October 2018

Charity and Donations

C. N. Vaze
Chartered Accountant

Ours is a charity minded society. 'Giving’ is an important ‘sanskara’ in our culture. My parents used to give ‘dakshina’ to the priests or alms to the beggars through our hands, so that the habit is inculcated in early childhood.


The rationale behind tax exemptions to charitable trusts is interesting. The Kings used to rule over a large territory.  During famines or other natural calamities, it was the king’s duty to provide food grains to the affected subjects.  The distances from capital city were quite long. Therefore, local godowns were maintained at various places spread across the kingdom. Local religious temple – trusts were entrusted with the task of looking after the warehouses and arranging for distribution in appropriate situations.  Since the trusts were performing the king’s task, they were granted exemption from paying taxes. The taxes used to be normally equivalent to one sixth of the crop, as agriculture was the main source of income.


Unfortunately, in the present era of degenerating values, such exemptions are being misused by both – the institutions as well as the donors while claiming tax benefits. Therefore, it is now experienced the world over that the Government’s or regulator's approach towards the charitable institutions or NGOs has not remained very healthy.


Nevertheless, charity still continues and will continue for ever. Here are two anecdotes:-


There was a housing society. Once, the children in the society formed their club or ‘mandal’. It was decided to raise funds by collecting contributions from the residents. There were many buildings and each building was allotted to one or two children. An innocent but smart boy collected some contribution from a gentleman. The person was a little witty. He asked the boy –"Now that I have become a member of your mandal, what will I get?".


The kid was fumbled. He never knew what for the funds were being collected. He thought for a moment and said, “Uncle, perhaps you can again give such contribution next year!”. The real secret and


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