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 on Thursday.
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.