest. Even if organization is working in partnership with Indian government, within the provisions of national plan of any flag ship project of national government, above stated reasons are given to freeze 59

62 their accounts. Consequently, the victim never gets answer to the crime for which he is being punished. In fact, victim is neither punished to declare innocent as investigations are not taken to logical end. 4. Unfortunately, selective leaks are being made in media about the misuse of foreign funds by the voluntary sector; on the contrary there is not a single case to prove this point. We see this as an attempt not only to tarnish the image of the voluntary sector but also to create fear among the minds of voluntary sector. No such leaks or accusations are proved ever. 5. Even, international development agencies are not spared. Some of them are being put under prior permission category without giving any chance of hearing or event informing them. Victims of such actions only get to know about the action of the department through information from the banks. 6. Misguiding figures about the funds received under FCRA by the voluntary sector is put in the public domain, whereas the latest annual report of FCRA department itself indicates that it is only marginal money out of total funds transferred in the country is for voluntary sector. The major beneficiaries under FCRA are not voluntary sector but the religious institutions and corporate academic institutions registered as Not for Profit Institutions under age old Societies Registration Act, Sir, being the partner in the development and nation building and on behalf of all genuine voluntary development organisations we request following steps: 1. There is an urgent need to inculcate the accountability on the actions of the FCRA department, by time bound investigations. We only request that provisions of the FCRA is respected and adhered to. We request that investigations are completed within the stipulated timeframe under the law. 2. Unexplained provisions which are used as the weapon to punish the innocents should be clearly defined. The terms like national interest, Dharna, agitations, and political interest need clear definition as today they are used as one-liners to freeze and suspend the registrations. Even giving information to people on national schemes like NREGS or SSA is considered as working against the national interest in some cases. We feel that making people aware about their entitlements under the law of the land should not be seen as any activity against national interest. Peaceful demonstration like satyagraha or taking small delegation to district collector is not a violent activity. We urge the proper notification to be issues by the Ministry of Home Affairs on theses definitions. 3. No certificate or document is issued by the FCRA department after receiving annual returns from the registered organisations. The liability always remains with the registered organization to beg in front of department to get their records updated. The case of cancellation of 4000 organisations has shown that. Being managed by Home Ministry, the voluntary organisations do not have physical access to the officials in the building and there is no provision of getting acknowledgement or certification. This not only makes voluntary organisations vulnerable due to uncertainty but also helps touts to misguide and exploit innocent and law abiding citizens. 4. There is needed to make the FCRA department more accessible to the voluntary organisations by having 60

63 structured interface. VANI along with FCRA department planned five regional outreach workshops, but the process was stopped after two namely South and West. We request you to restart the process and organize the remaining outreach workshops for North-East, North, and Eastern Region of the country. Such step not only gives chance to voluntary sector and officials to understand each other but also builds a relationship of trust. 5. Last but not lease we request a joint mechanism between voluntary sector and official of Ministry of Home Affairs to discuss issues related to not only to FCRA and other issues of mutual concerns. This is in line with the National Policy for Voluntary Sector prepared and endorsed by the Government of India in Such joint mechanism will also help in developing white paper on the foreign funding into India, which can clear lots of misconception in the minds of common people. Sir, being a leader of the democratic movement in the country we hope that you will do justice and take suitable action on the points raised. We would be happy to meet you any time to explain the details of the above points. Thanking you Sincerely, Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 61

