The loophole in the entire gamut of demonetisation is out finally and the political parties are exempted from restrictions on depositing old currency notes in their bank accounts, said Revenue Secretary Hasmukh Adhia.
It means all the black money not returning to the system in the form of individual accounts may as well return in the form of funding to the political parties and the ruling parties may benefit. Ironic but no news outlet has revealed the information so far until the revenue secretary revealed it on Friday.
All the deposits below Rs.20,000 will not come under the Income Tax Department’s scanner, provided they comply with certain rules, said the secretary, citing Section 13A of the Income Tax Act.
The Act provides relief to political parties on the condition that they duly file their income tax returns annually and the exemption includes funds from house property, capital gains and voluntary contributions. Political entities are eligible provided their income is documented and audited by a chartered accountant.
“If it is a deposit in the account of a political party, they are exempted. If the deposits are made in an individual’s account, that information will come under our radar,” Adhia said. Moreover, demonetisation withdrawal limits will be reconsidered after December 30, he said.
Meanwhile, the Centre announced under the Prime Minister’s Garib Kalyan Yojana a new scheme for tax disclosures between December 17 and March 31, 2017 and they “will attract 50% tax and penalty,” according to Adhia.
Contributions to political parties are governed by Section 182 of the Companies Act, 2013. A company that is not a Government company and which is in existence for at least last three financial years may contribute up to 7.5% of its average net profits during the last three years to a political party/parties registered under the representation of Peoples Act, 1951.
This is subject to further elaborations, disclosures and restrictions in the said section. A company can also make contributions within the above limits and restrictions to ‘Electoral Trust Companies’ and reflect these contributions in their books of accounts. The provisions of Section 182 are not applicable to foreign companies, acccording to a reply by Arjun Ram Meghwal, Minister of State for Corporate Affairs in written reply to a question in Lok Sabha on Friday.