The government plans to tighten administrative and penal provisions to discourage misuse of tax concessions by voluntary organisations (VOs).
“The government will consider tightening administrative and penal procedure to ensure these incentives are not misused by paper charities for private financial gains,” according to the National Policy on Voluntary Sector unveiled by deputy chairman of Planning Commission Montek Singh Ahluwalia today.
The Policy, however, made a case for continuing fiscal concessions for VOs and suggested the government should simplify and streamline the system for granting tax exemption to charitable projects under the Income Tax Act. Ahluwalia said donors should also be allowed to gift stocks and shares, which have become a significant form of wealth in the country, to such organisations.
The Policy also suggested simplification of related provisions of Foreign Exchange Contribution (Regulation) Act apply in consultation with joint consultative groups to be set up by relevant central departments.
The government is in the process of amending the FCRA to facilitate inflow of foreign contribution for legitimate voluntary activities. The Policy also suggested encouraging government agencies to ensure proper accountability and monitoring of public funds distributed to the VOs. Ahluwalia said monitoring of funds provided to the VOs by the government would address concerns regarding effectiveness of grants-in-aid schemes.

Feasibility
According to the policy, the centre would examine the feasibility of enacting a simple and liberal central law to serve as an alternative to all-India statute for registering VOs, particularly for those who wish to operate in different parts of the country and even abroad.
Such a law would co-exist with prevailing central and state laws, allowing a VO to register under one or more laws, depending upon the nature and sphere of its activities.
Referring to issues concerning registration of VOs, he said the voluntary sector must address these issues through a suitable self-regulation.
Stating that government accredition was not desirable, he said the government would encourage voluntary sector to develop alternative accredition methodologies to facilitate funding and make the process more transparent. Ahluwalia further said Planning Commission would encourage state governments to review laws and rules and simplify them in accordance with the National Policy.