Tag: tax exemption

Separation of Church and Estate

I’m talking about Sathya Sai Baba here (incidentally, in Kannada his name translates to “did you die? Die! Come, come!”), who recently “attained his own lotus feet”, to paraphrase what someone said on Twitter. Even Sachin Tendulkar’s prayers for his health didn’t help him, it seems.

So there are two sides to saibaba, and going forward it is important that the two be kept disjoint. On the one hand is the “NGO work” that his organization has undertaken – the super-specialty hospitals in Puttaparthi and Bangalore, the drinking water project they’ve implemented in Rayalseema, and the like. On the other is the spiritual side, where you have thousands of “devotees” (I once called my aunt “Sai baba’s follower” and she got offended saying “I’m a devotee, not a follower”) singing bhajan and going delirious when Sai Baba produced Caramilk toffees out of thin air and threw them into the crowd (a long time ago, I was one of them, jumping up and down to catch these toffees).

I guess efforts are on to find his “spiritual successor” (and I hope China doesn’t step in to prevent his reincarnation), and there is already reportedly a huge fight among his “close devotees” regarding control of his estate. The estate is huge, and is supposed to get lots of donations, a large part of which at least (it appears) has been deployed in developmental projects. It is important that these developmental projects continue, and to ensure that they’re not hijacked by “devotees” who want to pursue a different agenda, it’s important to spin off this side of the organization into a registered NGO – recognized and regulated by the government, providing tax exemption to donations, publishing accounts regularly, and the like. You know how common it is that “spiritual NGOs” are hijacked for purposes of money laundering.

I don’t care what happens to the rest of the organization – with the delirious “devotees” who sing bhajans and give “global” speeches” and start TV and radio stations. Perhaps it is important for it to also continue – for its presence will mean people continue to be attached to the baba, which could help in fundraising efforts for the NGO. I’m sure they’re going to find a spiritual successor, but it needs to be seen how many of the baba’s “devotees” remain devoted to this successor.

On an unrelated note, I see in the papers that the baba is going to be buried. I don’t know what the rules of the caste he was born into (Raju) is, but I suppose this is a tactic so that there is no mad fight for his ashes, the “holiest of the holy vibhutis”, in case he is cremated. Even then, I wouldn’t be surprised if his body gets exhumed by some overzealous “devotee” sooner or later. They need to dig deeper.

Tax Breaks

One thing that has struck me recently is about charitable organizations that try to attract donations by claiming “100% tax break under section 80G” or a similar 50% tax break or some such thing. Given how often organizations use this technique to get funds, I’m sure this works. That people do choose where to donate their money depending upon the amount of tax break they get.

I’m just trying to illustrate this concept from another angle. Let’s say you donate Rs. 10000 to a charity that has gives a “100% tax free” receipt. So effectively your taxable income goes down by Rs. 10000. And considering a 10% marginal tax rate (ignoring cess, surcharges, etc.) your tax payable comes down by Rs. 3000. So effectively, you have donated ONLY Rs. 7000 to this charity and forced the government to pay the balance Rs. 3000.

Do you see the catch in this tax-break scheme? Essentially the government is forced to pay money to charity at the behest of a single citizen! By granting this “tax free status” to a charitable organization, the government is making itself liable to commit unlimited funds to this particular charity (of course I suppose that it isn’t easy to get such breaks for your organization, and considerable greasing of palms is involved. But considering that a small charity run by my extended family gets 50% tax break it may not be very hard after all).

So yeah, I’m sure the numbers will be available somewhere but i’m too lazy to find it. But I’m interested in finding out the aggregate deduction sought by all taxpayers put together under this section 80G (the one where you get tax exemption for donations). And then see where the government’s forced charity is headed!