An NGO has urged Finance Minister Pranab Mukherjee to continue tax exemption for them in the proposed Direct Taxes Code in order to encourage non-profit organisations to undertake welfare activities.

"Taxes will put a constraint resource generation of charitable bodies and reduce their ability to undertake welfare activities," Tax Payers Protection & Welfare Society, said in a release.

Mukherjee, it said, should have a relook at the provisions in the DTC , likely to be implemented from April 2012, to ensure that charitable organisations are not impacted by the new law, which seeks to replace the 50-year-old Income Tax Act.

It said that any new regime should be applied only to those societies and trusts formed after the Direct Taxes Code (DTC) implementation.

So far, trust and institutions set up for charitable purpose enjoy tax concession.

Religious societies "should be eligible for exemption from taxation, even if they are not registered under Central or State Legislation for regulation of religious endowments or trusts," it added.

It said that government grants should continue to be excluded from gross receipts of such organisations.

It also said that capital expenditure incurred for construction of buildings, acquisition or equipment required for conducting religious or charitable activities should also be treated as an outgoing for charitable or religious purposes.