Tax Exemption to Political Parties [Section 13A] :
Section 13A of the Income-tax Act, 1961 grants exemption from tax to political parties in respect of their income specified below:
(i) Income from house property;
(ii) Income from other sources;
(iii) Capital gains; and
(iv) Income by way of voluntary contributions received by the political parties from any person.
The aforesaid categories of income would qualify for exemption without any monetary or other limit and the income so exempted would not even be includible in the total income of the political party for the purpose of assessment. The tax exemption will be applicable only if the following conditions are fulfilled:
(i) The political party must keep and maintain such books and other documents as would enable the Assessing Officer to properly deduce the income of the political party from those accounts.
(ii) The political party must keep and maintain records in respect of each such voluntary contribution which is in excess of ` 20,000 giving details of the amount received, the name and address of the person who has made the contribution, the date of receipt and such other details as may be relevant or appropriate. However, this does not mean that the political party need not disclose smaller contributions in its accounts which are maintained by it. The obligation to maintain proper record of voluntary contribution in excess of Rs 20,000 is over and above the obligation to maintain proper records and books of accounts in respect of all the income and expenses of the party.
(iii) The accounts of the political party must be audited by a Chartered Accountant.
(iv) A report under section 29C(3) of the Representation of People Act, 1951 has to be submitted by the treasurer of such political party or any other person authorised by the political party in this behalf for every financial year. If there is a failure to submit the above report, no exemption under this section shall be available for the political party for that financial year.
For the purposes of this section, ―political party‖ means a political party registered under section 29A of the Representation of the People Act, 1951.