Political parties depositing old notes in banks are exempt from income tax
Dec 16, 2016
NEW DELHI: As it levies stiff penalties on unaccounted cash in banks, the government on Friday said political parties depositing old Rs 500 and Rs 1000 notes in their accounts will be exempt from income tax.
However, the tax exemption on deposits by political parties subject to individual donations not exceeding Rs 20,000 in cash and with proper receipt.
Besides, farmers who are exempted from paying tax on agriculture income will need to furnish a self-declaration that their earnings are less than Rs 2.5 lakh in a year to make bank deposits without PAN.
For those unable to do that, furnishing PAN will be required, revenue secretary Hasmukh Adhia said.
He said deposits in bank accounts of political parties are not to be taxed.
"If it is a deposit in the account of a political party, they are exempt. But if it is deposited in individual's account then that information will come into our radar. If the individual is putting money in his own account, then we will get information," he told reporters here.
Section 13A of the Income Tax Act, 1961 grants exemption from tax to political parties in respect of their income. This income could be from house property, other sources, capital gains and income by way of voluntary contributions received from any person.
These categories of income qualify for exemption without any monetary or other limit and the income so exempted is would not even be included in the total income of the political party for the purpose of assessment.
However, the tax exemption is applicable only if the political party keeps and maintains such books and other documents of the income and the accounts are audited by a chartered accountant.
Asked if PAN will be mandatory for deposits made by agriculturalist, he said: "A farmer has to give self declaration in Form 60 where he has to declare that his income is less than Rs 2.5 lakh. If he files Form 60, then PAN is not required. Those who are not able to give declaration, they have to give PAN."
Adhia said the tax authorities will not unnecessarily chase deposits of less than Rs 2.5 lakh.