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Contributions for tsunami relief: tax rebate

QUESTION: To help our employees contribute towards the tsunami rescue activity, we intend to open a separate bank account, which will be used to channelise all our employees' contributions. The consolidated balance in this account will then be donated to the relief fund. We want our individual employees to get tax benefit towards their contributions. We believe that it should be possible. Can it be taken into account for TDS purposes? We understand 100 per cent deduction is available for Prime Minister's Relief Fund. Do we get 100 per cent deduction, if we contribute to the Chief Minister's Relief Fund?

ANSWER: In order that an employee may get the benefit of Section 80G, the receipt should ordinarily be in his name. There is no reason, however, why a consolidated receipt in the name of the employer as one on behalf of himself and employees cannot be obtained by the employer from the Fund, so that the employer can certify the employee's contribution and the employee can get deduction on the basis of such certificate.

A copy of the consolidated receipt with a list indicating the contributions made by individual employees forming part of the receipt can be made available to the assessing officer, if necessary. What is required is proof of contribution, so that payment by employer on behalf of employees backed by adequate documentation reconciling the collections with the payment should be acceptable as contribution by the employees.

The board had earlier issued circulars recognizing similar arrangement, as for example, for Chief Minister's Earthquake Relief Fund, Maharashtra, vide No. 678 dated February 10, 1994, for Prime Minister's National Relief Fund and Chief Minister's Relief Fund for Orissa Cyclone vide No. 782 dated November 13, 1999 and for Gujarat Earthquake vide No. 7 dated March 21, 2001. Employers had been authorised to take into account eligibility for relief in view of the difficulty "to obtain separate certificates." Hence, such collective contributions are bound to be recognised even for Tsunami Relief Fund. Alternatively, arrangement with the Fund administration for a separate receipt for each employee, though paid as a consolidated sum, should also be possible.

The second aspect is the matter of tax deduction at source (TDS). Board Circular No. 6 of 2004 dated December 6 would ordinarily expect, that no account should generally be taken for deduction under Sec. 80G. But an exception is made for contribution to such public funds listed in Sec. 80G, including funds for which 100 per cent deduction is available. Prime Minister's National Relief Fund is listed as qualifying for 100 per cent deduction, which can be taken into consideration for TDS purposes as well.

Chief Minister's Relief Fund is included for 100 per cent deduction under Sec. 80G and for TDS purposes in Board Circular (supra), subject, however, to the conditions under Sec. 80G(2)(iiihf) in following words:

"(iiihf) the Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund in respect of any State or Union territory, as the case may be :

Provided that such Fund is: (a) the only Fund of its kind established in the State or the Union Territory, as the case may be; (b) under the overall control of the Chief Secretary or the Department of Finance of the State or the Union Territory, as the case may be; and (c) administered in such manner as may be specified by the State Government or the Lieutenant Governor, as the case may be."

It is better that the State Government issues clarification as regards 100 per cent eligibility, if it satisfies the condition. As otherwise deduction may only be 50 per cent.

Similarly clarification from the Board regarding acceptance of consolidated receipt from employer or voluntary organisations with entitlement to 100 per cent deduction under Sec. 80G in the hands of individual contributions on certificate from employer or voluntary agencies registered under Sec. 12A, as had been done earlier, would help to augment the collections for tsunami relief.

S. Rajaratnam

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