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End of free lunch: Move to regulate NGOs

india Updated: Jun 23, 2006 01:28 IST
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THE GOVERNMENT is working on a mechanism to weed out the fraud and put the voluntary sector in order. The Planning Commission has prepared a draft national policy, proposing a slew of measures to regulate funding and functioning of NGOs.

The policy, which is with the prime minister for approval, says all voluntary organisations should declare their credentials and recommends measures to enable them to operate and spend their funds abroad.

The policy calls for a self-regulatory agency to look into the functioning and performance of NGOs and help the government in formulating a reliable accreditation methodology. "The focus is on self-evaluation. We'll let the NGOs work out a regulatory mechanism instead of extending bureaucratic control on them," says Planning Commission member Sayeeda Hameed. 

But not all is left to the NGOs. Checks have been proposed. Currently, not all voluntary organisations are required to file documents relating to their constitution, board composition, membership, and financial accounts with the government.

The policy wants them all to file the documents and post them on the internet.
The policy proposes to introduce measures to draw distinction between a public utility organisation dependent on fees (as in private schools and hospitals) and a public benefit organisation dependent on grants.

"To avoid tax evasions, separate classification and differential treatment of the two categories needs to be done in the Income Tax Act," the policy says.

The draft says it would examine the feasibility of enacting a central law to register voluntary organisations which want to operate across the country and even abroad. It proposes to introduce provisions in the Income Act and the Foreign Contribution (Regulation) Act to allow NGOs to spend their funds in other countries. "But strictly on philanthropic and charitable purpose barring funding of electoral politics, religious or ethnic sectarianism, and any other purpose restricted by local laws in the concerned country," the policy says. It also wants the FCRA liberalised to allow in funds from abroad.

It wants tax rebates on donations in the form of transfer of shares and stocks.
Under the Income Tax Act, NGOs must spend 85 per cent of their annual income in the same year. This means, it cannot set aside more than 15 per cent of its annual income as surplus funds, or transfer them to its corpus. The draft policy recommends a review of this provision.

But it also cautions the government against misuse of such provisions by paper charities.

To check this, the policy recommends that the government "consider tightening administrative and penal procedures".

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