Last week, the Finance Minister of India announced the Budget 2020-21 for the country. As an Economics student, reviewing the budget was a given annual assignment during my five-years in Higher Ed. It is a habit I have continued all these years except for two changes – the depth in reading that the lack of context personally for me now. The sections that I would be most interested to read through are those that relate to education, support for any innovative schemes and overall charitable giving clauses. Naturally so, I glanced through the key highlight of the budget this time around and I consider it a good timing as I launch Social Echoes.
One of the clauses in the bill talks about a new scheme of tax rates for individuals which offers an option to pay taxes at reduced rates. A caveat to this option is that if individuals opt for the reduced rates, they have to give up on certain exemptions and deductions – one of them being donations to charitable organizations. You can read key highlights of the budget here and summary of the tax changes here.
While there are several nuances to the taxation element and something to be left for chartered accountants to elaborate on, this clause made me ponder on what motivates people to donate. The background that I come from, people and companies give as a means to carry forward their commitment for donation, to see (as well as create) the impact of their donations. They typically donate to causes that are close to their hearts, be it girl-child education, religion, special needs, art heritage, environment and so on. Yes, the element of tax exemption does come through and I am presuming this is almost as an after-thought, as one of the ‘benefits’ of charitable contribution and not necessarily an ‘incentive’ to donate.
With this new reduced tax rates in place, only time will tell whether it would change the giving mindset of people (and companies). In my opinion, those committed to give will probably continue with their contributions. Those only recently in the giving market, may have a judgement call to make regarding their potential donations. My biased opinions aside, I am keen to explore –
What are some of the real motivations of giving?
Do the nonprofits face any real threat from the proposed tax changes?
What would you, as a potential donor, do – forgo the reduction or the giving?
More on these to follow, in the meantime feel free to share your thoughts on the above.