CA Anoop Kumar Sharma
Let's break down the rules for how political parties are taxed by CG. Basically, if a political party meets four specific conditions, all income earned is tax-free income. However, income from business or professional activities is still subject to taxes. This means that while political parties get relaxation on most of their income other than business income, As per Section 13A of the Income Tax Act, there are special provisions relating to the incomes of political parties regarding any income of a political party exempt in the course of "income from HP" or "income from O.S." and income from capital gain, but except "income from business or profession," some conditions are satisfied as per the below-mentioned:
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1. |
Party keeps and maintains such books of account and other documents |
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2. |
In the case of voluntary contribution excess of INR 20 thousands such political party keeps and maintain record of such contribution and the name and address of the person who has made such contribution (except contribution received electoral bond) |
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3. |
Political party must get its books of accounts of audited by CA. |
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4. |
Donation is more than INR 2000/- is received only other than CASH. |
Special point regarding Political party
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1. |
Political party are compulsory required to file return up to the due date of return of filing U/s 139(4B) for avail exemption U/s 13A. |
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2. |
Treasurer of such political party or any other person authorized by that political party in this behalf fails to submit a report U/s 29C (3) of representation of the people Act,1951 (43 of 1951) for a financial year, no exemption under this section shall available for that political party for such financial year. |
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3. |
If a company give donation to political party than company claims 100 % deduction in the U/s 80GGB but condition that this donation must be paid other than CASH. |
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4. |
If other than company (other assesse) give donation to political party than his claims 100 % deduction in the U/s 80GGC but condition that this donation must be paid other than CASH. |
Let's see with a example: The books of account maintained by a National Shakti Political Party registered with Election Commission for the year ending following receipt:-
- Rent Income of property 12,00,000.00
- Interest income on deposit 16,00,000.00
- Contribution received 1,00,00,000.00
- Profit from Restaurant 5,00,000.00
- Cash contribution from 100 persons 3000.00 (Per person)
Solutions
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S.No. |
Particulars |
Exemption |
Taxable Income |
|
1 |
Rent Income of property |
Exempted u/s 13A |
Nil |
|
2 |
Interest Income on Deposit |
Exempted u/s 13A |
Nil |
|
3 |
Contribution received (assume Bank Receipts only & Records maintain) |
Exempted u/s 13A |
Nil |
|
4 |
Profit from Restaurant |
5,00,000.00 |
|
|
5 |
Cash contributions in excess of 2000 not permissible (100 person@3000) |
3,00,000.00 |
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|
Total Taxable Income |
8,00,000.00 |
Conclusion
At the end of this article, understanding the tax regulations governing political parties is important for both parties and donors. The Income Tax Act, Section 13A, outlines exact conditions that, if met, render a political party's income tax-exempt, with the exception of income derived from business or professional activities. Knowing these rules or this article helps to understand how to tax paid by a political party and in which section an assessee gets a deduction when he donates to a political party. This article is only for informational and educational purposes; however, it is advisable to consult with a tax professional for specific issues and challenges.
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