Thursday, January 21, 2021
Home News Reports The truth behind political parties being exempt from tax scrutiny for deposit of old...

The truth behind political parties being exempt from tax scrutiny for deposit of old notes

First check out the following headlines of various media outlets:

All the above news articles scream in their headlines that the Income Tax Department will not scrutinise the deposit of old Rs 500 notes and Rs 1000 notes by political parties.

Obviously, from reading just the headline, it appears that firstly, this is a new law brought into force, and secondly, that this is a gaping loophole. The headlines suggest as if political parties have a sacrosanct position under Income Tax and are hence exempt from “scrutiny”.

If so, can these media houses explain the following:

Just last year, Political parties like AAP, Congress and many others were “scrutinised” by the very same Income Tax department! The 2015 story in the Economic Times goes on to say (emphasis ours):

“According to CBDT, the taxman has taken action after suspicion that a number of bogus or ‘entry operator’ companies were converting illegal cash into legitimate money in the national capital by donating black money to parties after similar instances were detected by its sleuths in Kolkata. The notices which have been issued in Delhi include AAP and Congress for receiving donations worth Rs 2 crore and Rs 10 lakh, respectively.”

So in early 2015 itself, political parties were under the scanner for being suspected conduits to convert illegitimate money, but if we believe media reports, they suddenly became exempt from any scrutiny in late 2016? They can now safely become a conduit to convert black money into white?

The truth lies in the details. As explained in our previous article, the only exemptions afforded to the political parties are that they are exempt from Income Tax (as they are not allowed to undertake commercial activities), and that donations below 20,000 rupees are not required to be reported to the Election Commission of India. Both these rules are not new and have been existing in the statutes for many years now.

As far as accepting the old 500 and 2000 rupees notes are concerned, the government made it clear that parties are not allowed to deposit those notes that came to them as donations after November 8 – the day when the demonetisation was announced.

Hence, trying to portray them as a new rule introduced by the current government is utter lie, as the following headline does:

At no place does the Income Tax Act proclaim political parties to be exempt from tax scrutiny. Political parties are required to maintain books of accounts, file income tax returns, be open to scrutiny (as was seen in the 2015 case), and even be ready for searches and raids.

In fact, whenever an assessee returns tax-free or exempt income, his case is more likely to be taken by the IT officers, than say an assessee who is subject to normal tax rates, because the person enjoying the exemption can misuse it.

As we had explained in another article, any sort of jugglery to convert old notes eventually leads the person to a bank. And once you deposit such notes in the bank, it is very easy for the Tax department to scrutinise the person’s data.

In case of political parties, surely they can try to launder money, but as soon as they deposit the money in the bank, they leave a trail. From thereon, it is a simple case of adding two plus two. A party which shows a sudden spike in donations and deposits is most likely to be indulging in some nefarious activities. This can be detected by some of the most rudimentary analytical tools.

So will a political party actually take such a risk? The consequences can be lethal. Even a news report (leave alone conviction by any authority) can do irreparable damage to the party’s public image. A conviction can jeopardise the whole party and their recognition can be cancelled by the ECI.

And funding of political parties has always been a hot-topic for scrutiny by not only Income Tax Departments, but also by courts. Just recently both Congress and BJP were seen battling a Delhi High Court verdict holding them prima facie guilty of violating the law on foreign funding. Although the term “foreign funding” sounds ominous, in the instant case, both the parties had only accepted donations from subsidiary companies of the Vedanta group (owned by Anil Aggarwal). Due to technical reasons, these subsidiaries were found to be “foreign companies” by the Court, and hence the parties were in a soup.

In such a situation, where political parties across the spectrum have always been facing heat over their donations, either from the Income Tax Department or from the Courts, it is highly misleading when news reports’ headlines scream that they will be exempt from tax scrutiny. A few reports did mention the truth in the main body, but the headlines are enough to fool anyone.

Having said so, tax reforms in the sphere of political parties are long overdue. The rule that donations below 20,000 rupees are not required to be reported to ECI needs to be scrapped as soon as possible. Parties should be made to declare granular data of each donation received by them. The fight against black money must be extended to all.

  Support Us  

Whether NDTV or 'The Wire', they never have to worry about funds. In name of saving democracy, they get money from various sources. We need your support to fight them. Please contribute whatever you can afford

OpIndia Staffhttps://www.opindia.com
Staff reporter at OpIndia

 

Related Articles

Trending now

Bernie Sanders and his mittens during Biden inauguration trigger a meme fest on social media. Details

The US Senator from Vermont was spotted at the venue wearing parka and a pair of very homely looking mittens at the high profile event.

