The government is amending law to make it mandatory for the political parties to file returns on its income by December every year, failure to do so may lead to losing the tax exemption status. Union Finance minister Arun Jaitley in his budget speech on Wednesday announced capping anonymous cash donations to the political parties at Rs 2,000.
The amendment in law will also facilitate to keep the identity of the donor confidential who buys the just-introduced electoral bonds from banks to make such donations.
“They (political parties) will lose the exemption status if they do not file ITR by December-end. We will give a notice and cancel their exemption status. Through this, strictest discipline will come,” Revenue Secretary Hasmukh Adhia said in an interview to the news agency.
“Our experience is, for last two years, more than 50 per cent parties are not filing ITR on time. These are smaller parties which do not bother to file returns,” he added.
To promote transparency in political funding, the Budget for 2017-18 seeks to amend law through the Finance Bill by making it mandatory for the political parties to file returns by December end for any assessment year. For example, for assessment year 2018-19 (fiscal year beginning April 1, 2017), returns will have to be filed by December 31, 2018.
The government will also amend the Representation of People Act to ensure secrecy of the electoral bond buyers, soon notify the banks that will be eligible for issuing such bonds and come out with guidelines for the same by March.
The amendment to the Representation of People Act will state that if donation is received in ‘Bearer Bond’, the name of donor need not be mentioned to ensure the secrecy is maintained, Adhia said.
The electoral bonds proposed in the Budget will not carry the name of the donor and can be purchased from authorised banks against cheque or e-payment. Such securities can be redeemed only through registered accounts of a political party.
In a significant move, the Budget also seeks to amend the provision by saying no political party can accept cash from one person or one company above Rs 2,000.
“Enforcement is going to be easy now. So, if there is a breach of this condition, we are entitled to cancel the exemption,” Adhia said.
As for the tax exemption status, political parties do not have to pay any income tax on donations received and also there is a 100 per cent exemption available to persons who donate under 80G.
(With inputs from the PTI)