Political parties exempted from income tax on old currency deposits
He further said, "If it is a deposit in the account of a political party, they are exempt. But if it is deposited in individual's account then that information will come into our radar. If the individual is putting money in his own account, then we will get information
New Delhi: The Finance Ministry has exempted the political parties, depositing old 500 and 1,000 rupee notes in their accounts, from paying income tax, provided the donations taken are below Rs 20,000 per individual and properly documented.
The exemption was given considering a decades old law that gives privilege to the political parties from paying taxes if the income is generated from a group of sources, including donations by volunteers.
Revenue Secretary Hasmukh Adhia on Saturday stated, the parties are free to deposit old 500 and 1000 rupee notes in their bank accounts. "...but these deposits would, however, be subject to the condition that individual donations taken in cash do not exceed Rs 20,000 and are properly documented with full identity of the donor," he said.
He further said, "If it is a deposit in the account of a political party, they are exempt. But if it is deposited in individual's account then that information will come into our radar. If the individual is putting money in his own account, then we will get information."
The law regarding exemption from income tax to political parties:
- Section 13A of the Income Tax Act, 1961 grants exemption to political parties from paying tax in respect of their income, provided the income should be from house property, other sources, capital gains and income by way of voluntary contributions received from any person.
- These categories of income qualify for exemption without any monetary or other limit.
- The income so exempted would also not be included in the total income of the political party for the purpose of assessment.
- This exemption is, however, applicable only if the political party keeps and maintains proper books of accounts and other documents of the income and gets them audited by a Chartered Accountant on a regular basis.
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What else the Revenue Secretary said:
- A single donation of above Rs 20,000 as per the existing law has to be done through cheque or bank draft.
- Farmers who are exempted from paying income tax on agriculture income will need to furnish a self-declaration that their earnings are less than Rs 2.5 lakh in a year to make bank deposits without PAN and for those who are unable to do that, furnishing PAN will be required.
- A farmer has to give self declaration in Form 60 where he has to declare that his income is less than Rs 2.5 lakh. If he files Form 60, then PAN is not required. Those who are not able to give declaration, they have to give PAN.
- The tax authorities will not unnecessarily chase deposits of less than Rs 2.5 lakh but where we find people have tried to misuse the provision by putting in multiple accounts in different banks, we will go after them."
- Banks will accumulate PAN numbers of all existing account holders except for Jan Dhan/BSBD account in a month or two.
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