Alarming disinformation campaign by China spotted across media platforms against its vaccine’s criticism

From sensational headlines to misleading reports and insinuations, China is now playing the dangerous game to spread disinformation on its coronavirus vaccines.

Those who blamed Modi for market crashes must congratulate him for Sensex at 50,000

As market crosses 50,000 points, will those who blame him for crashes credit him for bullish trend?

Fire breaks out at Serum Institute of India’s manufacturing facility in Pune. Details

Reports have stated that the fire incident happened at an under construction building and vaccine facilities are safe.

Twin suicide attack in Baghdad, Iraq leaves three dead, dozens wounded

As per reports, this was one of the rare suicide attacks in Central Baghdad.

How Indian Railways came to the rescue of a pregnant woman who slipped and injured herself: Read details

In just one hour of Ravi's tweet, the Indian Railways managed to get medical assistance for his pregnant wife.

Recently Popular

Arnab vs Navika: Arnab responds to Navika’s emotional monologue, says he carried his shoes with him

Recently, Navika Kumar said that when Arnab left Time Now, she had his shoes to fill. However, Arnab gives a befitting reply.

The hidden chats in the TRP Chargesheet that nobody is talking about, not even the police: India Today and BARC

In the TRP case chargesheet, pages of personal chats between Arnab Goswami and the ex-BARC CEO Partho Dasgupta have been added

‘Jack Ma is safe and sound’, is ‘laying low’ claims founder and chairman of equity firm Primavera Capital Group

Days after his unflattering opinion of the Chinese authorities, Alibaba founder Jack Ma went mysteriously missing

Has China constructed a new village inside Arunachal Pradesh? Not quite: How NDTV misled with its ‘exclusive’ report

Report China building a village inside Arunachal Pradesh was bought out by NDTV yesterday - and it turned out to be fake news

“Not forgetting this communication until death”: Chef turned filmmaker Vikas Khanna reveals how he was asked to pay for favourable reviews of his movie

Vikas Khanna stated that critics had asked him to pay 3 lacs for 3 star-rating and 4 lacks for 4 star-rating of his movie 'The Last Colour'

‘Comedian’ uses Kashmiri Pandit genocide to peddle propaganda about Munawar Faruqui

Samay Raina posted a tweet trivialising the horrors faced by exiled Kashmiri Pandits to oppose incarceration of Munawar Faruqui
- Advertisement -

 

Bernie Sanders and his mittens during Biden inauguration trigger a meme fest on social media. Details

The US Senator from Vermont was spotted at the venue wearing parka and a pair of very homely looking mittens at the high profile event.

After multiple FIRs against ‘Tandav’, makers of another Amazon Prime web series ‘Mirzapur’ in trouble, SC issues notice

The SC notice was issued following a petition complaining about UP's Mirzapur being portrayed in a bad light in the web series

Alarming disinformation campaign by China spotted across media platforms against its vaccine’s criticism

From sensational headlines to misleading reports and insinuations, China is now playing the dangerous game to spread disinformation on its coronavirus vaccines.

10 months after lockdown started, Lakshadweep reports the first coronavirus case. Details

The first Covid-19 case in Lakshadweep was reported just a few days after the UT revised its Standard Operating Procedures

Those who blamed Modi for market crashes must congratulate him for Sensex at 50,000

As market crosses 50,000 points, will those who blame him for crashes credit him for bullish trend?

Fire breaks out at Serum Institute of India’s manufacturing facility in Pune. Details

Reports have stated that the fire incident happened at an under construction building and vaccine facilities are safe.

Bengal: TMC leaders attack BSF, accuse it of working for BJP’s benefit, BSF hits back

The BSF has responded to allegations meted at the force by TMC leaders.

Has the govt increased interest rate on Kisan Credit Card loan from 7% to 12%

The Press Information Bureau has 'fact-checked' the claims made by some media portals that interest on Kisan Credit Card loan has been increased.

Union government decides to conduct periodic performance reviews of Jamia faculty, teachers take offence

Following a union govt notification, Jamia authorities issued an order to subject teachers for periodic review of their performance

Twin suicide attack in Baghdad, Iraq leaves three dead, dozens wounded

As per reports, this was one of the rare suicide attacks in Central Baghdad.

Connect with us

245,563FansLike
496,912FollowersFollow
22,800SubscribersSubscribe