The Central Board of Direct Taxes (CBDT), in a submission made to the Central Information Commission, has justified tax exemptions given to political parties for the contributions that are made to them despite apprehensions that this is being used to whiten black money.
The justification was made by the Board in response to an appeal filed before the CIC by RTI activist Subhash Chandra Agrawal. The tax body defended the exemptions, stating that “democratic institutions form the very basis of polity in India and it was deemed necessary that political parties be treated differentially so that impetus is given to organised political activity.”
“Political parties require funds in order to carry out a variety of activities including contesting of elections, organising meetings and rallies, publishing literature, among others. Also, these activities are both of a regular nature, such as organising of rallies and bringing out publications, and also periodic with respect to certain matters such as conducting elections. Accordingly, political parties have been granted certain exemptions and deductions to that they are able to utilise maximum funds for the public purpose of political activity.”
The exemptions are provided to the political parties under Sections 13A, 80GGB and 80GGC in the Income Tax Act in recognition of the role played by the political parties in the democratic set up of the country and to provide further necessary incentives to promote the activities of such political parties, the CBDT said in its response.
Agrawal had filed an appeal before the CIC, demanding that the tax exemptions given on the contributions made to political parties be abolished. His contention is that this exemption is being misused by the parties to whiten black money. “The CBDT has failed to take note of the mushrooming of political parties. The number has gone up to 2000, while only 50 of these are recognised as state or national level political parties,” he said.
Moreover, he said, the political parties had failed to comply with the verdict of the full bench of the CIC which brought them under the purview of the RTI Act, and hence the indirect government funding to them in the form of tax exemptions should be abolished.