So, in addition to filing their annual tax audit report, trusts and charities now have to maintain a record of projects undertaken, voluntary contributions received (including PAN and Aadhaar of donors), all donations from overseas, every fund transferred to others, income from assets and investments, and all purchases made by the trust. Greater accountability is fine. But one must also ensure that genuine trusts do not get drowned in paperwork that will raise their compliance burden needlessly.
The I-T law exempts all income spent towards a charitable purpose from tax. The idea is to enable trusts and charities to make a meaningful social impact. They must be registered under the I-T Act to qualify for the tax breaks. Shockingly, a recent report by the Comptroller and Auditor General (CAG) revealed that over 21,000 trusts enjoyed tax exemption without getting themselves registered. 347 trusts received foreign contributions without being registered under the Foreign Contribution (Regulation) Act between 2014-15 and 2017-18. This warrants an inquiry.
Charities and trusts are in the concurrent list, and governed by laws that inhibit uniform management practices. A central law will make the management of voluntary organisations easier. Reviving an earlier proposal to have a model uniform law to replace myriad central and state laws merits consideration. A balanced regulation, with checks to prevent money laundering, will smoothen the running of these institutions.