KOCHI: The revelation made recently by Varsha, a Kannur native who received around Rs 1.25 crore in donations for her mother’s liver transplant after she pleaded for help on social media, has pointed to a possible funnel for illegal money transaction in Kerala.
It is alleged that some charity workers encourage poor patients to make appeals on social media to mobilise funds for medical treatment and other immediate needs and channel the same to the individual’s bank account. The money is then rerouted to other accounts or the recipient is made to hand money to them in person. Authorities find it difficult to keep track of such transactions because the same account is not used a second time and the next beneficiary is not connected with the first one.
According to experts, such charity workers exploit loopholes in the law to raise money through crowdfunding. “Normally, crowdfunding does not come under any specific regulation. As per the existing laws, routing money this way cannot be considered as a benami or hawala transaction. These transactions comply with all existing laws,” said Suresh Gopinathan, a chartered accountant based in Kochi.
“Routing money received in a bank account to other accounts is not being subjected to any kind of audit. As per the Income Tax Act, gifts received from abroad are taxable under the head of ‘other sources’, but the donor is not taxed,” said Gopinathan.
“The flow of money by way of remittance through the banking channel is in line with the Foreign Exchange Management Act guidelines applicable for current account transactions. However, for charity programmes, it is advisable to receive donations from abroad in the account of a trust, society or Section 8 company, which are not-for-profit entities, with prior approval of the Union Ministry of Home Affairs under the provisions of Foreign Contribution (Regulation) Act, 2010, so that the flow of money and its utilisation are accountable,” said Pradeep Joy, a forex and tax laws practitioner.
The charitable social media crowdfunding has come under the scanner after Varsha alleged that she had been receiving threats from charity workers demanding a share of the donations she had received.
“Normally, transaction of an amount received from abroad is not audited. When people contribute to a particular cause, the person who receives the money is solely responsible. He or she has the right to retain the entire amount in the person’s account,” said Premson Paul, a lawyer based in Kochi.
“We have checked the list of donors in Varsha’s case and there is nothing unusual in those donations. All are meagre amounts, hence a further inquiry in this regard is not required,” said Vijay Sakhare, IG and Kochi City Police Commissioner.
Money trail
Charity workers encourage poor patients to make appeals on social media
The fund mobilised is rerouted to other accounts
Authorities find it difficult to keep track of such transactions because the same account is not used a second time