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May 4, 2008
Proposed Amendment to Definition of "Charitable Purpose" in India
N. Dadrawala of the International Center for Not-for-Profit Law reports that the Finance Minister of India has proposed an amendment to Section 2(15) of the Income Tax Act which currently defines "Charitable Purpose" to include: relief of the poor; education; medical relief; and "advancement of any other object of general public utility." The proposed amendment provides that "advancement of any other object of general public utility" will not be considered a "charitable purpose" if it involves carrying on an activity in the nature of trade, commerce or business or rendering services in relation to any trade, commerce or business for consideration.
The proposed amendment is not intended to affect organizations involved in activities such as relief of the poor, medical relief and education. It is only intended to apply to entities carrying on regular trade, commerce or business, or providing services in connection with regular trade, commerce or business, and earning incomes, which have sought to claim that their purposes also advance objects of general public utility. The amendment does not target all activities falling under "advancement of any other object of general public utility"; only those activities which are commercial or support commerce are affected. Thus, organizations involved in the relief of the poor, medical relief and education may safely carry out income-generating activities without losing their exemption under Section 2(15). Trade organizations and associations supporting commerce and industry, will, however, be affected by the amendment.
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