Clause - 011 - Amendment of section 13A.

THE FINANCE BILL, 2017

Clause 11 of the Bill seeks to amend section 13A of the Income-tax Act relating to special provision relating to incomes of political parties.

Section 13A of the Income-tax Act, inter alia, provides that any income of a political party which is chargeable under the head "Income from house property" or" Income from other sources" or "Capital gains" or any income by way of voluntary contributions received by a political party from any person shall be excluded in computing the total income of the previous year of such political party subject to the conditions that such political party keeps and maintains such books of account and other documents, maintains a record of voluntary contribution in excess of twenty thousand rupees and the accounts are audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and furnishes a report under sub-section (3) of section 29C of the Representation of the People Act,1951 to the Election Commission.

It is proposed to amend the said section so as to provide, inter alia, that political party shall be eligible for exemption of income-tax under section 13A if,-

(i) no donation exceeding two thousand rupees is received otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account or through electoral bond;

(ii) it furnishes a return of income for the previous year in accordance with the provisions of sub-section (4B) of section 139 on or before the due date as per section 139.

It is further proposed to provide that any contributions received by way of electoral bond shall be excluded from reporting as per clause (b) of said section.

It is also proposed to define the expression “electoral bond”.

These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-2019 and subsequent years.

 

Cash donation limits for political parties restrict non-bank payments; mandatory tax return filing required for exemption. Eligibility for political party tax exemption is conditioned on banning donations above a prescribed cash threshold except when received by bank cheque, bank draft, electronic clearing or by electoral bond, and on timely furnishing of the income-tax return for the previous year; electoral bond contributions are excluded from the standard donation-reporting requirement and a statutory definition of electoral bond is introduced.