Firms offering shares to VOs may get tax relief

The government is considering providing suitable tax rebates to private companies in order to encourage transfer of shares and stock options to voluntary organisations (VOs).

Under the 'national policy on the voluntary sector', released here today by Planning Commission Deputy Chairman Montek Singh Ahluwalia, the government intends to simplify and streamline the system for granting income tax exemption status to charitable projects under the Income Tax Act.

However, to curb the misuse of tax benefits given to voluntary organisations, for public donations, the government proposes to tighten the administrative, penal procedures. High networth individuals and companies often show donations only on pen and paper through liaison with the voluntary organisations to get tax benefits.

The government is also in the process of reviewing and simplifying the provisions under the Foreign Contribution (Regulation) Act. An organisation seeking foreign funding must be registered under this Act.

The Act at present prescribes stringent norms that often restrict the ability of voluntary organisations to avail foreign funds. The guideline for bilateral agencies to give direct assistance to voluntary organisations is also being simplified.

However, the Planning Commission is opposed to any certification of voluntary organisations by the central government. "I am not in favour of central government certifying whether an NGO is good or bad," Ahluwalia said.

The government would encourage evolution of a national-level self-regulatory agency for the voluntary sector, he added.

It will also encourage various agencies, including those in the voluntary sector, to develop alternative accreditation methodologies.