Opinion

Lies of Indian media totally exposed : Are political parties immune to Income Tax scrutiny ?

Since yesterday there are two news which are going viral. First, the news stating “Finance ministry says political parties are exempt from income tax on depositing old news” and the second is “Accounts of political parties are immune to scrutiny from Income Tax“. So, are the news really true ?? Has Modi govt allowed the political parties to deposit old bank notes without any tax scrutiny or tax paid on them ?

It turns out that once again, media has done a hit-job, bigger than ever before by twisting the statements and misleading the public. The Director General of Press Information Bureau Frank Noronha has clarified the myths being propagated by media and slammed them for wrong reporting. So, let us understand the truth.

1. Section 13 A of Income Tax Act clearly states that any deposit made by “political parties” is NOT TAXABLE. This act has been in place since 1961 and it has nothing to do with the present government.

2. Political parties are exempted from paying income tax for the donations they receive, provided the donation in cash is below Rs 20,000 per individual, that too only when every cash donation below Rs 20,000 is properly documented. Any amount greater than Rs 20,000 can NOT be donated to a party in cash. It has to be through draft or cheque. If an amount greater than Rs 20,000 is donated by cash, it is against the rule and WILL be taxable.

3. Every party is exempt from income tax only if they maintain an account book, properly documenting each and every donations they receive below Rs 20,000. To file Income Tax returns, every donation has to be properly accounted. The tax exemption is applicable only if the political party keeps and maintain such books and other documents of the income and the accounts are audited by a Chartered Accountant.

5. So, any amount of unaccounted cash deposited by political parties is NOT EXEMPTED and WILL be taxable. The Tax exemption is only for properly ACCOUNTED donations, and this is an age-old rule under Section 13A of Income Tax Act 1961. (Yes, 1961 when Modi was just 11). This means that if a political party has UNACCOUNTED black money in huge cash, they cannot deposit it in the banks and exempted from tax. For UNACCOUNTED cash deposits, they will be TAXED just like any other individual or organisation.

6. The accounts of political parties have to be audited and all the details of donations have to be sent to Election Commission within a time-frame, failing which action

7. There are multiple laws in Income Tax Act under which the accounts of political parties CAN be scrutinized. Media is spreading false news that Income Tax cannot scrutinize the accounts of political parties. Here is a series of tweets from Frank Noronha, Director General of Press Information Bureau clarifying the falsehood being spread by the media.


Kshitij Mohan

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