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Income-Tax-Exemption-for-Political-Parties

 

Income Tax Exemption for Political Parties

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Introduction-

In India Political parties are governed by The Representation of the People Act, 1951 (RPA) i.e. BJP, Congress, AIDMK, AAP etc, all are registered with Election Commission under RPA as political party.

A political party need to make an application to the Election Commission to get itself registered under Section 29A as political party in order to take part in elections and for other provisions of RPA. The political party consist only Indian citizens.

RPA also allows political parties to receive voluntary contributions from anyone including corporates (but not Government Company) and excluding contributions from foreign sources such as from citizens of foreign country, foreign company, foreign corporation, foreign trust etc.


 
Income Tax Exemption-

Section 13A of Income-tax Act, deals with tax provisions relating to political parties. It confers tax-exemption to recognized political parties for income from house property, income by way of voluntary contributionsincome from capital gains and income from other sources or says, only income under the head salaries and income from business or profession are chargeable to tax in the hands of political parties in India.

 

The following condition must be fulfilled to avail Income Tax Exemption-

  • A Political party must be registered under section 29A.
  • In respect of each such voluntary contribution [other than contribution by way of electoral bond] in excess of twenty thousand rupees, such political party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution.
  • The accounts of such political party should be audited by the Chartered Accountant holding certificate of practice.
  • The party has not received any donation of more than Rs. 2,000 otherwise than by way of account payee cheque/demand draft or ECS or Electoral bond.
   

The specified income of political party has exempted under Income Tax Act. The political party has not given any relief from furnishing return of income.

Any political party as per Section 13A is required to furnish return of income under Section 139(4B) if its income exceeds maximum amount not chargeable to tax (limit is computed before taking into consideration Section 13A exemption).

Tax slab applicable for political parties is same as the one applicable to normal resident individual.

It is the responsibility of the Chief Executive Officer or Secretary or any designated person to file/sign/verify the return of income on behalf of the political party.

   
“Form ITR -7” has to be used for filing return of Income electronically under digital signature. The Income Tax Return contains the following information-
  • Balance sheet 
  • Income and Expenditure Account 
  • Whether political party is registered under Section 13A
  • Whether report under Section 29C of RPA is filed and date of submission of report.
  • Details regarding donors who made contribution in excess of Rs 20,000.

 

Deduction allowed to the person giving donation to Political Party-
  • Deduction u/s 80GGB- It is available for all Indian Companies for contributions made to Political parties registered u/s 29A.
  • Deduction u/s 80GGC- It is available to an assessee (Including an Individuals) being any person other than local authority and artificial judicial person i.e. non corporate assesse for contributions made to Political parties registered u/s 29A.
   



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