Revenue Secretary Hasmukh Adhia clarified that political parties can not accept old notes as donations
Reports on the alleged privilege to political parties in the wake of demonetisation are false, the Finance Ministry said, adding that the parties are also liable for questioning like anyone else by the tax authorities.
In a series of tweets, Revenue Secretary Hasmukh Adhia clarified that political parties can not accept old 500 and 1,000 rupee notes as donations.
"All reports on the alleged privilege to political parties are false & misleading. Political parties have not been granted any exemption or privilege, post demonetisation and introduction of Taxation Amendment Act, 2016," he said.
"Post demonetisation, no political party can accept donations in Rs 500 and Rs 1,000 notes since they were rendered illegal tenders. If there is any discrepancy, political parties are as liable to be questioned by IT authorities as is anyone else. They enjoy no immunity," he added.
Mr Adhia said that income and donations of political parties fall in the purview of Sec 13A of the Income Tax Act 1961 and there is no change in its provision.
"This is a provision of law which is more than 35 years old and no change is made in that now," Mr Adhia said.
Earlier the Central Board of Direct Taxes said that there are enough provisions in the Income Tax Act to scrutinise the accounts of political parties even though their income is tax exempt.
Donations to registered political parties are exempt from income tax subject to certain conditions including audit of accounts and all donations above Rs 20,000 taken in tax, it said.
Clarifying on reports that it cannot scrutinise tax returns of political parties, CBDT said: "There are enough provisions in the Income Tax Act to scrutinise the accounts of the political parties and these political parties are also subject to other provisions of Income -tax including filing of return."
The exemption from Income-tax is given to only registered political parties subject to certain conditions, which are mentioned in Section 13A of I-T Act, which includes keeping and maintaining books of accounts and other documents as would enable the Assessing Officer to deduce its income therefrom "In respect of each voluntary contribution in excess of Rs 20,000, the political party will have to maintain a record of such contributions along with the name and address of such person who has made such contribution," the CBDT said in a statement.
Further, the accounts of each political party are to be audited by a Chartered Accountant. Besides, political parties have to submit a report to the Election Commission about the donations received within the time-frame prescribed.