The funds are clearly received by these individuals with an ‘overriding diversion of title to the funds in favour of beneficiaries’, points out BCAS. (Representative image)
MUMBAI: Celebrities and other individuals who have raised donations from friends and relatives, to help migrant workers, Covid patients and their families, should not be taxed on such funds.
These funds were received by them, as trustees for the benefit of others, points out the Bombay Chartered Accountants’ Society (BCAS), in its letter to the Chairman, Central Board of Direct Taxes (CBDT).
BCAS refers to the press note, issued by the CBDT on June 25. This note provided income-tax (I-T) exemption in respect of funds received by a taxpayer from an employer or others for treatment of Covid-19.
The funds are clearly received by these individuals with an ‘overriding diversion of title to the funds in favour of beneficiaries’, points out BCAS.
Technically, the funds received by them are not taxable as they have received the funds in the capacity of trustees for the benefit of others. Trustees are liable to tax in the like manner and to the same extent as beneficiaries. Since beneficiaries have been exempted under the press note, trustees would also get exempted, it explains.
BCAS also suggests certain safeguards. Those collating the funds (intermediary celebrities and other individuals) should either spend the money directly for Covid relief or donate it to I-T registered charitable trusts. Any sum retained by them for more than 6 months or up to such a period as CBDT may specify should not be entitled to tax relief.
If they have received more than Rs 10 lakh, submission of audited statements with their I-T returns could be introduced, so that the same can be examined by the I-T authorities.
Original posted at timesofindia.indiatimes.com