New Delhi: The finance ministry, through the Central Board of Direct Taxes (CBDT), has defended exemptions granted to political parties under the Income Tax Act 1961 on the grounds 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.”
The ministry’s response came in the form of a reply to an appeal before the Central Information Commission (CIC) filed on August 17 by RTI activist Subhash Chandra Agrawal, who contended that the exemptions granted to political parties should be withdrawn.
He said many of these parties existed “only to whiten black money” and only about 50 of them were recognised as state or national level political parties, while about 400 contested Lok Sabha elections in the year 2014.
While demanding the abolition of tax exemptions for political parties and NGOs, Agrawal stated that “presently there is two-way loss to the exchequer in respect of contributions, donations et cetera [that are] made to political parties and certain non government organisations (NGOs). There is income-tax exemption not only on contributions or donations received by these bodies, but even donors and contributors also get income-tax exemption.”
He also said that since political parties are not ready to accept the CIC verdict which made them accountable to the public under the RTI, there is no sense in granting any indirect-funding through income-tax exemption to political parties and those contributing to them and that these exemptions should be totally abolished.
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