The Fifteenth Finance Commission Chairman N K Singh’s call to increase tax-GDP ratio from the existing 18% (approximate) levels has significant importance for both Union and state public expenditure. Demands to increase the Union Budget’s education allocation to 3% or 4% of the GDP at current levels of tax-GDP ratio may cause stress on other strategic and socio-economic public expenditure like defence, infrastructure, utilities, etc. With education and healthcare being the twin towers of social infrastructure with one in the concurrent list and the other in the state’s, and before I unconsciously trespass into uncharted territories of fiscal autonomy or devolution of powers, my Budget panchsheel relies more on a healthy mix of treatment of certain provisions of the Income Tax Act of 1961, exemptions and incentives to the education sector.
Creation of endowments/corpus: Charitable organisations running educational institutions may be allowed to create an internal corpus not exceeding 10% of total receipts every year. This provision in addition to the existing 15% accumulation of non-applied income will go a long way in building institutions with long-term vision. The current 15% accumulation is just adequate to compensate wage and salary increase, spiralling operations and maintenance costs of existing infrastructure, removal of obsolescence in basic teaching and research infrastructure, etc., with very little room for massive growth in the positive direction. The provision to create internal corpus/endowment shall certainly provide an assured source of annual income, which can be earmarked for strategic development through capital expenditure, teaching and student incentives for research and innovation, freeships and waivers, etc., in the run-up to building globally competitive educational institutions. To ensure transparency, this internal corpus/endowment may also be subject to the same level of scrutiny as per the provisions as applicable to the regular receipts of trusts/societies under Sections 11, 12 and 13 of the Income Tax Act.
Spurring local entrepreneurship: A special fund for University Research & Innovation for Social Empowerment (U-RISE) for the creation of 75 campus start-ups in the next five years, in universities other than institutions of national importance, is needed. Celebrating India’s 75th Independence Anniversary, this fund can be supported by a one-time grant of `100 crore to be distributed amongst top-100 NIRF universities based on innovative ideas and solutions that address the problems of rural India. This can be done through a 100% matching grant policy doubling the expected outcome. The fund shall be used to establish and run campus start-ups in areas that are influenced by the local socio-economic contours and modelled against the ‘One Village One Product’ successfully adopted by Japan for regional development and similar to the ‘One District One Product’ that’s currently administered by the Ministry of Food Processing Industries. The U-RISE fund shall be differentiated by the fact that the start-up shall be established, run and administered by university-village engagement to not only create socio-economic wealth but also provide a hands-on entrepreneurship learning ecosystem for students with a focus on rural wealth creation. The initial grant of `100 crore can be expanded through budgetary or industry support or any other form of accepted philanthropy (with or without tax relief).
Access to soft loans: In the lines of the Higher Education Funding Agency (HEFA) but with a different approach, access to bank consortia-based lending to top-100 NIRF institutions through USD denominated foreign currency loans at competitive rates will provide some relief from the crowding out of financial resources. Such loans can be guaranteed by the Government of India through the Ministry of Education with back-to-back agreements with borrower institutions, linked to their performance carrying high exit costs. This shall not only provide access to less expensive funds with longer repayment periods but also provide much-needed financial oxygenation to progressive higher education institutions.
Auxiliary educational services: GST exemption to higher educational institutions for auxiliary educational services provided by third-party vendors (currently limited upto school education) is a long-pending request. Though an amendment cannot be made through the Union Budget, if a road map is announced towards this direction, it shall be an enabling provision for the competent authorities to act on the same to reduce the unit cost of education.
Recognition to teachers: Recognising the nobility of the teaching profession and for the quick transition to render transformational service during the pandemic situation, a one-time 100% tax deductible expense on any purchases made upto a maximum of `1,00,000 for the purpose of digital/online teaching by any full-time teacher in any type of educational institution will be a booster of a different type. Additionally, financial incentives/awards instituted by an educational institution in the spirit of creating healthy competition amongst its teaching fraternity needs to be fully exempted from income tax at the hands of the awardee. This permanent exemption shall encourage teachers to engage in creative pedagogy as the world gets prepared for hybrid or phygital education.
In short, this panchsheel for India’s education sector can be the Union Budget’s sovereign touch and not a knock-out punch.
(Views are personal)
S Vaidhyasubramaniam
Vice-Chancellor & Tata Sons Chair Professor of Mgmt, SASTRA Deemed University