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    Carry forward and set off of losses preserved for successor co operative banks, subject to specified conditions and penalties.
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      Comparison of SCHEDULE VIII "INCOME NOT TO BE INCLUDED IN THE TOTAL INCOME OF POLITICAL PARTIES AND ELECTORAL TRUSTS" between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

      18 September, 2025

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      SCHEDULE VIII - INCOME NOT TO BE INCLUDED IN THE TOTAL INCOME OF POLITICAL PARTIES AND ELECTORAL TRUSTS

      Income-tax Act, 2025

      At a Glance

      SCHEDULE VIII (Bill, Old Version) lists categories of income that are excluded from the total income of political parties and electoral trusts for income-tax computation. It matters to registered political parties and electoral trusts, and to donors and tax authorities concerned with compliance and reporting. The document does not state an effective date. Not stated in the document.

      Background & Scope

      Statutory hook: "See section 12" (SCHEDULE VIII). The Schedule sets out a Table with three columns: (B) Income not to be included in total income, (C) Eligible persons, and (D) Conditions. The Schedule covers two entries: (1) certain incomes (house property, other sources, capital gains, and voluntary contributions) for political parties registered u/s 29(a) of the Representation of the People Act, 1951; and (2) voluntary contributions for electoral trusts. The Schedule contains a Note defining "electoral bond" by reference to the Explanation to section 31(3) of the Reserve Bank of India Act, 1934. The Schedule provides enumerated conditions attached to each exclusion. No other definitions or extended explanations are provided. Not stated in the document: legislative intent beyond the text; effective date; interaction with other income-tax provisions beyond the internal cross-references provided.

      Statutory Provision Mode

      Text & Scope

      The Schedule exempts specified categories of income from inclusion in total income for eligible political parties and electoral trusts. For political parties (registered u/s 29(a) of the Representation of the People Act, 1951), the exempt incomes include: income chargeable under "Income from house property," "Income from other sources," "Capital gains," and "any income by way of voluntary contributions received from any person." For electoral trusts, the exempt income is "any voluntary contributions received."

      Coverage is limited to "eligible person" as defined in column C of the Table; eligibility for a political party is tied to registration under the cited section; for an electoral trust, the table simply identifies "An electoral trust." The Note supplies a cross-statutory definition relevant to electoral bonds.

      Interpretation

      The Schedule conditions the exemption on compliance requirements contained in column D. The text indicates a legislative intent to condition tax benefits on maintenance of records, audit, restricted modes of receipt for small donations, reporting obligations under the Representation of the People Act, and, for electoral trusts, distribution and regulatory compliance. The use of cross-references to specific sections of the Representation of the People Act suggests a statutory integration of electoral reporting and income-tax treatment. The Schedule uses prescriptive compliance criteria rather than blanket immunity, signalling a policy to incentivise transparency and traceability of political funding.

      Exceptions/Provisos

      Clause (d) caps small-donation anonymity: "no donation exceeding Rs. 2,000 is received ... otherwise than by an account payee cheque ... or through electoral bond." Thus donations <= Rs. 2,000 may be received in other modes; donations > Rs. 2,000 must be through specified financial instruments. Clause (b) requires a record of voluntary contributions other than electoral bonds in excess of Rs. 20,000, including the name and address of the contributor. For electoral trusts, clause (a) mandates distribution of 95% of aggregate donations in the tax year (plus any earlier surplus) to political parties during that tax year. Clause (b) requires that the electoral trust function according to Central Government rules.

      Illustrations

      • Example 1: A registered political party receives Rs. 50,000 as a voluntary contribution by cheque and has maintained books, audited accounts, kept contributor records where required, submitted the report u/s 29C(3), and filed the tax return as required. The contribution would be excluded from total income under the Schedule subject to compliance. (Derived from clauses (a)-(f).)
      • Example 2: An electoral trust receives Rs. 1 crore in donations in the tax year and distributes Rs. 95 lakh to registered political parties during that year and functions per Central Government rules. The Rs. 1 crore of voluntary contributions is not included in total income under the Schedule, assuming compliance. (Derived from electoral trust clauses.)
      • Example 3: A political party receives a cash donation of Rs. 5,000 in hand (i.e., not by cheque or electronic mode). Under clause (d) such a receipt would contravene the prohibition (since exceeding Rs. 2,000 received otherwise than by specified modes), potentially jeopardising the exemption for that donation or the party's entitlement under the Schedule. (Derived from clause (d).)

