ABSTRACT

This chapter examines the role of tax incentives in India’s non-profit sector with the aim of offering policy recommendations for strengthening the country’s tax incentives regime for philanthropic giving. The Indian context lacks a systematic evaluation of whether tax incentives can effectively increase donations to the non-profit sector and their legal and regulatory implications. This study argues that India’s tax incentive regime primarily incentivises donations to government entities rather than to non-profit organisations (NPOs). Additionally, its design is a relatively conservative one compared to 11 countries across the developed and developing world we have examined in our chapter. Second, although tax incentive-based donations are not a major source of non-profit funding, they constitute a critical source of financial stability and legal recognition for smaller NPOs that form the bulk of this sector. Last, tax incentives for charitable donations are not costly to the government exchequer. Their share in revenue forgone in the government budget over the last 13 years is less than 2%.