Economic slowdown to affect the IIMs corporate donations

Published On: 27 Jul 2012

 | Last Updated On: 27 Jul 2012

The economic downturn is expected to take its toll not only on the profits of India Inc. but also on the IIMs (Indian Institutes of Management) plans which hoped to raise funds from the corporate houses to develop their corpus.

IIM-A (Indian Institute of Management-Ahmedabad) which had planned to approach corporate world directly to seek funds is now relying on its alumni association. The institute had decided to raise Rs 250 crore ($50 million) has now reduced its target to only Rs 50 crore ($10 million).

However, the institute managed to raise fund commitments from its alumni of about Rs 40 crore by hosting a number of alumni meets during its 50 years celebrations.

IIM-A had also started raising funds through alumni donation during its celebrations.

IIM-B has not witnessed any signs of economic downturn till now. Institute welcomes cash donations, tangible assets, transfer of appreciated equities or stocks and contributions in form of property.

On the other hand, IIM-Calcutta has no fund raising program from companies.

MHRD (Ministry of Human Resource Development) in regard to IIMs plan to seek funds from corporate houses had asked Balakrishnan to examine the mechanism particularly in reference to the education sector and suggest in context to tax provisions and tax breaks. MHRD has been considering the alternatives for IIMs to build their corpus.

Options include non-cash endowments, allowing tax benefits to the donor on their contributions to the institute and giving equities or stock and not to impose tax on long term capital gains.

In 2010, HRD ministry committee head and chairperson of IIM Raipur presented a report on suggestions of the committee on fund raising by IIMs. The recommendations included establishing campaign committees and development office in each IIM. Some of the ways to raise funds suggested were campaing committees, mass alumni, lunches and dinners, academic seminars, formation of board visitors and board counselors.

Indian corporate houses have been demanding tax benefits from the government to raise donations in terms of contributions to higher education institutes. Presently, contributions of companies to institutes in foreign countries are exempted from tax as they are operated by trusts.

However in India, only those trusts running educational institutes are exempted from tax which is registered as a Section 25 company or as charities commissioner under the Income Tax Act.

Moreover, many corporate give donations to foreign institutes as Indian Income Tax department does not consider these contributions as legal ones but as a tax making practice.

Source: Business Standard

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