Why does the Government of India DISCOURAGE philanthropy by Non-Resident Indians?

Here is an interesting fact:

a particular non-resident Indian (NRI) who I know has published a book abroad as well as in India. From the royalties of his book in other countries, the NRI wishes to benefit, so let us keep that in a separate box.

From the earnings of his book in India, he was minded to give it all to an NGO. Imagine his surprise on discovering that if donations are given to a properly registered charity (that is under section 80G of the Income-tax Act), only 50% of the amount donated can be deducted from the income for tax purposes. However, the maximum amount of donation that will qualify for deduction is limited to 10% of the total income.

In other words, if his book earns Rs. 100,000 and he donates all of that to Indian charities, he is still liable to pay tax on Rs. 90,000!

On the other hand, if he takes ALL of his money out of India and uses it for his own benefit, then the Government gets only 5% of the Rs. 100,000 as tax (or whatever remains of that amount after suitable expenses are deducted, because of the double-taxation treaty.

This is an incentive, not only to avoid giving to charity in India, but even to take the money entirely out of the country!

What kind of lunacy is this! Sphere: Related Content