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Political parties will remain exempted from tax: govt

Political parties are cornerstone of democracy; can’t abolish tax exemptions

Policy Pulse
Publish Date: Aug 22 2016 9:33AM | Updated Date: Aug 22 2016 12:17PM

Political parties will remain exempted from tax: govt

The government has rejected the suggestion to abolish tax exemptions given to political parties. They central government says that these exercises are necessary to encourage political activities and regulating parties’ activities in the interest of democracy. 


Terming the suggestion of RTI activist Subhash Agrawal as not feasible, the Ministry of Finance has said, "Political institutions are important for any democratic set-up. Besides, provisions contained in the 13A, 80GGB and 80GGC of the Income Tax Act, 1961 intend to encourage such institutions." 


According to a Central Information Commission (CIC) report, Six national political parties including Congress, BJP, BSP, NCP, CPI and CPI(M) enjoy indirect funding from the government in the form of subsidies and tax exemptions. 


“All the political parties should bring under the RTI Act,” says CIC report. But the parties are opposing the directive of the transparency panel. 


As a response, the central government said, "As the very purpose of charitable entities and political parties are different. And different provisions have been made under the Income Tax Act to check different institutions," it said. 


“It would not be appropriate to compare the activities of political parties to the other entities such as trusts and charities. The nature of activities undertaken by charitable entities is very different from that of political parties,” the response further said.


Response was given to Agrawal, who suggested abolishing tax exemption to political parties and NGOs. “Democratic institutions are pillars of democracy and it deemed necessary that political parties be treated differentially,” the response said.