Despite possessing characteristics of being uncritical, irrational and
heavily dogmatic, religions have played an undeniably crucial role in shaping
the history of mankind. The faith and fear of humans in a supernatural creator
deity has helped clergy earn and live without much of a work which would also
enjoy tax exemption. Any form of organized religion generally has a place of
worship and there are billions of followers visiting them and most of these
followers offer their wealth to the place of religious worship. Whether it is
the Tirumala Balaji Temple or WAKF Board, irrespective of their faiths,
believers have contributed every penny for making some of these religious
organizations even richer than some sub-Saharan countries.
All the religious organizations are getting this exorbitant amount of money from
people. All these institutions are exempted based on ancient mythology and with
claims which are proved to be either unverifiable or empirically proven to be
wrong. In this paper, I would be talking about the donations which a religious
organization receives from a devotee. However, I feel the need for setting this
up as a separate specific charity trust which is not the part of any religious
There are various countries which are governed by secular laws and these are the
countries which have separated religion from the public sphere. The limitation
of religion to a personal sphere is possible in those countries where modern
education is almost mandatorily accessed by everyone. The idea of scientific
temperament is there in a lot of people and consequently in the legislators.
They were intelligent enough to separate religion from influencing legislations.
This is not the case in India because majority of the believers have helped the
politics get based on identity rather than issues or the issues are shaped based
on the caste or religious identity. When vote-banks and election manifestos are
typically reflecting on religions, Indian secularism is not the separation of
state from religion but a strike of balance of harmony between various
religions. Before delving into the legal aspects of taxing the religions, the
famous idea of Dworkin about law and politics being inseparable should never be
forgotten. With the caveat that Indian secularism is a misnomer for religious
harmony, I would briefly analyze the jurisprudence of taxation and the possible
ways in which more revenue can be extracted out of various religious
organizations in the country.
We must look at the various examples of Indian religious organizations and their
incomes to understand why Indian gods are very rich. The wealthiest of all
temples in India is the Padmanabhaswamy temple [situated in Kerala] which is
assessed to have about $20 billion USD. The next one is Tirumala Balaji
Temple which is visited by approximately 60,000 devotees who bequeath around INR
650 crore to the temple annually. The gold on the idol itself weighs 1,000
kg. Now we must consider another endemic aspect of devotion in India which is
the concept of godmen.
For example, Sai Baba of Shridi who had relinquished all the riches in his life
and ended up leading an abstemious presence, is supposed to possess gold and
silver jewelry priced roughly at INR 320 million and silver coins worth more
than INR 60 million. The temple at Shirdi receives donations worth INR 35
million every year. There are various other so called spiritual gurus in India
like Sri Sri Ravishankar who is the organizational head of Art of Living, Baba
Ramdev, Asaram Bapu, etc who are wealthy. Shashvat Committee, which was
supervised by Justice Shahsvat Kumar, came up with an extensively prepared
status report on Muslims in India in 2011 which found out that Nationwide, WAKF
properties constitute a land bank worth INR 1.2 lakh crore and could have
generated annual returns of INR 12,000 crores.
Like the US, there is like an unwritten contract made between these kinds of
religious organizations and the government which seems more like a perfidious
compromise with the clergy. Simply put it is this: You don't obstruct polity and
governance, and in return the state will not tax religious proselytism. This
cannot be done in case of India because the lack of necessity of religions in
politics is not even recognized by the state. Additionally, various states as
well as the union government have established various subsidies for pilgrimage
tours like Haj, Amarnath, etc. Since this is irrelevant to taxation, I would not
elaborate on that.
There is an aspect of charity attached to tax exemption which
is almost at the same level ludicrousness when compared to Indian agricultural
loans which were misused blatantly. It is definite that there a lot of people
who would be noble enough to do charity just like some poor farmers who would
have used the loan because they genuinely needed it. Laws are not immune from
misuse nor are without any loopholes. There is a way out if a person wishes to
legitimize his/her black money, a donation of the same to any charitable
institution after cutting a deal, based on a quid pro quo, with the owner of
that institution can ensure the legitimization of black money.
The various tax exemptions given to religious organizations accrue broadly from
section 10 of the Income Tax Act, 1961. Religion is considered as a non-profit
entity in the act. Sub-sections (23BBA), (23C) [v] are some of these which
enables tax exemption to religious organizations.
The institution must spend 85% of its income in any financial year which is from
April 1st to March 31st on the purposes of the organization. Surplus income may
be collected for precise projects for a period alternating from 1 to 5 years.
Section 11 specifies the methods to deposit.
There are a lot of procedural technicalities mentioned in the act in other
sections as well. Religious and other charitable institutions are both liable
for registration and are governed by rules relating to application and
accumulation at present. Direct Taxes Code of 2009 would also give a more
privileged position of total immunity from taxation for religious trusts and
institutions by exemption in Item No. 37 in the Seventh Schedule. Except for
a very few instances, there is no way in which a religious entity can be taxed.
To get registered as a religious entity in a country as corrupt as India is not
a very difficult task, just like how some rich industrialists ends up under the
BPL. Making charity through government is the only way out to solve this issue.
Government can collect the money which all these noble people are willing to
give away as charity and redistribute it to the not so privileged class of
people who are needy. Previously, even according to Service Tax religious
organizations providing shops as rentals or any place to religious function in
this area were also exempt from service tax.
The way in which tax exemptions for religious organizations are misused would be
better explained with the help of a case. After the introduction of GST in July
2017, Tirumala temple has come under the ambit of taxation. A lot of its
tax-exempt properties were taken away once GST was introduced. As per some
unofficial records, the pilgrimage visits by the devotees all over the year
fetched supplementary income of 12% in the form of spending on transport and
hospitality industry to the state exchequer. Tirumala Tirupati Devasthanams [TTD]
is estimated to have a burden of INR 50-100 crores. Unlike the previous
exemptions allowed by the state and union in case of the Value Added Tax, GST on
all goods and services is held obligatory even for charitable and religious
institutions. Union Finance Minister Arun Jaitley has affirmed its obligation as
immutable. TTD had challenged certain provisions of the Finance Act, 1994 in
February 2014 in the Supreme Court by claiming violations of A 26 and Article 27
of the constitution. Similarly, under the same garb of doing a religious
function, TTD had challenged service tax of their guest houses in 2012. That
writ petition was not allowed by Andhra Pradesh High Court.
The way in which the words for charitable purposes is tried to be misinterpreted
is because of the vagueness which makes it difficult to be defined. The case of
TTD is just one of many where multi-million business turnovers are avoiding tax
under the pretext of religious purposes. There are a lot of other religious
organizations which are filthy rich too and they should also be similarly dealt
The problems of not taxing religions are lot of unaccounted money and misuse of
legal provisions to avoid taxes. There are various solutions to this like
bringing these organizations completely under the ambit of RTI & ensuring that
government has complete control of these institutions. Government should not
interfere in the traditions and rituals but the financial aspect should be
scrutinized by the government at any cost.
5 The Income-tax Act, 1961