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Last month, the Siddhivinayak temple in Mumbai announced that they had opened a Demat account, which would allow devotees to donate shares and stocks in publicly-listed companies, as they would donate cash or jewellery. This isn't the first time a temple is opening a demat account, however. The previous August, the Tirumala Tirupati Devasthanam (TTD), home of Lord Venkateshwara, the richest divine debtor in the Hindu Pantheon, >opened a demat account with the Stock Holding Corporation of India . This led to the trustees at the Siddhivinayak temple to follow TTD’s lead. Devotees can currently transfer listed shares but, in the coming days, they will soon be able to transfer bonds, gold exchange traded funds, and even units in mutual funds. The temple does not intend to trade in shares and securities. They will sell whatever has been transferred to them the very next day, irrespective of the changes in price.
It is significant to note, however, that our country’s tax authorities won’t look at these donations of shares the way they would cash donations. The way a regular cash donation works is that the temple, which is registered with the Income Tax Authorities and holds a certificate under section 80G of the The Income Tax Act, 1961, gives you a receipt when you make the donation that you can later deduct from your income before you calculate tax on it.
The donation of shares and securities will also earn you a receipt that you can later deduct from your income, but also attracts Capital Gains Tax, a tax that is only levied when a person assessed to Income Tax in India relinquishes his or her right over an asset by way of transfer. Now, according to the I-T Act, shares and securities are considered to be assets, the same way that, say, property (land and building) or motor vehicles are, so unless you’re a trader in shares and securities, the transfer of title over these shares and securities — even if it is to a divine being — will attract Capital Gains tax. Now, Long Term Capital Gains, that is, any profits made on sale of shares and securities which have been held for more than a year, are exempt from income tax.
The issue arises when the devotee has had title over the shares he’s transferring for less than a year. If their value has increased from the time he had purchased them, then he is expected to pay Short Term Capital Gains tax on the increase, despite the fact that the devotee may not have actually made any real money in the transaction.
Is it possible for this intervention from the tax authorities to have a negative impact on donations? The temple doesn’t think so, and they’re right. The Siddhivinayak temple is one of the most popular and iconic temples in India which attracts hundreds of thousands of devotees every day. >The temple collects around Rs. 75 Crore in donations every year , in the form of cash or jewellery. It is still considered custom in many parts of India to begin any business or venture with a Ganesha Pooja, which is why over the years the temple has been seeing a rise in devotees dropping physical copies of share certificates in the Hundi. Apparently, there are many religious businessmen out there who would want to give share certificates to Ganesha as a token of their faith and gratitude.
In order to understand why people are celebrating a facility which will help them give a part of their wealth away to deity better, we need to first understand the deity, and the reasons he is worshipped better.
A vast majority of the Hindu populace, especially the businessmen adore Ganesha not only because he’s actually quite adorable but also because they believe that the elephant-headed god will bless them with success, prosperity, and ease their journey through the rat race. After all, he is revered and worshipped as ‘the remover of obstacles’, a title that he earned from his father, Lord Shiva.
The story goes that Lord Shiva’s consort, Goddess Parvati, went to bathe in her celestial palace one day, leaving Nandi, her husband’s divine bull, to stand guard and to not let anyone enter under any circumstances. However, when Shiva wanted to pass through, Nandi let him in anyway, for though he served Parvati his first allegiance would always be to Shiva. Parvati was enraged, and also came to the realisation that no matter which Gana (the guards of Mount Kailasha) she asks to stand guard for her, like Nandi, their loyalty to Shiva would surpass their loyalty to her. She decided to create a Gana of her own, a young boy who was as skilled as he was full of valour. Her Gana came to life, and one look at the boy was all it took for Parvati to adore him as she would her own son, and the Gana, too, took her to be his mother. She asked him to guard her palace, and told him the same thing she had told Nandi — not to let anyone in under any circumstances.
Shiva decided that he wanted to drop in again, except this time he was stopped at the door by a young boy. Shiva brushed past him, only to get a sound walloping from the youth for trespassing. Furious, the God of Destruction threw everything he had at the young boy to make him relent, but to no avail. All of his faithful guards, including Nandi, were reduced to the ground. Finally, Shiva decided to take matters into his own hands, and began combat, resulting in the young boy’s head being severed by Shiva’s mighty trident.
Shiva immediately regretted it, but it was too late.
Parvati was furious — so furious that she brought to life thousands of Shaktis — powerful, many-armed forms of herself to wage war on the world and creation itself. The other gods panicked, and rushed to Parvati to pacify her and prevent the destruction of worlds. Parvati relented, but only on the condition that her son be brought back to life, and worshipped as a god. Shiva agreed, and brought forth the head of the first animal that he encountered on his way back to her palace, a single tusked elephant, placed it on the boy, and brought him back to life. He named him, Ganesha (Lord of the Ganas), and declared that he be worshipped as a god who would be the remover of obstacles. And the remover of obstacles he has been ever since.
Ganesha has slain multiple demons, all of whom have been metaphors for human impediments, the obstacles that mortals must overcome to live a true, blissful life. He has killed Mohasura (delusion), Krodhasura (anger), Lobhasura (greed) and Maatsaryasura (envy), >among others . With the opening of the demat account, Ganesha has — rather, his trustees have — put to an end another obstacle that his devotees may have faced in the past: distance. The demat account allows for international transfers of shares, enabling devotees across the country, and the world to donate shares to the temple, and the temple management believes that it would not only make donating shares and securities easier, but even increase the amount of donations that the temple receives, despite the fact that devotees may have to pay tax on such transactions.
One can’t help but wonder, though, that for all these incredible conveniences that the temple now offers, why does it allow its devotees to be burdened by additional tax, when they’re merely contributing to philanthropic causes? After all, it seems grossly unfair, especially because they might not even be making money in the transfer. Unfortunately, that is how the law works. Capital Gains kicks in the moment an asset — any asset — is transferred. Thankfully, there is an easy way out of all this.
You can either transfer shares whose value is on the decline (and pray that Ganesha manages to save the enterprise), or hold on to the shares for a full year, which is when shares become a long-term asset, and the profit on selling the same is exempt from tax. If, however, you must absolutely donate shares whose value has increased within the year that you’ve had them for, keep in mind two things — you’ll have to pay tax on the increase in value, and that the revenue department also has Ganesha devotees.
