New Delhi

Only three parties declared that they received more than 50 per cent of their funding in amounts above Rs. 20,000 during financial years 2009-2010 and 2010-2011 — meaning donations where the names and addresses of the donors are known. Notably, these are small parties and their receipts through donations are also marginal.

This is disclosed in the black money report prepared by the National Institute of Public Finance and Policy (NIPFP), which the Union Finance Ministry accepted as final last year but is yet to be tabled in Parliament.

In the case of the BSP, its entire income is by way of donations below Rs. 20,000. In the case of 10 other parties — INC, BJP, NCP, CPI(M), AIADMK, SP, JD(U), Lok Janshakti Party, RLD, SAD — this percentage is more than 75 per cent, or three-fourths, of their total funding. These parties therefore did not maintain or disclose the names and addresses of the contributors.

“Such donations have become a major opaque source of income for these parties,” says the black money report. Large cash amounts are being credited by parties in their books of accounts as coupon sales or cash donations received from anonymous/unknown sources. Since the identity of the donors is not known, there is no possibility of the names being disclosed or even of a verification of their genuineness.

“Cash donations/coupon sales below Rs. 20,000 per donor are an opaque avenue for parties to introduce any amount in their books of account, if they are so inclined to, and also avail themselves of exemption from tax, no questions asked.”

Section 29C of the Representation of the People Act (RoPA) requires all political parties to furnish an annual statement of all contributions in excess of Rs. 20,000 to the Election Commission of India (ECI), giving the names and addresses of the donors. Association for Democratic Reforms (ADR) compiled the sources of funding of major political parties for the financial years 2009-2010 and 2010-2011 based on their statements filed with the ECI and the returns filed with the Income Tax department.

The black money report recommends that the Income Tax rules be amended so that exemption is available to a political party only if it has not received any donation/contribution/fee etc exceeding Rs. 10,000 in a year, except through account payee cheques, from a single person or entity.

It also recommends that rules be framed for curbing the use of opaque avenues for funding. The alternatives could be machine numbered receipts or depositing cash collections in banks.

Contributions and incomes from house property, capital gains and such other sources are exempt from tax if parties maintain books of accounts and records of all contributions exceeding Rs. 20,000, giving the names and addresses of donors, submits them to the ECI and get their accounts audited by chartered accountants.

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