While the masses are yet to get any respite from the queues outside banks and ATMs, the government has given political parties great respite as now the political parties will neither face any tax scrutiny nor will they give any tax on the cash they deposit in banks.

This move is seen as a double setback for the common man who's already battling long queues outside banks and ATMs followed by massive cash crunch which is unlikely to get addressed in days to come. The government has said political parties depositing the demonetised Rs 500 and Rs 1,000 notes in their accounts will not face income tax investigation either.

BCCL/representational image

"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," revenue secretary Hasmukh Adhia told reporters.

Also Read: Maharashtra Cooperative Banks Are Becoming The Go To Centers For Money Laundering, Rs 5,000 Crore Deposited In 4 Days

Tax exemption for political parties is an old law

The Section 13A of the Income Tax Act, 1961 grants exemption from tax to political parties in respect of their income from house property, other sources, capital gains and income by way of voluntary contributions received from any person.

BCCL/representational image

Adhia was replying in response to a question whether the government is also investigating political parties/political treasuries depositing their own cash in banks.

This came on a day the government gave tax offenders a last chance to come clean.

Also Read: Internet Is Flipping Out Over The Three-Day Bank Holiday, Low Cash May Add To People's Woes



Face Saving Move

While political parties got great breather while common is getting sandwiched between queues and cash crunch, the government says that it will monitor the individual donations given to the parties and parties can be called upon in case needed. The parties can be called upon to explain volunteer donations and must be able to provide details of the contributors.

Parties are regularly accused of manufacturing lists of small volunteer donors to escape the scrutiny of tax officials. Contributions of up to 20,000 do not have to be accompanied by details of the giver, providing a major loophole to parties.

The exemption in respect of contributions is available only when in the case of all voluntary contributions in excess of ten thousand rupees, such political party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution.

AP/representational image

This mean anonymous contribution cannot be more than Rs 20,000. Farmers exempt from tax on agricultural income will need to furnish a self-declaration that his earnings are less than Rs 2.5 lakh in a year to make deposits in bank without PAN. “We will not go unnecessarily after those with Rs 2.5 lakh deposits. But where we find people have tried to misuse the provision by putting in multiple accounts in different banks (we will go after them),” Adhia said.