Political parties can deposit banned Rs 500 and 1,000 notes without inviting tax scrutiny, officials said
Highlights
- Decades-old law exempts parties from taxes on income from several sources
- Election Commission says black money plays huge role in polls
- Parties exempt from tax but can be called to explain donations
The 500- and 1,000-rupee notes that were abolished last month can be deposited by political parties till December 30 in their bank accounts without having to pay any tax, said the Finance Ministry today.
A decades-old law exempts parties from taxes on income generated from a group of sources including donations by volunteers.
Election Commission officials and others have repeatedly highlighted that black money plays a huge role in elections and that parties attribute disproportionate parts of their funds to donations from volunteers.
"If it is a deposit in the account of a political party, they are exempt. But if it is deposited in individual's account then that information will come into our radar. If the individual is putting money in his own account, then we will get information," Revenue Secretary Hasmukh Adhia said today about the old notes being deposited.
However, officials clarified that parties can be called upon to explain volunteer donations and must be able to provide details of the contributors. Parties are regularly accused of manufacturing lists of small volunteer donors to escape the scrutiny of tax officials. Contributions of up to 20,000 do not have to be accompanied by details of the giver, providing a major loophole to parties.
The government has said that tax-dodgers have until the end of March 2017 to come clean under a scheme announced by Finance Minister Arun Jaitley last month.
Revenue Secretary Adhia told reporters that those who fail to declare their untaxed income under the scheme will have to pay a minimum 77 per cent and up to 100 per cent in tax and fines.
(With inputs from Reuters, PTI)