Do political parties have to pay Income tax?

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Source-This post on Do political parties have to pay Income tax? has been created based on the article “Congress alleges I-T Dept withdrew 65cr from its accounts: Do political parties have to pay Income tax?” published in “The Indian Express” on 25 February 2024.

Why in the news?

Congress treasurer alleged that the income tax department has undemocratically withdrawn ₹65 crore from the party’s accounts.

Taxation pf political parties
Source-Economic Times

What is a political Party under Indian laws?

For any association of Indian citizens or body of individual citizens of India to be recognised as a political party, it needs to make an application to the Election Commission to get itself registered under Section 29A of RPA 1951.

Section 13A of the Income Tax Act, 1961 deals with tax provisions relating to political parties.

What is a political party for the purpose of Section 13A?

Political party for the purpose of Section 13A means a political party which is registered under Section 29A of the Representation of the People Act, 1951.

Do political parties pay any tax?

Section 13A has given 100% exemption to political parties on its income from house property, income from other sources, capital gains and voluntary contributions received from any person however, subject to conditions.

What are the conditions for applicability of Section 13A for political parties?

1) They need to be registered under Section 29A of the RPA

2) They need to maintain books of account and other documents to enable the Assessing Officer to deduce its income.

3) They need to maintain records of each contribution of more than Rs 20,000 including name and address of the person making such contribution.

4) They need to get its books of account audited by a chartered accountant.

5) They should not receive any donation of more than Rs 2,000 by cash.

6) Treasurer of political party need to furnish a report of donations received in excess of Rs 20,000 to Election Commission of India for the financial year.

Do political parties need to furnish return of income?

Yes, though political party has 100% exemption on specified income, it is not given any relief from furnishing return of income.
It is the responsibility of the Chief Executive Officer of the political party to file the return of income and also to sign and verify the same.

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