Politics and Elections are matter of huge money affairs in India and the political parties do spend a lot of money for publicity campaigns. This huge fund accumulates from voluntary contributions, donations and party incomes together. However, Indian Income Tax rules imply on these money as well to avoid any chances of discrepancy. According to section 13A, Income Tax Act 1961, it has been clarified that all donations, voluntary contributions, capital incomes are exempted from the tax liabilities. But the income made from head salaries and business is liable to be taxed under this law.
In this period of demonetization and tracking black money campaign, the Election Commission has recommended the government to amend the rules a slight bit for the political parties. According to this recommendation, tax liability should be exempted for those parties only which have contested and win seats in Assembly or Lok Sabha elections. The Commission has addressed that there are chances that fake parties can formed just to availing the tax exemption provision. The fake attempts can be a big loop whole to escape the tax situation which is going on now in this country and can help some people to render blackmoney illegally.
Section 29C of Income Tax Act 1951, there is no prohibition on receiving anonymus donations by political parties, but there is an indirect ban on the donation limit through the requirement of declaration of donations. The declaration for such ban mandate only for the donations made above Rs. 20,000. EC has also recommended that all parties should be asked to keep details of al the donations received and register them. Parties accept donation with self printed coupons and the coupons can be used to accept Rs 10 or 20 donations. But in the long run, these small donations makes a huge amount and thus, EC has recommended utter transparency for them too. Also, it has been recommended that no political party can accept old Rs 500 or 1000 notes.
However, these are the recommendations made by the Election Commission of India, which are not yet granted legal by the Government. According to the Taxation Amendment Act, 2016, no political parties have been given any tax exemptions during this demonetization period. Old notes can not be accepted by any political parties and possessing such notes will be counted as discrepancy in the eye of IT department. For any of these two cases, political parties are liable to answer IT department just like any common citizen of India.
In a word, demonetization has closed all the loopholes for common citizen as well as political parties from making any money discrepancy.
Source : https://www.evernote.com/shard/s324/sh/a341d388-fc0a-4635-badf-8dda41c69f6e/2340cfd3b56da30d17786a3ead8c5c7e
Also Read : GST Rollout May be Pushed to July as Industry Needs Time
Section 29C of Income Tax Act 1951, there is no prohibition on receiving anonymus donations by political parties, but there is an indirect ban on the donation limit through the requirement of declaration of donations. The declaration for such ban mandate only for the donations made above Rs. 20,000. EC has also recommended that all parties should be asked to keep details of al the donations received and register them. Parties accept donation with self printed coupons and the coupons can be used to accept Rs 10 or 20 donations. But in the long run, these small donations makes a huge amount and thus, EC has recommended utter transparency for them too. Also, it has been recommended that no political party can accept old Rs 500 or 1000 notes.
However, these are the recommendations made by the Election Commission of India, which are not yet granted legal by the Government. According to the Taxation Amendment Act, 2016, no political parties have been given any tax exemptions during this demonetization period. Old notes can not be accepted by any political parties and possessing such notes will be counted as discrepancy in the eye of IT department. For any of these two cases, political parties are liable to answer IT department just like any common citizen of India.
In a word, demonetization has closed all the loopholes for common citizen as well as political parties from making any money discrepancy.
Source : https://www.evernote.com/shard/s324/sh/a341d388-fc0a-4635-badf-8dda41c69f6e/2340cfd3b56da30d17786a3ead8c5c7e
Also Read : GST Rollout May be Pushed to July as Industry Needs Time
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