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India

Income tax order upsets Indian priests, nuns

High Court rules that those working in state-funded educational institutions in Tamil Nadu must pay tax

ucanews.com reporter, New Delhi

ucanews.com reporter, New Delhi

Updated: March 25, 2019 10:56 AM GMT
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Income tax order upsets Indian priests, nuns

An Indian nun carries a cross made with of palm fronds during a procession in remembrance of the crucifixion of Jesus Christ during a Passion play at St. Joseph's church in Hyderabad on March 30, 2018. The Indian state of Tamil Nadu wants to tax priests and nuns who work in state-funded schools. (Photo by Noah Seelam/AFP)

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Church people in India’s Tamil Nadu state are seeking legal ways to counter a High Court order that asked priests and nuns to pay income tax if they draw a salary from state-funded educational institutions.

The March 20 order in the southern state ended a long-time practice that exempted Catholic priests, brothers and nuns from paying tax on their salaries on grounds that they donate their salaries to religious homes or dioceses engaged in social services.

“The order is a setback. We will definitely look for legal options to tide over this order,” said Father L. Sahayaraj, deputy secretary of Tamil Nadu Bishops’ Council.

The High Court order said salaries are received by individuals and that surrendering salaries can only be treated as “application” of their income. Their choice of application would not merit tax exemption, it said.

The case dates back to 2015 when the state’s income tax department instructed state-aided educational institutions to deduct tax from the salaries of priests, religious brothers and nuns, ending a long-standing convention that exempted them from tax.

Church officials challenged the move in the High Court, which dismissed the income tax order, Father Sahayaraj told ucanews.com.

The court accepted that since priests and nuns have taken a vow of poverty and surrender their personal income to the Church, no income is effectively accrued so they are not liable to pay tax, he said.

However, the tax department appealed against the order, resulting in the latest court verdict.

The court said neither the income tax department nor the state government has anything to do with the religious character of the institution. Teachers may be nuns or missionaries but that cannot be a reason for seeking exemption from paying tax, it said.

Church officials are weighing various legal options to challenge the latest order.

Father Sahayaraj said 5,000 religious people including priests, nuns and brothers are working in more than 2,800 church-managed but state-aided educational institutions. “The state should also consider their immense contribution helping the state educate millions, especially the poor,” the priest said.

Catholic religious teaching in state-funded institutions was exempted from tax even before India became independent from British rule in 1947.

In 2015 the southern state of Kerala ended the practice and began to deduct tax from salaries.

In northern India few priests and nuns are employed in state-funded schools. While some states like Jharkhand allow them tax exemption, others do not.

“We don’t get any exemption,” said Father P.J. John, principal of Bhopal School of Social Sciences, a renowned church-run college in Madhya Pradesh.

“Currently, the government would not appoint Catholic priests and nuns in our institution, so the order will not have much impact on us,” he told ucanews.com.

In northeastern states where Christian missioners runs hundreds of educational institutions, it remains a non-issue because the government does not fund these institutions.

“We don’t have state-aided educational institutions, so we don’t get any exemption,” said Father G.P. Amalraj, deputy secretary of the North Eastern Regional Bishops' Council.

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