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Income Exempted from Income Tax of Political Party

As per sec 13A of Income Tax Act following Incomes are Exempted from Income Tax upon satisfaction of Certain Conditions : -

Income Chargeable under Heqd Income from House Property

Income Chargeable under Head Income from Capital Gains

Income Chargeable under Head Income from Other Sources including Donation Received.

But any Income which is Chargeable under Head Profits and Gains of Business or Profession shall not be Exempted from Income Tax i.e. Profits and Gains of Business or Profession shall be fully Taxable in the Hands of Political Party at slab Rate Applicable to Political Party based on formation of Political Party.

Any Political Party can't earn any Income chargeable under Head Income from Salary due nature of its formation and Employee and Employer relationship doesn't exist. So, there will be question of Exemption or Taxability of Income Chargeable under Head Income from Salary.

 

Condition required to be fulfilled by any Political Party to Claim Exemption from Income Tax under sec 13A of Income Tax Act : - 

Political Parties required to Register under Sec 29A of Representatives of People Act 1951 to cliam Exemption under sec 13A of Income Tax Act.

Political Party must maintain books of Accounts and Other Documents as Prescribed under Income Tax Act

Political Party must get Audited it's books of Accounts from any person which is compitent to audit in India (Currently a Chartered Accountant in Practice can do so)

Political Party must maintain and keep records  ( such as Name of Contributor / Donor and Address of Contributor / Donor ) of  each Voluntary Donor / Contributor who's donation or contribution exceed Rs. 20000.

Political Party shall not accept Donations or Contribution exceeding Rs 2000 from any Person in any Mode other than Account Payee Cheque, Demand Draft or Electronic Transfer.

Treasurer of Political Party or any Person authorised by Political Party shall require to Report under sec 29C of Representatives of People Act 1951 for all Donations or Contribution Received exceeding Rs. 20000 to Electoral Board.

Chris Executive officer of Political Party is required to file and verify Income Tax Return of Political Party under 139 (4B) of Income Tax in ITR form ITR 7.

 

Deduction under Chapter VIA of Income Tax Act to Donor or Contributor to Political Party : -

As per sec 80 GGB of Income Tax Act if any Indian Company subject to Non Violence of Sec 182 of Companies Act 2013 makes any amount of Donation to any Political Party can Claim Deduction, of amount so donated or Contributed to Political Party, from Total Income Under Chapter VIA of Income Tax Act. Maxium Deduction available to Donor or Contributor Indian Company is lower of amount Donated and Total Taxable Income of Indian Company. However Deduction under Chapter VIA is not available to Donor or Contributor Indian Company where Donation or Contribution to Political Party is made in cash.

As per sec 80 GGC of Income Tax Act if any Person other than Indian Company makes any amount of Donation to any Political Party can Claim Deduction, of amount so donated or Contributed to Political Party, from Total Income Under Chapter VIA of Income Tax Act. Maxium Deduction available to Donor or Contributor Assessee is lower of amount Donated and Total Taxable Income of  Asseessee. However Deduction under Chapter VIA is not available to Donor or Contributor Assessee where Donation or Contribution to Political Party is made in cash.

Restriction on Indian Companies under Sec 182 of Companies Act 2013: -

As per sec 182 of Companies Act 2013 any company can make Donation or Contribution to any Political Party subject to Maximum 7.5 % of Average Profits of Last 3 year of Company. However any Companies which formed less than 3 year ago and Government Company are prohibited under sec 182 of Companies Act 2013 to make Donation or Contribution to any Political Party. Any Company which Contribute or Donate any amount within Limits prescribed shall require to report in Profit and Loss Account the amount of Contribution or Donation along with the name of Political Party.

Income Exempted from Income Tax of Electoral Trust

As per sec 13 B of Income Tax Act any amount of Voluntary Contribution or Donation Received by an Electoral Trust shall be fully Exempted from Income Tax up on satisfaction of Certain Conditions prescribed under Income Tax Act.

Following Conditions needs to be satisfied by Electoral Trust to claim Exemption under sec 13B of Income Tax Act : -

Electoral Trust should Distributed to any Political Party at least 95% or more of aggregate Donation or Contribution Received along with surplus brought forward to current year from Earlier Year.

Electoral Trust shall function in accordance with rules prescribed by Central Government.

Deduction under Chapter VIA of Income Tax Act to Donor or Contributor to Electoral Trust : -

As per sec 80 GGB of Income Tax Act if any Indian Company subject to Non Violence of Sec 182 of Companies Act 2013 makes any amount of Donation contribution to any Electoral Trust can Claim Deduction, of amount so donated or Contributed to Electoral Trust, from Total Income Under Chapter VIA of Income Tax Act. Maxium Deduction available to Donor or Contributor Indian Company is lower of amount Donated and Total Taxable Income of Indian Company. However Deduction under Chapter VIA is not available to Donor or Contributor Indian Company where Donation or Contribution to Electoral Trust is made in cash.

As per sec 80 GGC of Income Tax Act if any Person other than Indian Company makes any amount of Donation or Contribution to any Electoral Trust can Claim Deduction, of amount so donated or Contributed to Electoral Trust, from Total Income Under Chapter VIA of Income Tax Act. Maxium Deduction available to Donor or Contributor Assessee is lower of amount Donated and Total Taxable Income of  Asseessee. However Deduction under Chapter VIA is not available to Donor or Contributor Assessee where Donation or Contribution to Electoral Trust is made in cash.

 

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