Political parties like BJP, Congress, DMK, AIDMK, AAP, SP and BSP are tax exempted in India. Section 13A of income tax act specifies that on satisfying certain conditions these political parties will be allowed tax exemption.
Here are those conditions that each political party is required to satisfy to get tax exemption;
- Political party must be registered or deemed to be registered with the election commission of India.
- Must maintain proper books of accounts and other documents to enable the assessing officer to properly deduce its income there from.
- Books of accounts of a political party are required to be audited by a chartered accountant in practice.
- Has to keep and maintain records of each voluntary contribution in excess of Rs. 20000 with their names and address.
- The treasurer or any authorised person of a political party shall in each financial year prepare a report in respect of contribution received in excess of Rs.20000 from any person or company in that year and submit it to the election commission of India before the due date of submission of return of income.
If all these conditions are satisfied then political parties registered in India will be liable for tax exemption under section 13A of income tax act, 1961.
As per this section, following incomes are not to be included in total income of a political party;
- Any income that is chargeable to tax under the head Income from house property, Capital gain, Income from other sources
- Any income by way of voluntary contribution
Apart from these incomes, all other income like income under the head profits and gains of business and profession will be chargeable to tax.
However, tax exempted does not mean that these political parties are not required to file their income tax return. As per section 139(4B) of income tax act, political parties have statutory obligation to file their income tax return if total income without giving effect to section 13A exemptions exceeds the maximum amount which is not chargeable to tax.
If political party’s income exceeds the maximum limit then they are liable to file income tax return on or before 30th September of the assessment year for which return is to be filed. For financial year 2014-2015, income tax return filing due date for a political party is 30th September 2015. If return of income is not filed before the due date or before the date as extended by CBDT then exemption under section 13A as discussed above will not be available.