Budget 2021: A Tiny Speck For Non-Profits, Madam Finance Minister
There are myriad demands thrown at you, Madam Finance Minister, at this time of year from hundreds of industry lobbies. Dozens of pundits seek to advise you on pulling off the balancing act that is India’s annual budget. No doubt you are also confronted by political pressures seeking sops for various constituents. It cannot be easy to contend with them all.
A group you hear less from is the nonprofit sector. You may recall its yeoman service to our fellow citizens this past year. Lauded by the Prime Minister and several of your colleagues, countless nameless heroines and heroes across the length and breadth of India stepped up to provide food, shelter, cash, talk time, transport, PPE, testing, education, information, counselling and so much more to people affected by the pandemic and the effects of the draconian lockdown. Governments across municipalities, states, and central ministries relied on their support in many different forms. Donors from every walk of life came through with all the support they could muster in cash, kind, volunteer services, talent, and solidarity. As severe as the effects of the pandemic have been, they would have been immeasurably more lethal without this vast national outpouring of generosity and service.
Many governments around the world recognise the criticality of these organisations and believe that they serve a crucial role in society that would continue to be vitally needed for the foreseeable future. Accordingly, they have seen fit to ensure that this essential sector is protected from massive job losses or shutdowns and helped to shore up its finances by increasing tax incentives for philanthropy. No such support has been forthcoming in India. Instead, nonprofits here have seen huge sums diverted away from the sector to the PM-CARES Fund even as CSR budgets were cut and international funds frozen by the uncertainties of the new amendments to the FCRA.
While stock markets achieve new records to considerable jubilation, the data on the entire gamut of issues civil society seeks to address — malnutrition, unemployment, school dropout rates, child marriage, violence against women and girls, climate change, and the like — are all causing dismay. The challenges ahead in public health, housing, urban development, education, and the entire range of social protections are daunting. India’s progress on the Sustainable Development Goals, lagging before COVID-19, has since taken further serious hits.
If there were a budgetary head where a minuscule decrease in revenue could unlock billions of rupees in support for citizens facing the greatest crisis of their lives, might it make sense to consider it? In your last budget, you reported that a total of Rs 2,316 crore of revenue had been foregone by way of tax exemptions for charitable donations by individuals and organisations combined. This made up less than 0.2% of tax revenue. The present tax regime permits donors to reduce their taxable incomes by 50% of the value of the contributions they make to approved charitable organisations up to a limit of 10% of income.
In a move that would make a barely noticeable difference to your revenues, you could restore the 100% exemption that was withdrawn in 2016.
The potential loss of revenue to the exchequer would be insignificant but, for thousands of NGOs stretched to their limits and beyond, and for the millions they serve, the relief would be lifesaving.
The sector faces many challenges. Torturous regulatory hurdles, constraints on its freedoms, and hostility and harassment from many different quarters. All these need to be urgently addressed. For now, however, the tiny gesture on tax incentives could go a long way to signalling your belief that civil society and philanthropy are at the heart of any ‘new normal’ India can hope to achieve.
Ingrid Srinath is the founding Director of the Centre for Social Impact and Philanthropy at Ashoka University. The views here are personal and do not reflect those of the university.
The views expressed here are those of the author, and do not necessarily represent the views of BloombergQuint or its editorial team.