The ASSOCHAM, in its pre-budget memorandum to the Finance Ministry, has said that political parties should be brought under the purview of Income Tax Act and asked to pay tax at the rate of 30 percent in respect of anonymous donations received by them and should also be subjected to penalty for not filing their returns well in time.
“Surprisingly, there is no penalty prescribed for not filing the return of income by a political party in time. Thus there is a need to amend provision in the Income Tax Act to provide penalty in case a political party fails to file the return of income in time,” the chamber has said in its pre-budget memorandum submitted to Revenue Secretary Shaktikanta Das.
Further provision relevant to anonymous donation received by charitable trust or institution were amended by the Finance Act, 2006 to provide that in case of anonymous donation income tax at the rate of 30 percent shall be payable by the trust or the institution on such anonymous donation. As per the facts in public domain, more than 75 percent of the donation received by the political parties are falling in the category of voluntary contribution not in excess of Rs. 20,000/- with the result that there is no trail of the name and address of the person who has made such contribution, highlighted ASSOCHAM.
The chamber said the normal perception is that these contributions have come out of the money which has not been subjected to tax.
“Accordingly, there is a need to introduce a provision similar to the provision of Section 115BBC that each political party shall be required to pay tax at the rate of 30 percent in respect of the anonymous donation received by it,” added ASSOCHAM.
At present under Section 13A of the Income Tax Act, income of a political party is exempt. Further under section 139(4B) every political party is required to file return of income in case the total income without giving effect to the provisions of Section 13A exceeds the maximum amount which is not chargeable to tax.
Income of a political party under Section 13A is exempt subject to the condition that such political party keeps and maintains books of accounts and other documents as would enable the assessing officer to properly deduce it income.
Further in respect of each voluntary contribution in excess of Rs. 20,000/-, such political party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution.
The Finance Act, 2006 has inserted a new provision i.e. Section 80AC to provide that no deduction under Section 80IA, Section 80IB shall be allowed in case the return has not been furnished in time.
Similar provisions were introduced for denial of deduction under Section 10A and Section 10B by the Finance Act, 2005.This provision is too harsh as explained hereinabove.
“The law has to be fair and equitable to all. If exemption is being denied to a person for not furnishing the return in time there is no reason that similar provision is not introduced for political parties to deny exemption in respect of its income under Section 13A, in case it does not furnish the return of income in time,” the ASSOCHAM said.
—-ANI