64 May 14, 2013 Smt. Sonia Gandhi Hon ble Chairperson National Advisory Council Government of India 2 MotiLal Nehru Place, Akbar Road New Delhi Respected Greetings from VANI! I am writing this appeal on behalf of members and associates of VANI, to draw your attention on the rampant misuse of Foreign Contribution Regulation Act against genuine voluntary development organisations of India. Needless to say here that voluntary sector has been partnering with the Indi an government and marginalised communities to create a prosperous society. However, since last two years i.e. after the implementation FCRA (2010), it is being used as a tool of silencing and demining the society movements in the country. I would like to draw you re your attention to certain facts which need proper investigation: 1. Last year almost 4000 registrations were cancelled without informing the organisations. It was from the website that we came to know about this action. Eventually it came out that nearly 200 cases were represented with the department where the records of FCRA department were not updated. These 200 organisations then again submitted their proof of returns and addresses to plead for their case of innocence. Even today all of such cases are not settled by the FCRA department where all proof of due diligence by the visits have been submitted to the department, rather new investigations are initiated to delay the reversal. 2. As per the provisions of FCRA, if bank accounts of any registered organisation are freezed or suspended, then investigations have to be completed in 80 days. These investigations have to be conducted by following the laws of natural justice, i.e. it has to be timely, with fair chance of listening to other party, but unfortunately, none of these provisions are being followed. We have cases where investigations are being carried out since two years. In such cases neither victim can appeal nor can go to court of law and is kept under permanent suspension. 3. Surprisingly, there are some provisions which are left unexplained and unspecified which are being used against voluntary sector. One line notices are being issues by sighting such provisions which are neither explained nor proved by investigations. The case to sight is working against national interest. Even if organization is working in partnership with Indian government, within the provisions of national plan of any flag ship project of national government, above stated reasons are given to freeze their accounts. Consequently, the victim never gets answer to the crime for 62

65 which he is being punished. In fact, victim is neither punished to declare innocent as investigations are not taken to logical end. 4. Unfortunately, selective leaks are being made in media about the misuse of foreign funds by the voluntary sector; on the contrary there is not a single case to prove this point. We see this as an attempt not only to tarnish the image of the voluntary sector but also to create fear among the minds of voluntary sector. No such leaks or accusations are proved ever. 5. Even, international development agencies are not spared. Some of them are being put under prior permission category without giving any chance of hearing or event informing them. Victims of such actions only get to know about the action of the department through information from the banks. 6. Misguiding figures about the funds received under FCRA by the voluntary sector is put in the public domain, whereas the latest annual report of FCRA department itself indicates that it is only marginal money out of total funds transferred in the country is for voluntary sector. The major beneficiaries under FCRA are not voluntary sector but the religious institutions and corporate academic institutions registered as Not for Profit Institutions under age old Societies Registration Act, Madam, being the partner in the development and nation building and on behalf of all genuine voluntary development organisations we request following steps: 1. There is an urgent need to inculcate the accountability on the actions of the FCRA department, by time bound investigations. We only request that provisions of the FCRA is respected and adhered to. We request that investigations are completed within the stipulated timeframe under the law. 2. Unexplained provisions which are used as the weapon to punish the innocents should be clearly defined. The terms like national interest, Dharna, agitations, and political interest need clear definition as today they are used as one-liners to freeze and suspend the registrations. Even giving information to people on national schemes like NREGS or SSA is considered as working against the national interest in some cases. We feel that making people aware about their entitlements under the law of the land should not be seen as any activity against national interest. Peaceful demonstration like satyagraha or taking small delegation to district collector is not a violent activity. We urge the proper notification to be issues by the Ministry of Home Affairs on theses definitions. 3. No certificate or document is issued by the FCRA department after receiving annual returns from the registered organisations. The liability always remains with the registered organisation to beg in front of department to get their records updated. The case of cancellation of 4000 organisations has shown that. Being managed by Home Ministry, the voluntary 63

66 organisations do not have physical access to the officials in the building and there is no provision of getting acknowledgement or certification. This not only makes voluntary organisations vulnerable due to uncertainty but also helps touts to misguide and exploit innocent and law abiding citizens. 4. There is need to make the FCRA department more accessible to the voluntary organisations by having structured interface. VANI along with FCRA department planned five regional outreach workshops, but the process was stopped after two namely South and West. We request you to restart the process and organise the remaining outreach workshops for North-East, North, and Eastern Region of the country. Such step not only gives chance to voluntary sector and officials to understand each other but also builds a relationship of trust. 5. Last but not lease we request a joint mechanism between voluntary sector and official of Ministry of Home Affairs to discuss issues related to not only to FCRA and other issues of mutual concerns. This is in line with the National Policy for Voluntary Sector prepared and endorsed by the Government of India in Such joint mechanism will also help in developing white paper on the foreign funding into India, which can clear lots of misconception in the minds of common people. Madam, being a leader of the democratic movement in the country we hope that you will do justice and take suitable action on the points raised. We would be happy to meet you any time to explain the details of the above points. Thanking you Sincerely, Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 64

