Income Tax on Political Parties

Sai Charan | Last updated: 04 August 2022

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Political parties are vital to a democracy, playing a key role in elections and governance. In India, Section 13A of the Income Tax Act, 1961, provides tax exemption on certain incomes for registered political parties. To avail this exemption, parties must maintain proper accounts, report voluntary contributions over ₹20,000, and have their accounts audited. Failure to comply with these conditions, including submitting required reports to the Election Commission, can result in the loss of tax benefits.

Introduction Political parties are easily one of the most visible institutions in a democracy. For any ordinary citizen, democracy is equal to a political party. India is the largest democratic Country in the World. It has a large number of national and regional parties. The political parties are

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FAQ :

Section 13A of the Income Tax Act, 1961, states that income of a political party chargeable under 'Income from house property', 'Income from other sources', 'Capital gains', or voluntary contributions received from any person, shall not be included in its total income, provided certain conditions are met.

To claim exemption, a political party must be registered under Section 29A of the Representation of the People Act, 1951, maintain proper books of account, keep records of voluntary contributions exceeding ₹20,000 (including donor details), and have its accounts audited by a qualified accountant.

The Representation of the People Act, 1951, is crucial as it mandates that a political party must be registered under Section 29A of this Act to be eligible for tax exemption benefits under Section 13A of the Income Tax Act.

If the treasurer or an authorised person fails to submit the required report on contributions (especially those exceeding ₹20,000) to the Election Commission as per Section 29C of the Representation of the People Act, 1951, the political party will not be entitled to any tax exemption under Section 13A for that financial year.

Yes, companies can claim a 100% tax deduction for voluntary contributions made to registered political parties under Section 80GGB of the Income Tax Act, provided the donation is not in cash and the party is registered under Section 29A of the Representation of the People Act, 1951.

Yes, individuals can claim a 100% tax deduction for voluntary contributions made to registered political parties under Section 80GGC of the Income Tax Act, subject to certain conditions like the donation not being in cash.