Politics

Political Parties Enjoy Tax Exemption on Deposits of Demonetised Notes

Financial services secretary Hasmukh Adhia answers a question during a news conference in New Delhi on 14 August. Credit: Reuters/Files

Financial services secretary Hasmukh Adhia answers a question during a news conference in New Delhi on 14 August. Credit: Reuters/Files

On December 16, finance secretary Ashok Lavasa said that the government will not examine demonetised notes deposited in the bank accounts of political parties, the Indian Express reported.

The Economic Times quoted revenue secretary Hasmukh Adhia saying, “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,”

While the clarification conforms to Section 13A of the Income Tax Act, which exempts political parties from paying tax on income from certain sources including voluntary contributions, Business Standard reported that it did draw ire on social media. The report also noted there is no upper limit to the income that political parties can have to be exempt from paying tax, though to avail the exemption they do need to maintain and reveal records of sources to tax officers.

While the exemption may be sound legally, in light of demonetisation, the leeway being given to political parties in this respect effectively ensures that they will not come under scrutiny, as the Indian Express points out.

The clarification came on the same day that the government also gave tax offenders a last chance to own up.