67 May 14, 2013 Shri Sushil Kumar Shinde Hon ble Minister of Home Affairs Ministry of Home Affairs Room No. 104, North Block, New Delhi Respected Greetings from VANI! I am writing this appeal on behalf of members and associates of VANI, to draw your attention on the rampant misuse of Foreign Contribution Regulation Act against genuine voluntary development organisations of India. Needless to say here that voluntary sector has been partnering with the Indi an government and marginalised communities to create a prosperous society. However, since last two years i.e. after the implementation FCRA (2010), it is being used as a tool of silencing and demining the society movements in the country. I would like to draw you re your attention to certain facts which need proper investigation: 1. Last year almost 4000 registrations were cancelled without informing the organisations. It was from the website that we came to know about this action. Eventually it came out that nearly 200 cases were represented with the department where the records of FCRA department were not updated. These 200 organisations then again submitted their proof of returns and addresses to plead for their case of innocence. Even today all of such cases are not settled by the FCRA department where all proof of due diligence by the visits have been submitted to the department, rather new investigations are initiated to delay the reversal. 2. As per the provisions of FCRA, if bank accounts of any registered organisation are freezed or suspended, then investigations have to be completed in 80 days. These investigations have to be conducted by following the laws of natural justice, i.e. it has to be timely, with fair chance of listening to other party, but unfortunately, none of these provisions are being followed. We have cases where investigations are being carried out since two years. In such cases neither victim can appeal nor can go to court of law and is kept under permanent suspension. 3. Surprisingly, there are some provisions which are left unexplained and unspecified which are being used against voluntary sector. One line notices are being issues by sighting such provisions which are neither explained nor proved by investigations. The case to sight is working against national interest. Even if organization is working in partnership with Indian government, within the provisions of national plan of any flag ship project of national government, above stated reasons are given to freeze their accounts. Consequently, the victim never gets answer to the crime for 65

68 which he is being punished. In fact, victim is neither punished to declare innocent as investigations are not taken to logical end. 4. Unfortunately, selective leaks are being made in media about the misuse of foreign funds by the voluntary sector; on the contrary there is not a single case to prove this point. We see this as an attempt not only to tarnish the image of the voluntary sector but also to create fear among the minds of voluntary sector. No such leaks or accusations are proved ever. 5. Even, international development agencies are not spared. Some of them are being put under prior permission category without giving any chance of hearing or event informing them. Victims of such actions only get to know about the action of the department through information from the banks. 6. Misguiding figures about the funds received under FCRA by the voluntary sector is put in the public domain, whereas the latest annual report of FCRA department itself indicates that it is only marginal money out of total funds transferred in the country is for voluntary sector. The major beneficiaries under FCRA are not voluntary sector but the religious institutions and corporate academic institutions registered as Not for Profit Institutions under age old Societies Registration Act, Sir, being the partner in the development and nation building and on behalf of all genuine voluntary development organisations we request following steps: 1. There is an urgent need to inculcate the accountability on the actions of the FCRA department, by time bound investigations. We only request that provisions of the FCRA is respected and adhered to. We request that investigations are completed within the stipulated timeframe under the law. 2. Unexplained provisions which are used as the weapon to punish the innocents should be clearly defined. The terms like national interest, Dharna, agitations, and political interest need clear definition as today they are used as one-liners to freeze and suspend the registrations. Even giving information to people on national schemes like NREGS or SSA is considered as working against the national interest in some cases. We feel that making people aware about their entitlements under the law of the land should not be seen as any activity against national interest. Peaceful demonstration like satyagraha or taking small delegation to district collector is not a violent activity. We urge the proper notification to be issues by the Ministry of Home Affairs on theses definitions. 3. No certificate or document is issued by the FCRA department after receiving annual returns from the registered organisations. The liability always remains with the registered organisation to beg in front of department to get their records updated. The case of cancellation of 4000 organisations has shown that. Being managed by Home Ministry, the voluntary 66

