Charitable institutions are banking on the government to revoke the 30% tax on anonymous donations it introduced last year in the Budget, as no such tax exists for totally religious institutions.

In the 2006-07 budget, the government introduced a new sub-section, 155BBC, to tax anonymous donations at 30%.

Institutions classified as religious and charitable have been permitted to received anonymous donations without any limit for purposes other than educational and medical.

On the other hand, institutions classified as totally charitable cannot receive such donations, even for religious purposes, unless they are ready to pay income tax at 30%.

Some institutions here said this is grossly unfair and highly discriminative.

According to legal opinion sought by them, the proviso also contradicts section 80 (G) of the Income Tax Act, which allows even charitable institutions to spend up to 5% of their income on religious purposes. Such income obviously comes from religious sources.

According to the experts, behind every charitable initiative in India, there is a religious background or inspirations and most such charitable institutions have a shrine or prayer hall with a collection box.

Since last year, all such anonymous collections at charitable institutions are subject to 30% income tax and also subject to harassment by income-tax officials.

Sources in one charitable institution here said this 30% tax seems to be aimed at encouraging the circulation of black money, as people can now openly drop bundles of cash in the hundis of religious institutions without fear of enquiry.

They said the government seemed to have designed the new sub-section 115BBC to curb the receipt of anonymous donations by medical and education institutions.