Income Tax rules for political parties

• Context (IE): Congress alleges I-T Dept withdrew 65cr from its accounts. Congress treasurer alleged that political parties do not normally pay income tax and that the central government was targeting the Congress.

Are political parties required to pay income tax?

• The Income Tax Act of 1961 exempts political parties registered by the Election Commission under the Representation of the People Act, 1951 from paying income tax, with some conditions.
• Section 13-A: Any income a political party receives from voluntary contributions or any interest, dividend, or rent from its assets is not included in the party’s total income for taxation. The exemption is valid if the party fulfils the following conditions.
  • Maintains a record of all contributions above Rs. 20,000 each.
  • Its accounts are audited by an accountant.
  • Does not accept any donation above Rs. 2,000 each in cash.
  • Submits a declaration of its donations to the Election Commission before the due date of filing Income Tax returns.
• Section 139 (4B) Political parties must file returns if their total income, before considering exemptions under Section 13A, exceeds the income tax exemption limit.