The Election Commission has sought to eliminate the flow of black money into the electoral process of the country, curb money laundering in general and reduce instances of huge undisclosed wealth by decidingto amend laws that allow tax-exempt contributions to political parties. The EC has asked the centre to ban anonymous contributions to political parties amounts equal to or more than Rs 2000. In addition, the EC has asked that only those parties which win seats in elections, in the Lok Sabha or Assembly polls, should be under the umbrella of tax-exempt funding. There are currently 1700 registered political parties in India and it is assumed that many of them are mere money laundering firms posing as genuine political parties.
No constitutional provision exists that can limit or ban such contributions at this moment, making a constitutional amendment necessary should the centre persist. Exemptions to political parties for income from house property, by voluntary contributions, capital gains and other sources are provided under Section 13A of the Income-Tax Act. Income under the head ‘salaries and income from business or profession’ are tax-deductible.Only an ‘indirect partial ban’ exists, with contributions above Rs. 20,000 requiring a declaration in accordance with 29C of the People’s Representation Act, 1951.
The proposed amendment, which has ben sent to the centre by the EC, is part of a broader plan of electoral reforms in the country and restrain unscrupulous elements from taking public office. On Saturday, Revenue Secretary Hasmukh Adhia had declared that no political party could accept donations in old Rs. 500 or 1000, as they were illegal tender afterNovember 8.
5/6 Post demonetisation, no political party can accept donations in 500 and 1000 rupee notes since they were rendered illegal tenders.
— Dr Hasmukh Adhia (@adhia03) December 17, 2016
In related news, the EC has asked the centre to ensure political parties are made to register details of donors by issuing coupons. Coupons are issued and printed by the respectiveparties and issued to register donation. Currently, small-denomination donations-Rs 10 and 20- are not liable to be registered via coupons and the EC seeks to curb this funding aspect. This is in line with a 1996Supreme Court order. The EC’s announcement to allow only those parties which win elections to have tax-free funding is a move to ensure that voter and election fraud is done away with.