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Every one of us heard of the term Political Party, which is India's most discussed topic. But what is a political party, and how is the income of the political party treated under the Income Tax Act? Read on to learn more about Section 13A and the exemptions available for the political parties in India.
A political party registered U/S 29A of the Representation of the People Act, 1951, is referred to as a “political party.”
Section 13A of Income Tax Act is a special provision for the political parties that provide tax exemption in some cases. According to this section, any income a political party receives from voluntary contributions or any interest, dividend, or rent from its assets is not included in the party's total income for taxation.
According to Section 13A, any income of a political party from the following sources is exempt from tax:
A political party that wants to claim tax exemption under Section 13A must meet the following requirements:
While Section 13A states that no tax relief will be given for non-submission of such a report, it should be noted that Section 29C of RPA itself denies tax relief to a political party if it fails to submit such a report.
According to Section 139(4B) of the Income Tax Act, a political party must file a return of income if its income (before claiming exemption) under Section 13A exceeds the basic exemption limit (without considering the exemption under Section 13A). The tax rate applicable for political parties is the same as that for a normal resident individual. The return of income must be filed and signed by the Chief Executive Officer of the political party for the relevant financial year.
Under Section 80GGC of the Income Tax Act, 1961, an individual can claim a tax deduction for any donations or contributions to any political party or an electoral trust. The entire amount of donation or contribution is eligible for deduction under this section. However, the donation or contribution must be made through legitimate banking channels and not in cash or kind. The individual must also furnish a receipt for proof of donation or contribution.
ITR-7 is required to be furnished by the political parties.
Even though political parties can not participate in commercial activities and cannot make profit, though they do have income from voluntary contributions, and such income are exempt u/s 13 A of Income tax act subject to furnishing of report to Election commission.
