The idea goes all the way back to ancient Rome and the Bible, and the words are those of Jesus himself: “Render, therefore, to Caesar the things that are Caesar’s, and to God the things that are God’s.” (Matthew 22: 21). India’s Union finance ministry has done well to rediscover this secular principle of taxation. Why should a government forego its tax income if a citizen wishes to contribute part of his income to a religious institution/trust/fund as an act of faith? Money spent as a gesture to one’s faith need not be tax exempt. It is money spent by an individual in pursuit of that individual’s personal faith. It may or may not have positive social externalities, its welfare implications may be good or bad, but at the end of the day, it is money being spent by an individual in pursuit of that individual’s personal faith, not social welfare even if it contributes to it indirectly. Hence, a clear distinction should be made between income spent on social welfare, on truly charitable activity that, in fact, does not yield any pecuniary or other benefits for the person spending that money but potentially has a positive impact on the welfare of the community or a section of citizenry, and income given away to religious institutions/trusts/funds. In fact, the provisions of 80(G) in the existing income tax Act are quite clear. Section 80G sub-section 5(iii) clearly denies the benefits of 80G to any contribution made to an “institution or fund” that is “for the benefit of any particular religious community or caste”. In other words, while the income of religious institutions, trusts and funds are eligible for tax exemption, those who make contributions to such institutions cannot derive tax exemption benefits. However, it seems to have been the case that such exemptions have been given from time to time requiring the proposed amendment. Interestingly, while explanation 3 of 80G clearly states, “In this section, ‘charitable purpose’ does not include any purpose the whole or substantially the whole of which is of a religious nature”, provisions in section 5(B) fudge the issue. Hence, a clear statement by an official of the finance ministry that “if the donation is for charity, it will get deduction. India is a secular country. No deductions will be allowed for making donations for religious purposes” is both correct and welcome.
In fact, section 80G deserves a thorough reconsideration. Why should those making contributions to some institutions, as listed in this section, derive the benefit of securing tax exemptions while others cannot? It is curious that the Jawaharlal Nehru Memorial Fund, the Indira Gandhi Memorial Trust and the Rajiv Gandhi Foundation are all beneficiaries of 80G, along with various relief and welfare funds administered by the prime minister and various chief ministers. Along with debarring tax deduction benefits for donations made to religious institutions, the government should also debar such institutions, which seek to glorify individuals from tax deduction. Their’s is not unselfish charitable activity. Charitable organisations that, in fact, transfer incomes from the wealthy to the poor, and are not self-seeking, as well as government funds that seek to do this during natural disasters and calamities should be the only beneficiaries of such tax exemptions. While some religious extremists and political sycophants may object to these suggestions, the truly devout, the truly socially concerned and the truly munificent and philanthropic will never object to Caesar taking his due, even as they give generously in the name of God or worthy causes.
