Page 112 - DCOM301_INCOME_TAX_LAWS_I

Unit 4: Exemptions and Deductions - I

4.7 Tax Exemptions to Political Parties Notes

‘Political party’ means an association or body of individual citizens of India registered with the
Election Commission of India as a political party and includes a political party deemed to be
registered with that Election Commission of India.
Political parties are liable to pay tax on their income and they are assessed as ‘An association of
persons’. However, the income derived by these parties as income by way of voluntary
contributions, Income from House Property; and Income from Other Sources or Capital Gains
are exempt from subject to the following conditions:
(a) the party keeps and maintains such books of account and other documents as would
enable the Assessing Officer to properly deduce the income;

(b) in respect of each such voluntary contribution in excess of ` 20,000, the party keeps and
maintains a record of the contributions and names and addresses of the persons who have
made such contribution; and
(c) the accounts of the party are audited by a Chartered Accountant or other qualified
accountant.
The Chief Executive Officer of the political party is required to file a return of income if the total
income (computed under this Act without giving effect to the provisions of Section 13A) exceeds
the maximum amount which is not chargeable to income-tax. In this connection, the provisions
of Section 139(1) shall apply.

Did u know? Voluntary contributions received by an electoral trust
Any voluntary contributions received by an electoral trust shall not be included in the
total income of the previous year of such electoral trust, if:
(a) such electoral trust distributes to any political party, registered under section 29A of
the Representation of the People Act, 1951, during the said previous year, ninety-
five per cent of the aggregate donations received by it during the said previous year
along with the surplus, if any brought forward from any earlier previous year; and
(b) such electoral trust functions in accordance with the rules made by the Central
Government.

Notes ‘Electoral Trust’ means a trust so approved by the Board in accordance with the
scheme made in this regard by the Central Government.

Self Assessment

Fill in the blanks:
26. …………………………..means an association or body of individual citizens of India
registered with the Election Commission of India as a political party and includes a
political party deemed to be registered with that Election Commission of India.

27. Political parties are liable to pay tax on their income and they are assessed as
………………………..

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