EC wants ban on anonymous donations over Rs 2,000 to parties

New Delhi, December 18

The Election Commission has urged the central government to ban anonymous contributions of over Rs 2000 made to political parties to stop black money from being used in next year's assembly elections.

Although there is no constitutional or statutory prohibition on political parties' receiving anonymous donations by political parties, they need to be declared under Section 29C of The Representation of the People Act, 1951.

However, such declarations are restricted to contributions above Rs 20,000.

According to the commission's proposed amendment — which has been sent to the government and made part of its compendium on proposed electoral reforms — “anonymous contributions above or equal to the amount of Rs 2,000 should be prohibited”.

On Friday, the central government had said that political parties depositing old 500 and 1,000 rupee banknotes in their accounts would be exempt from income tax provided the individual donations were below Rs 20,000 and was appropriately documented.

Revenue Secretary Hasmukh Adhia said the central government is not tinkering with the tax exemption available to political parties and they were free to deposit old 500 and 1000 rupee notes in their bank accounts. These deposits should not exceed Rs 20,000, should be in cash and should be documented.

The Commission has also proposed that exemption of Income Tax should only be extended to political parties that contest elections and win seats in Lok Sabha or assembly polls.

Section 13A of the Income-tax Act, 1961 confers tax exemption to political parties for income from house property, income by way of voluntary contributions, income from capital gains and income from other sources.

Only income under the head ‘salaries and income from business or profession' are chargeable to tax in the hands of political parties in India.