There are lot of hurdles in arranging funds for Traditional veda patha-shlas and Certification of the learning as well. There are various disadvantages in bringing the Vedic Institution under the current Educational Boards or any upcoming Central Boards. NEP 2020 Talks about encouraging local variations (including culture) and making alternative models of schools less restrictive. (NEP-3.6)
Therefore it’s better to keep Traditional vedic education away from all kinds of centralization and bureaucracy until parallel and cultural education is also accepted as “education” by the society.
Instead of expecting a centralized board from the govt, Traditional vedic Scholars may form a system with multiple regional centres to examine and certify the Vedic learnings so that non-vedic people don’t interfere and spoil it further. Leaving the complex issue of examination or certification aside, let us particularly look into the legal challenges in sourcing funds for Veda patha-shala
One of the many sources of funding Vedapatha-shalas is through Corporate Social Responsibility under the Companies Act, 2013’. Also, large scale crowd funding/public funding is possible by getting Income Tax Exemptions. Many people are attracted to donate when they know of income tax exemptions for such donation.
Let us understand this process step-wise.
- Register as a trust or society
Whatever may be the form and nature of an organisation, for legal recognition, an NGO must be recognised & registered under law. India Trusts Act & State level Societies Registration Act are two means for registering any NGO. Hence, Veda-Pathashalas too must be registered under law, to be recognised as a legal entity and obtain the benefits provided by various statutes. The consequences of bringing specific tax exemptions to religious institutions like veda-pathashala can be discussed on a different forum. For now, let us examine how Veda-Pathashalas can obtain CSR funding, tax exemptions etc under the existing set-up.
Firstly, any organisation wanting to run a Veda-pathashala must register under any of these laws to enable them to avail the benefits listed later below.
- Registration as Trust / Society with the local municipal authorities or state boards as per law along with basic documents such as trust deeds, formation documents, Memorandum of Association, Aadhar/PAN of trustees etc.
- Prepare financial statements after each financial year and get it audited/certified as per the respective laws.
This is the minimum requirement to start with. Organisations cannot collect donations or obtain tax exemptions, when they are not recognised by law.
- Obtain Income Tax Section 12AA deduction certificate –
- Section 12AA of the Income Tax Act, 1961 allows NGOs to be exempt from taxes on their income, provided 85% of their income is applied/used for the activities of such organisation. Simply put, by applying under this section, NGOs need not pay any income tax
- The registration procedure is now simple and van be obtained through online application.
- Basic requirements –
i. Objectives of the NGO must be as per the objects/purposes mentioned in Section 2(15) of Income Tax Act, 1961 viz. relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility.
ii. Veda-pathashalas can register themselves under the “education” or “yoga” category. It can categorise under 'any other objectives of general public utility's as well, depending on the nature, need & requirement.
iii. Basic documents needed would be formation documents & audited financial statements (discussed in point 1 above), Project report of the NGO, and ID proof of principal trustees.
iv. Registration under this section or under Section 80G is not permissible exclusively for religious purposes. Hence, the Veda-Pathshalas must maintaindocuments & function in a manner that it works for promotion of yoga and spreading of education. All educational institutions (Schools/Colleges) claim exemption by using this provision itself.
- Obtain deduction under Section 80G of Income Tax Act, 1961
By obtaining registration under this section, donors to the NGO will get benefit of Income Tax deduction up to 50% of the amount of donations made. Obtaining registration under this section will attract public funding.
Registration procedure & basic requirements are same as point number 2 (i.e., for Section 12AA registration.
- Documentations & Approach for CSR funding
Section 135 of the Companies Act, 2013 read with Schedule VII talks about Corporate Social Responsibility (CSR) spending for certain companies. All companies may voluntarily spend on CSR activities while for some it is compulsory by law.
- For following companies CSR is compulsory by law, if during any financial year, their:
i. net worth is rupees five hundred crore or more
ii. turnover is rupees one thousand crore or more
iii. net profit is rupees five crore or more
- Minimum compulsory CSR amount to be spent = 2% of Avg. profits of past 3 years.
- There is no maximum limit.
Here again, education is one of the objects for which corporates can make CSR contributions.
Corporates have their own internal policies, checks & systems in place. Here we have jotted some basic requirements that any company's CSR committee may ask for, if an NGO approaches them for CSR funds:
i. Audited financial statements
ii. Trust Formation documents
iii. Report on activities of the trust / NGO
iv. Budgets/Financial report for a particular project for which the CSR fund is required. For example, Salaries to Acharyas per annum, Salary to Vedic Scholars who are exclusive doing some research etc.
v. NGO’s internal policy documents such as financial thrift policy, Conflict of Interest Policy, Anti-Corruption Policy, Child Protection Policy, POSH (Prevention of Sexual Harassment) policy, CSR Policy etc.
It is good to have at least few of these policies drafted and kept ready for submissions to CSR applications.
vi. Fund utilisation certificate/report. Sometimes Company's ask for a ‘Utilisation Certificate’ certified by auditors as a record for their funds being utilised for the purpose it was initial granted.
Simply put, documentation and presentation become important for obtaining CSR funding.
- Receiving foreign contributions through FCRA Account
- Foreign contributions in India are regulated through the Foreign Contribution Regulation Act (FCRA).
- For receiving Foreign Contributions an NGO must:
i. Register itself under FCRA by applying to the Ministry of Home Affairs, Government of India.
ii. Open a bank account, post registration, exclusively meant for collecting foreign donations/contributions.
Law cannot or will not exclusively say that Veda-Pathashalas can take donations or that their income is exempt. There is mechanism or means to obtain the benefit of legal provisions. Veda pathashalas can register themselves under the “education” or “yoga” category and avail the benefit of CSR and pay the teacher’s salary as yoga teacher’s honorarium. Without proper registrations and documentation, no Veda-pathashala can claim CSR funds or tax benefits. Veda-pathashalas in essence can be the traditional Gurukulas for functioning of the organisation and also to reach its objectives. But legally, that is to say “on paper”, it must be registered in the manner & language as is permissible by law. This is sine-quo-non for obtaining donations/funds/contributions exemptions.