69 organisations do not have physical access to the officials in the building and there is no provision of getting acknowledgement or certification. This not only makes voluntary organisations vulnerable due to uncertainty but also helps touts to misguide and exploit innocent and law abiding citizens. 4. There is need to make the FCRA department more accessible to the voluntary organisations by having structured interface. VANI along with FCRA department planned five regional outreach workshops, but the process was stopped after two namely South and West. We request you to restart the process and organize the remaining outreach workshops for North-East, North, and Eastern Region of the country. Such step not only gives chance to voluntary sector and officials to understand each other but also builds a relationship of trust. 5. Last but not lease we request a joint mechanism between voluntary sector and official of Ministry of Home Affairs to discuss issues related to not only to FCRA and other issues of mutual concerns. This is in line with the National Policy for Voluntary Sector prepared and endorsed by the Government of India in Such joint mechanism will also help in developing white paper on the foreign funding into India, which can clear lots of misconception in the minds of common people. Sir, being a leader of the democratic movement in the country we hope that you will do justice and take suitable action on the points raised. We would be happy to meet you any time to explain the details of the above points. Thanking you Sincerely, Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 67

70 May 14, 2013 Dr. Manmohan Singh Hon ble Prime Minister South Block, Raisina Hill, New Delhi Respected Dr.Manmohan Singh, Greetings from VANI! I am writing this appeal on behalf of members and associates of VANI, to draw your attention on the rampant misuse of Foreign Contribution Regulation Act against genuine voluntary development organisations of India. Needless to say here that voluntary sector has been partnering with the Indi an government and marginalised communities to create a prosperous society. However, since last two years i.e. after the implementation FCRA (2010), it is being used as a tool of silencing and demining the society movements in the country. I would like to draw you re your attention to certain facts which need proper investigation: 1. Last year almost 4000 registrations were cancelled without informing the organisations. It was from the website that we came to know about this action. Eventually it came out that nearly 200 cases were represented with the department where the records of FCRA department were not updated. These 200 organisations then again submitted their proof of returns and addresses to plead for their case of innocence. Even today all of such cases are not settled by the FCRA department where all proof of due diligence by the visits have been submitted to the department, rather new investigations are initiated to delay the reversal. 2. As per the provisions of FCRA, if bank accounts of any registered organisation are freezed or suspended, then investigations have to be completed in 80 days. These investigations have to be conducted by following the laws of natural justice, i.e. it has to be timely, with fair chance of listening to other party, but unfortunately, none of these provisions are being followed. We have cases where investigations are being carried out since two years. In such cases neither victim can appeal nor can go to court of law and is kept under permanent suspension. 3. Surprisingly, there are some provisions which are left unexplained and unspecified which are being used against voluntary sector. One line notices are being issues by sighting such provisions which are neither explained nor proved by investigations. The case to sight is working against national interest. Even if organisation is working in partnership with Indiangovernment, within the provisions of national plan of any flag ship project of national government, above stated reasons are given to freeze their accounts. Consequently, the victim never gets answer to the crime for 68

71 which he is being punished. In fact, victim is neither punished to declare innocent as investigations are not taken to logical end. 4. Unfortunately, selective leaks are being made in media about the misuse of foreign funds by the voluntary sector; on the contrary there is not a single case to prove this point. We see this as an attempt not only to tarnish the image of the voluntary sector but also to create fear among the minds of voluntary sector. No such leaks or accusations are proved ever. 5. Even, international development agencies are not spared. Some of them are being put under prior permission category without giving any chance of hearing or event informing them. Victims of such actions only get to know about the action of the department through information from the banks. 6. Misguiding figures about the funds received under FCRA by the voluntary sector is put in the public domain, whereas the latest annual report of FCRA department itself indicates that it is only marginal money out of total funds transferred in the country is for voluntary sector. The major beneficiaries under FCRA are not voluntary sector but the religious institutions and corporate academic institutions registered as Not for Profit Institutions under age old Societies Registration Act, Sir, being the partner in the development and nation building and on behalf of all genuine voluntary development organisations we request following steps: 1. There is an urgent need to inculcate the accountability on the actions of the FCRA department, by time bound investigations. We only request that provisions of the FCRA is respected and adhered to. We request that investigations are completed within the stipulated timeframe under the law. 2. Unexplained provisions which are used as the weapon to punish the innocents should be clearly defined. The terms like national interest, Dharna, agitations, and political interest need clear definition as today they are used as one-liners to freeze and suspend the registrations. Even giving information to people on national schemes like NREGS or SSA is considered as working against the national interest in some cases. We feel that making people aware about their entitlements under the law of the land should not be seen as any activity against national interest. Peaceful demonstration like satyagraha or taking small delegation to district collector is not a violent activity. We urge the proper notification to be issues by the Ministry of Home Affairs on theses definitions. 3. No certificate or document is issued by the FCRA department after receiving annual returns from the registered organisations. The liability always remains with the registered organization to beg in front of department to get their records updated. The case of cancellation of 4000 organisations has shown that. Being managed by Home Ministry, the voluntary 69

