04 October 2022

What is a charity?

In 2012, the United Nations General Assembly declared 5th September as International Charity day with an intention of making people realize the significance of charitable work and providing a global platform for charitable activities (for individuals, NGOs, charitable, philanthropic and other volunteer organizations). This date was specifically chosen in the remembrance of Mother Teresa who devoted herself whole life to helping people (demise on 5th September, 1997).

Looking at the significance that the United Nations has given to the term charity, it becomes very important to know what exactly does this term mean? 

Charity can be defined as the gesture of generosity or helpfulness especially towards the needy. It can also be referred to an institution or organisation that is involved in helping needy and underprivileged people.

A charity can be done by devoting resources like time, money, or experience to the weaker sections of the society to ensure that their human needs and rights are not violated in any way. 

One can either volunteer themselves to do the charity work or can donate for charity via money donations or by giving certain resources (like toys, books, etc). They can also donate for food and other such necessities. Some individuals and organisations also donate for hospitals, religious bodies and so on.

History of Charity in India

Charity is not a new concept in India. Hinduism, one of the oldest and most popular religions of India, explains this concept in the form of ‘Dana’ (helping someone without expecting anything in return). 

However, the significance of charity, charity laws and charitable organisations arose during the Independence struggle. Earlier, many religious organisations (like Christian Missions) worked towards helping the poor. Their work led to the creation of organisations who voluntarily worked for charitable purposes. 

With the gained popularity (especially through Mahatma Gandhi who promoted their noble purpose), the funds and other resources were used to establish schools, orphanages, hospitals and so on. 

Laws regarding Charities and charitable organisations

The definition of “charitable purpose”, under section 2(15) of the Income tax Act includes-

  • Relief of the poor
  • Education
  • Medical relief
  • Preservation of the environment (includes watersheds, forests and wildlife) 
  • Preservation of places, monuments or objects of artistic or historic interest, and
  • The advancement of any other object of general public utility, provided it should not involve any activity in the nature of trade, commerce or business, or any activity rendering any service in relation for the same, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless:
  1. The activity is undertaken in the course of carrying out of the advancement of any other object of general public utility,
  2. The aggregate receipts from the activity during the previous year, do not exceed 20% of the total receipts of the trust or institution.

Usually, the charitable organisations in India are formed by trust, society or a company. However, article 19(1)(c) guarantees the right of all citizens of the country to form unions and associations. In India, there is a very complex structure of laws that governs the various aspects of charitable organisations like 

  • The charitable and Religious Trusts Act, 1920 deals with regulation of administrative functions of charities and religious trusts, 
  • The section 80G of income tax Act, allows a donor to enjoy tax deductions if they donate to the notified charitable organisation or trusts(religious and political organisations are not included),
  • The FCRA (the Foreign Contribution (Regulation) Act) deals with foreign contributions to trusts and charities and so on.