Jan 12, 2017, 03.21 AM IST
NEW DELHI: Political parties will continue to enjoy income tax exemption for the funds they collect as the Supreme Court ruled on Wednesday that there is no illegality in the exception made to keep parties out of the tax net. The decision puts to rest the debate over whether the exemption was an unfair privilege granted to political parties. The apex court said the matter was one of executive determination and parties needed money to propagate their beliefs.
A bench of Chief Justice J S Khehar and D Y Chandrachud dismissed a public interest litigation challenging the constitutional validity of Section 13A of the Income Tax Act which grants exemption to political parties.
The issue had gained salience in the context of PM Narendra Modi’s push for reforms in political funding.
Prime Minister Narendra Modi had linked the push to the anti-black money objectives of the demonetisation of Rs 500 and Rs 1,000 currency notes. The SC also turned down the plea to make it mandatory for political parties to declare the source of all money received. But as Modi’s recent speeches indicate, this is an area that is likely to be reviewed soon.
While the government seems ready to consider lowering the current limit of Rs 20,000 for anonymous donations, there is no indication that it is could consider reviewing the tax exemption. There is a move to de-register parties that have been inactive and are suspected to be using their status largely to launder unaccounted and illegal money.
Section 13A of the IT Act says any income of a registered political party which is chargeable under the head “income” from house property or from other sources or any income by way of voluntary contributions received by a political party from any person shall not be included in the total income of the previous year of such political party.
Challenging this provision, advocate M L Sharma contended exempting political parties from paying tax is illegal, unconstitutional and against national interest. He alleged that there are 1,848 registered political parties and they misused the law to hold unaccounted money. “Political parties are supposed to be main chest of the black money in the country.