72 organisations do not have physical access to the officials in the building and there is no provision of getting acknowledgement or certification. This not only makes voluntary organisations vulnerable due to uncertainty but also helps touts to misguide and exploit innocent and law abiding citizens. 4. There is need to make the FCRA department more accessible to the voluntary organisations by having structured interface. VANI along with FCRA department planned five regional outreach workshops, but the process was stopped after two namely South and West. We request you to restart the process and organize the remaining outreach workshops for North-East, North, and Eastern Region of the country. Such step not only gives chance to voluntary sector and officials to understand each other but also builds a relationship of trust. 5. Last but not least we request a joint mechanism between voluntary sector and official of Ministry of Home Affairs to discuss issues related to not only to FCRA and other issues of mutual concerns. This is in line with the National Policy for Voluntary Sector prepared and endorsed by the Government of India in Such joint mechanism will also help in developing white paper on the foreign funding into India, which can clear lots of misconception in the minds of common people. Sir, being a leader of the democratic movement in the country we hope that you will do justice and take suitable action on the points raised. We would be happy to meet you any time to explain the details of the above points. Thanking you Sincerely, Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 70

73 To Shri. Anil Malik Joint Secretary (FOREIGNERS) Major Dhyan Chand National Stadium Outer India Gate, New Delhi Subject: Extension for linking FC registered bank accounts with PFMS compliant banks to 31 March 2018 Respected Sir, I am writing on behalf of the members of Voluntary Action Network India, the national platform for Indian Voluntary Organizations pertaining to the notification vide 2/21022/58(951)/2017 released by your august department on 21 December Sir as you are aware the notification stipulates the deadline for shifting FC designated bank accounts of Voluntary Organizations to PFMS compliant Banks by 21 January Sir, this is a very small period for such an onerous transition and entails various difficulties for Voluntary Organizations. As you know opening FC designated bank accounts is not an easy process requiring documentation and multiple-tier level clearances. The problem is compounded with regards to Voluntary Organizations at the grass roots that are confronted with diffused banking facilities at village and tehsil level and thus face difficulty in shifting to notified PFMS banks. Similarly there are many operatio nal constraints encountered by banks in opening FC designated bank accounts and lack of understanding among bank officials of the procedural modalities especially when it involves the use of link accounts at regional levels. Additionally owing to the year end, many Voluntary Organizations are involved in consolidating and filing their FC-4 Annual Returns and thus face challenge in opening new bank accounts. It has also been noticed that many banks who are PFMS compliant are not included in the notified list issued by the department. It is with this plea that we submit to your humble consideration to extend the date of the deadline to 31st March 2018 for integrating FC bank accounts with PFMS compliant banks. This will not only grant time for Voluntary Organizations to smoothly transition to new bank accounts but will give ample time for banks to implement the order. Please bear in mind that we as the Voluntary Sector welcome this move by the department as it supports transparency and accountability however the time allotted for the process is not enough and may throw room for human error which is not desirable under FCRA rules. It is hoped that you would grant us this extension and allow us time to spread this information as many grassroots Voluntary Organizations would not be aware of this notification. Thank you for your time and consideration Best Regards, Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 71

74 Date: 27 October 2016 KirenRijiju Hon. Minister of State (Home Affairs) Ministry of Home Affairs, Room No. 127 North Block Central Secretariat New Delhi Respected Sir, Subject: Representation of VANI on delay on FCRA Renewal On behalf of the members of Voluntary Action Network India, we would like to thank you for the opportunity given to us to submit our representation for consideration on Renewal of FCRA Registration. Being an apex body of Voluntary Development Organisations, VANI represents 15,000 voluntary organisations from all over India. These organisations are engaged in developmental initiatives, like, health, education, water & sanitation, old age care, child and women development. We along with our members pride ourselves in contributing the growth and development of India. VANI has a very longstanding relationship with government in not only representing the voluntary sector but also providing necessary input and support as and when required. VANI and its members have always stood for highest level of accountability and transparency of the voluntary sector. We have not only supported all such initiatives of the government but also run series of capacity building interventions with our members to keep their compliancesto highest levels. VANI is proud of collaborating with Foreigners department of MHA for framing of FCRR in We had organised consultation of leaders and legal experts to interface with Ministry. We also provided input to officials of MHA on the challenges faced by voluntary organisations and suggestions to improve the efficacy of FCRA. VANI values the collaborating relationship with MHA, while organising such outreach workshops of FCRA with Ministry. In the case of FCRA, VANI has always helped government and Voluntary Organisations in compliance of the Act and our efforts have been recognised by Ministry and government in the past. As far as renewal of FCRA is concerned, VANI organised almost 20 FCRA clinics all over India to facilitate the online submission of necessary documents. However, we have certain concerns, which we would humbly like to share with you: 1. Although, many organizations had filled their forms and completed the required formalities on time they are still waiting for the renewal orders. It becomes more critical as the last date of validity of the old registration is approaching very fast. 2. Sir, many of these organizations are working on the flagship programmers of government and this 72

