A Review of Charities Administration in India

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A Review of Charities Administration in India A Review of Charities Administration in India Sampradaan Indian Centre for Philanthropy Sponsored by The Planning Commission, Govt. of India September 2004 Sampradaan Indian Centre for Philanthropy Sector - C, Pocket - 8 / 8704 Vasant Kunj, New Delhi - 110 070 Tel: 2689 9368, Telefax: 2612 1917 E-mail: icp@ndb.vsnl.net.in Web: www.sampradaan.org ACKNOWLEDGEMENTS This research was made possible thanks to grant funding by the Planning commission. Government of India , New Delhi. Sampradaan Indian Center for Philanthropy acknowledges with thanks the support of the Planning Commission. A number of professionals from different cities, including charted accounts, Ngo leaders, retired government officials, and others, too numerous to detail here, helped us gain a better understand of the operations of the regulatory agencies as well as the problems faced by charitable organizations. Our grateful thanks to all of them and especially to Mr. M. Kandasamy, who redefined our thinking and assisted the project at various stages. We would also like to thank the several government officials in charge of the various regulatory agencies who readily gave us time to explain the Government’s perspective, and willingly co- operated to provide whatever information they could. We further acknowledge a debt to all the leaders and staff of all the organizations who respond to our survey questionnaire and who agreed to give their time for in depth interviews in the hope of a new deal for the voluntary sector. We thank them and appreciate their willingness to promote a good cause. Data collection from the many different regions covered would have been an onerous task for us but for the assistance of the Center for Social Markets (CSM) Calcutta, and the Confederation of Indian Organizations for Service and Advocacy, (CIOSA) Chennai who supported us for information from the Calcutta and Chennai respectively. Finally, we acknowledge the work put in by various members of the Sampradaan team in to the report. Pushpa Sundar Executive Director, Sampradaan Indian Centre for Philanthropy September 2004 PREFACE India’s development needs are vast; the resources to meet them are not. Most of them come from government and foreign donors. Promoting other sources of funds to supplement these two, and also to provide choice and independence of action is an urgent necessity. Private philanthropy, institutional and individual, offers an obvious alternative, especially as India has a long and distinguished tradition of philanthropy. However, in today’s context, philanthropic attitudes and practices need a reorientation to keep abreast of new developments and to meet the needs of the time. The impact of private charitable resources (time, skills, money) could be improved with better appreciation and knowledge of the opportunities for making a difference, more professional practice and building of alliances or networks. Established in 1996, as a national level organization, by a group of distinguished individuals from various fields, Sampradaan- Indian Centre for Philanthropy (SICP) represents an effort to facilitate the practice pf philanthropy and to increase its impact on society. SICP’s Vision is of an India in which private resources of money, assets, time and skills are shared willingly, and used effectively, to create a developed and equitable society. Its Mission is to help strengthen civil society by enhancing the effectiveness of philanthropy. Its Objectives are: · To promote a culture of giving · To ensure more effective philanthropy by acting as a resource for civil society in India. · To influence public policy for support of philanthropy and to advocate for it. · To encourage and promote co-operation between the state, corporate sector, and civil society organizations for improved philanthropic practice. SICP fulfils its mission and objectives by undertaking research, advocacy, training; dissemination of information; playing a convening role for networking; and providing consultancy assistance to individual and institutional donors on philanthropic issues and practice. It has, in the past, conducted several research studies on the different sources of charitable giving; on fund raising in India; on volunteering; and on Indian trusts and foundations. The studies have culminated in several publications. The organization has also been in the forefront of advocacy on behalf of the voluntary sector in India esp. in relation to tax and law reforms. The present research was undertaken in continuation of its goal of creating a culture of giving by creating an enabling environment, which not only encourages philanthropy to flourish, but also ensures that public trust in charitable organizations is maintained by proper regulation of the use of charitable funds. Though the laws governing the sector have been reviewed before, this is perhaps the first systematic look at the official infrastructure for promoting and regulating charity. Its objective was to highlight inadequacies, if any, in the existing institutional set up, and to suggest improvements so that all those who work in and for charitable organizations can contribute their best to India’s development efforts. It is a subject of vast scope but also of vast importance for the social sector. We sincerely hope that this effort, though only a first step, will have a chain reaction leading to a reform of both the charitable sector and the official machinery charged with promotin g and overseeing it. Pushpa Sundar Executive Director, Sampradaan Indian Centre for Philanthropy September 2004 A Review of Charities Administration in India TABLE OF CONTENTS Page No. Executive Summary i-xix Chapter 1 Introduction 1-10 Chapter 2 Objectives, Scope and Methodology 11-18 Chapter 3 Legal and Institutional Framework of 19-50 Charity Administration in India Chapter 4 Review of Institutional Frameworks for 51-64 Charity Administration in other Countries Chapter 5 Findings the Perspective of Charities 65-93 Chapter 6 Perspective of the Law Enforcers 94-104 Chapter 7 Conclusions 105-114 Chapter 8 Recommendations 115-133 List of Annexure 134 i A Review of the Charities Administration in India EXECUTIVE SUMMARY 1. INTRODUCTION With the liberalization of the Indian economy, the enhanced focus on development, and the increasing awareness of the importance of human resource development, there is a growing awareness amongst government and the general public about the potential role of non-profit organizations in development. To facilitate the non-profit sector in realising its potential it is necessary to create an environment, which is conducive. This includes creating a legal and fiscal framework which allows voluntary non-profit organizations to come into existence without restraint and in a manner that is easy and inexpensive; to operate free of undue interference; and to have direct and indirect access to funds through tax benefits. 2. THE LEGAL AND FISCAL FRAMEWORK Charity is on the concurrent list of subjects where both the Center and the States are competent to legislate. Accordingly some of the laws are Central and applicable all over India, while others are enacted by individual states. There are five main laws governing the non-profit sector, each of which is administered by an agency specifically created for the purpose. These are: · The Registration of Societies Act of 1860, a Central Act, and its versions enacted by different states, with a Registrar of Societies in each state to register and regulate organizations registered under this Act. · There is no Central Act for registering or regulating public charitable trusts. A variatio n of the Indian Trusts Act of 1882, which applies only to private trusts, is in force in different states. Maharashtra and Gujarat have offices of the Charities Commissioner, created under the Bombay Public Trusts Act, 1950, to oversee charities in these states; Tamil Nadu has a Department of Religious and Charitable Endowments, and other states have some similar organization for charitable trusts. · Section 25 of the Companies Act 1956, deals with nonprofit companies. It is administered by the Registrar of Companies, and · The Income Tax Act, 1961, again a Central Act applicable all over India, provides fiscal benefits to NPOs, the administrative agency being the Department of Income Tax Exemption. · The Foreign Contributions Regulation Act, (FCRA) a Central Act applicable all over India, was essentially a security measure to control external funds flowing to nonprofit organizations, which could be used to threaten national security. In practice it has come to regulate the receipt and spending of all foreign funds going to nonprofit organizations, irrespective of security concerns. ii This basic legislative framework sets out the parameters within which the nonprofit sector can operate. During a hundred plus years of growth, rapid economic and social changes have changed the conditions under which the sector operates but the laws and institutional frameworks have not changed commensurately, though some attempts at change have been made sporadically. The latest of such efforts was the establishment in October 2000, by the Planning Commission, Government of India, of a Task Force to review, analyse and suggest ways in which the present acts, rules and procedures can be modified or simplified to facilitate the growth and development of the voluntary sector. The problem, the Task Force noted, is not only of lacunae in the laws, but also of the way the laws are interpreted and implemented by
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