Why Charitable Organisations Need Wealth Managers

The legal discourse around charitable organisations is as complex as it gets; the diversity of laws and provisions makes it very daunting for charities to navigate through investments efficiently. There is often not enough clarity on what is allowed and prohibited under the various acts of the constitution to invest by charities. This confusion can lead to improper utilisation of funds at best and far-reaching penalties or closures at worst for many charitable organisations.

This blog will look at what investments are legally allowed for charities and why wealth managers on the best wealth management platforms are best suited to support them in this space.

Investments by charitable organisations are regulated under state law (Maharashtra Public Trusts Act, 1950, Section 35) as well as central law (Income Tax Act, 1961, Section 11(5)). Accordingly, investments in stocks and shares are prohibited. However, the Act allows charities to buy public sector bonds like SBI Bonds. Charities can mainly invest in companies engaged in providing long-term finance to the residential and industrial development of the country, basically Housing Finance Companies. Consequently, it also grants charities the power to invest in selective debt-based mutual funds that the charity commissioner has approved Charities, however, cannot invest in foreign funds through mutual funds, as the Ministry of Home Affairs decreed under FCRA 2010 Act.

To add to this, charities can expand their investment scope to fixed deposit schemes by banks, housing finance NBFCs, government bonds, government debentures, and immovable property.

It is worth noting that compliance with the aforementioned investment opportunities is required for charities to avail of tax exemption on their income and funds under Section 11(5). Failure to do so can lead to excessive taxation on the payment of charitable organisations, deteriorating their disposable funds to engage in transformative social work. This is just a snapshot; the complexities run far more profound in laws regulating the charitable sector. Hence, to avoid any errors, it is advisable to use a wealth manager’s expertise or, to reach out to the top wealth management platforms to manage the investments of a charitable organisation. Tailwind has the right experience, expertise, and resources you need to navigate the convoluted space of laws and provisions for nonprofits and can help you take off the burden of investment management. This way, you can focus your core strength on making a difference while we take care of preserving your funds and investments!


Important Aspects of Financial Planning
Balanced Advantage Funds
International Mutual Funds
5 Common Mistakes Investors Make in Falling Market
ELSS: Equity Linked Saving Scheme
Is Asset Allocation important?
SIP: Systematic Investment Plan

Leave a Reply

Your email address will not be published. Required fields are marked *

Close Bitnami banner