      Interplay

      The Schedule cross-references provisions of the Representation of the People Act (section 29(a); section 29C(3)) and the Reserve Bank of India Act (Explanation to sub-section (3) of section 31). It also requires compliance with section 263(1)(a)(iii) for return furnishing. No other Rules/Notifications/Circulars are cited in the Bill text beyond the general reference that electoral trusts must function as per Central Government rules. The Schedule thus relies on external statutory and regulatory instruments for definitional and compliance content. Specific interaction details (e.g., precedence where Schedule conditions conflict with other tax provisions) are Not stated in the document.

      Differences Between the Two Versions and Practical Impact

      • Reference to Representation of the People Act-Section numbering: The Bill (Old Version) refers to a political party "registered u/s 29(a) of the Representation of the People Act, 1951," whereas the Act text (Income-tax Act, 2025) refers to a political party "registered u/s 29A of the Representation of the People Act, 1951."
        • Practical impact: The Act version corrects or alters the cross-reference. If the Bill reference (29(a)) was erroneous, the Act version aligns the income-exemption to the correct statutory registration provision, avoiding uncertainty about eligible entities. This is a drafting/clarificatory change; no substantive shift to eligibility is apparent from the texts themselves.
      • Prescription language regarding electronic mode: The Bill uses the phrase "as prescribed" in clause (d) (Bill: "as prescribed"), while the Act uses "as may be prescribed" (Act: "as may be prescribed").
        • Practical impact: Minimal substantive difference; "as may be prescribed" is the more conventional enabling language for delegated legislation, clarifying that the electronic modes will be specified by rule-making authority. It likely strengthens the permissive legislative footing for future rules.
      • Return filing cross-references and due dates: The Bill requires the political party to furnish a return "as per the provisions of section 263(1)(a)(iii) on or before the due date under that section." The Act requires furnishing "as per the provisions of section 263(1)(a)(iii) and 263(2) on or before the due date referred to in section 263(1)(c)."
        • Practical impact: The Act adds an additional cross-reference to section 263(2) and specifies the due date provision more precisely (263(1)(c)). This tightens the statutory compliance framework by pointing to an additional subsection and a precise due-date clause, potentially expanding or clarifying filing obligations and consequences for non-compliance.

      Practical Implications

      • Compliance and risk areas: Political parties must maintain books of account and documentary records sufficient for an Assessing Officer to determine income; failure may lead to denial of exemption. Specific risks include non-receipt through prescribed modes for donations over Rs. 2,000, failure to record contributor details for contributions over Rs. 20,000 (other than electoral bonds), and failure to secure an audit. Electoral trusts must ensure timely distribution of 95% of receipts to preserve tax treatment; failure to distribute may endanger exemption. These obligations create audit and reporting exposure for both entities.
      • Record-keeping/evidence: The Schedule explicitly requires maintenance of books and records, contributor name and address for relevant donations, and audit reports. Entities should retain bank evidence for account payee cheques/ drafts/electronic transfers and maintain documentation of electoral bond receipts. The Schedule itself prescribes these documentary requirements; procedural detail (forms, formats, retention period) is Not stated in the document.

      Key Takeaways

      • The Schedule grants targeted income exclusions for registered political parties and electoral trusts, conditioned on specified transparency and procedural requirements.
      • Eligibility for exemption for political parties is tied to registration under a specified provision of the Representation of the People Act; accuracy of cross-references is material to eligibility determinations.
      • Donations above Rs. 2,000 must be received by specified financial instruments; donations above Rs. 20,000 (except electoral bonds) require recording of donor identity and address.
      • Electoral trusts must distribute 95% of receipts in the tax year to preserve the exclusion; they must also function under Central Government rules.
      • Audit of accounts and filing of returns (cross-referenced tax provisions) are preconditions for enjoying the benefits; failure to comply can jeopardise tax exemptions.
      • The Schedule relies on cross-statutory definitions (RBI Act) and electoral reporting (RPA provisions); operational detail is delegated to rules and external provisions.
      • Where the Bill's text is silent (effective date; specific procedural formats; penalties for non-compliance within the Schedule), the document states "Not stated in the document."

      Full Text:

      SCHEDULE VIII - INCOME NOT TO BE INCLUDED IN THE TOTAL INCOME OF POLITICAL PARTIES AND ELECTORAL TRUSTS

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      ActsIncome Tax