Political Parties Not Exempted From Tax Paying, Do Adequate Research, Says Jaitley

Finance minister Arun Jaitley has refuted claims that political parties will be exempted from paying taxes while depositing scrapped old currency notes of Rs 500 and Rs1000, after the Modi government announced a sudden move to demonetise them.

"Income and donations of political parties fall in the purview of Section 13A of the Income Tax Act, 1961, and there is no change in its provisions. In this era of instant outrage, a 35-year-old law is presented as a new law being passed by the NDA government," the FM said in a statement. 

Under section13A of the IT Act 1961, political parties have to submit audited accounts, income and expenditure details and balance sheets.

"Just like anyone else, political parties can also deposit their cash held in the old notes in banks till December 30 (the deposit deadline), provided they can satisfactorily explain the source of income, and their books of accounts reflect the entries prior to November 8," he said.

In case of discrepancies, political parties are equally liable to be questioned by the Income Tax authority. 

He said, "There is no question of sparing anyone, and the political class is no exception. In fact PM Modi is setting a new example of propriety in public life, by asking all MPs and MLAs of BJP to submit their bank account details post demonetisation. We would like to urge the other parties to do the same." 

He added, saying “I implore all to be fully outraged against any step of the government if it is not against corruption. But in equal measure, I would also implore them to do adequate research before jumping the gun,"

Reports circling around earlier claimed that political parties, provided they are registered with the Election Commission and subject to certain conditions will not be scrutinised by the Income Tax department, with reference to Section 13A.

"In respect of each voluntary contribution in excess of Rs 20,000, each political party will have to maintain a record of such contributions along with the name and address of (the) person who has made such contribution," the department said.

Under the Income Tax Act, income of political parties is exempt from tax subject to condition that all donations above Rs 20,000 are taken through cheque and lower ones are properly documented with full detail of donors. These accounts also have to be audited.

The conditional tax exemptions historically given to income of registered political parties continue and no new concession or exemption has been granted either post November 8 demonetisation announcement or in the last two-and-a-half years, said the Finance Minister.