Political parties are also in the ambit of scrutiny, clarified Centre:
The Ministry of Finance sought to clarify that deposits of demonetised high-value currency notes into political parties’ bank accounts could also be subjected to scrutiny under the Income Tax law.
Reason behind the rumour of political party being exempted from the scrutiny:
The inference seems to have been drawn because of the fact that the income of the political parties is exempt from Income Tax under Section 13A.
1. The ministry has said that accounts of each party have to be audited by a chartered accountant and parties have to submit a report to the Election Commission about the donations received within a ‘prescribed time frame.
2. The exemption from Income Tax is given to only registered political parties subject to conditions which includes keeping and maintaining books of accounts and other documents as would enable the Assessing Officer to deduce its income.
3. 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.
What does Article 13A of Income Tax Act state?
Section 13A of the Income Tax Act, 1961 grants exemption from tax to political parties in respect of their income. This income could be from house property, other sources, capital gains and income by way of voluntary contributions received from any person.
These categories of income qualify for exemption without any monetary or other limit and the income so exempted would not even be included in the total income of the political party for the purpose of assessment.