75 delay is causing anxiety among the team, experts and experts engaged in the projects. 3. Many large and reputed organizations, which provide valuable technical support to the government departments and smaller organizations, are yet to receive their renewal orders. 4. Sir, the recent developments within the Ministry has also caused lots of anxiety among the law abiding genuine organizations. 5. Due to non-communication on the status of the pending applications, we fear that the situation could be exploited by the so called agents who look for such opportunities to exploit. In the past the Ministry has always communicated with VOs on the status, which not only gives confidence to the organizations but also helps us to keep these agents away. 6. Humble Submission: Sir, based on the above submissions, we would humbly urge the Foreigners Department of the Ministry of Home Affairs, to consider following steps: a) A line of communication to the organizations whose case is pending. This could be done on their online system also. b) To speed up the process of renewal, which does not breaks the chain of programme implementation in the field. c) In case, government is planning to extend the date, then timely information will help In the end, we would like to reiterate our commitment to the highest level of transparency and accountability for the Voluntary sector as well as in public life. We are hopeful that our humble suggestions will receive positive consideration. We look forward to seek opportunity to discuss the above in person at your convenient time. Thank you Sincerely Harsh Jaitli Chief Executive Officer Voluntary Action Network India 73

76 Dr. Jitendra Singh Hon ble Minister of State Ministry of Personnel, Public Grievances and Pensions Government of India Subject: Referral of The Lokpal & Lokayuktas (Amendment) Act, 2016 to the relevant Parliamentary Standing Committee Dear Dr. Jitendra Singh, I am writing this appeal on behalf of Voluntary Action Network India (VANI), which is the apex body of Indian Voluntary Development Organisations. We have outreach of organisations all over India. Most of our member organisations are involved in supporting and implementing development projects on the priority area of Indian government. Being an apex body the role of VANI is to work towards strengthening the voluntary sector in India, through internal capacity building as well as evidence based advocacy with the government. We are proud of working with Ministry of Home Affairs, Finance Ministry, NITI and Ministry of Corporate Affairs. We do provide input on the relevant policy areas of the government. Sir, we are writing to you with reference to the Lokpal & Lokayuktas (Amendment) Act, During the debate in Parliament on this legislation on the 27th& 28th of July, 2016, you had given an assurance that the Act will be referred to the Standing Committee. The relevant extract of your speech is pasted below: "DR. JITENDRA SINGH: Sir, that is why we are sending it back to the Standing Committee and keeping up the spirit of the House, we expect that it will be done expeditiously, possibly before the next Session of Parliament. (Ends) MR. DEPUTY CHAIRMAN: Yes; that is the only point. It should come back before the next Session..." (Source: As per information available on the websites of the Rajya Sabha and Lok Sabha, it appears that the Lokpal&Lokayuktas (Amendment) Act, 2016 has not yet been referred to any Parliamentary Standing Committees. We urge you to kindly take appropriate steps and ensure that the Lokpal&Lokayuktas (Amendment) Act, 2016 is immediately referred to the relevant Parliamentary Standing Committee, as per the assurance given by you in Parliament. Referring the legislation to a Parliamentary committee will provide an opportunity for concerned citizens and groups to send suggestions on the provisions of this important Act, which fundamentally amends the Lokpal and Lokayuktas Act (L&L Act) Thank you, Best wishes and regards Harsh Jaitli Chief Executive Officer Voluntary Action Network India (VANI) 74

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