Income Tax Exemptions for Political Parties; What are they? Let’s Know
Political parties in India are governed under the Representation of the People Act of 1951 (RPA). Any association of Indian citizens or body of individual citizens of India calling itself a political party must apply to the Election Commission to be registered as a political party under Section 29A in order to participate in elections and other provisions of the RPA.
Section 13A defines a political party as one that has been registered under Section 29A of the Representation of the People Act, 1951. Section 13A of the Income Tax Act, 1961 deals with tax provisions relating to political parties.
Political parties are prohibited from engaging in commercial activities for the purpose of profit. This is not to say that the political party has no income at all. As previously stated, political parties are permitted to solicit voluntary contributions under the RPA. Political parties may also own immovable properties or deposits, which could provide money. Political parties may make money from coupon sales, membership fees, and other sources.
However, Section 13A provides political parties with a 100% exemption on their income from house property, other sources, capital gains, and voluntary contributions received from any person, subject to certain criteria. But they must meet prescribed conditions.
Conditions for Tax Exemption
- A party must keep books of account and other records so that the tax department’s assessing officer can appropriately “deduct its income.”
- It is required to keep records of each voluntary contribution, with the exception of contributions made through electoral bonds in excess of Rs.20,000 (which no longer applies).
- Party accounts must be audited by a chartered accountant.
- Donations above Rs.2,000 must be provided via account payee cheque, electronic transfer, or electoral bonds (now defunct).
- On or before the due date for filing returns, the treasurer or an authorised person must provide EC with a report of donations in excess of Rs.20,000.
- Parties must file returns for the previous financial year by the specified deadline.
What happens if Conditions are not met
Non-compliance leads to the withdrawal of the exemption, which is considered a “beneficial provision”. Along with returns, parties must attach specific documents, such as the balance sheet, income and expenditure statement, and contribution report, among others.
If Tax Exemption Denied to Political Parties
In that situation, political parties are considered as an “association of persons” and taxed according to the applicable slab.
Matter of Congress Party
A day after the INDIA bloc issued tax notices to Congress party ahead of the elections, the I-T department informed the Supreme Court on Monday that it will not pursue ‘coercive steps’ to recover Rs.3,500 crore from the party. Congress is currently dealing with three cases.
Join StudyCafe Membership. For More details about Membership Click Join Membership Button
In case of any Doubt regarding Membership you can mail us at [email protected]
Join Studycafe’s WhatsApp Group or Telegram Channel for Latest Updates on Government Job, Sarkari Naukri, Private Jobs, Income Tax, GST, Companies Act, Judgements and CA, CS, ICWA, and MUCH MORE!”
