Let non-profits function, make FCRA simpler

Mathew Cherian

THERE has been over-regulation of non-profit organizations when what they really need is to be left free to fulfil their complex roles in the development of the economy. Non-profits close last-mile gaps, promote inclusion and drive new ideas. They enable the adoption of new technologies.

Governments often highlight what they do to improve the ease of doing business. But what about the ease of doing good? Development programmes need voluntary effort to make them more effective and reach communities efficiently.

Non-profits make a substantial contribution to the economy. They employ 18 million people and it is estimated there are nine million volunteers in the country.

 

FCRA licence renewal should be as simple as getting a passport

Doing Foreign Contribution Regulation Act (FCRA) documentation online can be a nightmare, especially for small organizations. Mistakes cannot be corrected and if there is a discrepancy between the soft and hard copy versions of the information, all the documents go up for scrutiny. In the absence of clear-cut criteria for renewal of an FCRA licence every five years, organizations are not sure of their survival. Why can’t the conditions be clearly spelt out and the paperwork made easier — like getting a passport.

The rule that requires 85 percent of foreign funds to be spent in the same year should go. The unspent money is treated as income when it is more in the nature of ‘deferred liability’.

Small community-based organizations can’t use their own resources every year till the funds arrive from the grantee. FCRA reporting becomes more complicated if local money is used. The local police, Income Tax Department and also the Economic Offences Wing harass the ground-level voluntary organizations.

Make the norms for registration and exemption simple in much the same way as rules relating to FDI are simplified for companies. Why should there be double standards for different sectors?

The stipulation of opening an FCRA account only in the State Bank of India on Parliament Street, New Delhi, should be changed. Any SBI branch should do.            

 

Reduce discretion in tax matters, treat fundraising as charity

The legal incentives available to philanthropic organizations and the non-profit sector fall into two general categories: (i) tax exemptions for the income and goods that non-profit organizations receive and (ii) tax advantage for donors, both individual and corporate, for contributing to the non-profit sector through deductibility of charitable contributions.

The revenue authorities retain substantial discretion in these decisions and apply it arbitrarily. The structure of support is enhanced by exemption or deduction procedures that are not entirely transparent. It leads to harassment by the tax officials.

Fundraising by non-profits should not be seen as a commercial activity as most revenue authorities currently tend to do. Building an organization requires fundraising. It involves costs which should not be seen as commercial costs but as charitable costs.

Philanthropic donations should be 100 percent tax exempt and Section 35 AC should be reinstated. Local donations can sustain the voluntary sector and the contributions to the national economy can be improved significantly. Going swadeshi and not videshi is the path ahead.

 

Liberalize CSR spending, open up more sectors for companies

The CSR guidelines indicating that spending should be 100 percent complete by the end of the financial year is an artificial timeline. This needs to be modified and, if tax exemptions are being given for CSR donations, it should follow the tax guideline of 85 percent spend and carry forward for five years as before. There needs to be a more liberalized approach to CSR and support to all the SDG goals and inclusion of all sectors of children, disabled, women, elderly, animal welfare and a ‘leave no one behind’ approach. Sustainability goals should be incorporated into these objectives of the Ministry of Corporate Affairs  CSR guidelines and should be solely for the social sector, implemented by non-profit organizations.  

 

Incentivize impact investing to get the Social Stock Exchange working

The present lack of tax incentives for the zero-coupon bond will create a situation where donors may not invest, barring an altruistic donor. Tax incentives of at least 80 G tax exemption need to be provided which will create a new funding avenue for the listed non-profits, if not 100 percent tax exemption. The government needs to enable tax exemption for Social Stock Exchange donors.

 

An appellate tribunal to address the grievances of the voluntary sector

In spite of the tremendous contribution by civil society there is a perennial problem: departments do not answer to the grievances of the voluntary sector. There is no appeal process or grievance redressal system. The Home Ministry poses a major problem, not answering any emails or letters or even acknowledging them. It is a non-transparent and completely unaccountable system. I suggest creation of an appellate tribunal headed by a judge on the lines of the Central Administrative Tribunal (CAT) so that our grievances can be addressed. 

 

Mathew Cherian is Global Ambassador of Ageing, Helpage International.