Clarification of Status of Political Parties under Income Tax Act, 1961

There have been some newspaper reports which seem to wrongly suggest that there cannot be any scrutiny of Income-tax returns of political parties registered with the Election Commission in the context of deposits of old currency notes. This inference seems to have been drawn because of the fact that the income of the political parties is exempt from Income - Tax under Section 13A. 

In this context, the following clarifications need to be kept in mind :

• The exemption from Income-Tax is given to only registered political parties subject to certain conditions, which are mentioned in Section 13A, which includes keeping and maintaining books of accounts and other documents as would enable the Assessing Officer to deduce its income therefrom;
• In respect of each voluntary contribution in excess of Rs. 20000, the political party will have to maintain a record of such contributions along with the name and address of such person who has made such contribution;
• The accounts of each such political party is to be audited by a Chartered Accountant; and
• The political party has to submit a report to the Election Commission about the donations received within a timeframe prescribed.

There are enough provisions in the Income Tax Act to scrutinise the accounts of the political parties and these political parties are also subject to other provisions of Income-Tax, including filing of return.

Statement by Finance Minister Shri Arun Jaitley

Following is the statement by Union Minister for Finance and Corporate Affairs Shri Arun Jaitley: 

"Political parties have not been granted any exemption post demonetisation and introduction of Taxation Laws (Second Amendment) Act, 2016 which came into force on 15th December, 2016. 

Income & Donations of political parties fall in the purview of Section 13A of the Income Tax Act 1961 & there is no change in its provisions. In this era of instant outrage, a 35 year old law is presented as a new law being passed by the NDA Government. 

I implore all journalist friends to be fully outraged against any step of the Government, if it is not against corruption. But in equal measure, I would also implore them to do adequate research before jumping the gun. 

Under Section 13A of IT Act 1961, Political parties have to submit audited accounts, income & expenditure details and balance sheets. 

Post demonetisation, no political party can accept donations in 500 and 1000 rupee notes since they were rendered illegal tenders. Any party doing so would be in violation of law. 

Just like anyone else, political parties can also deposit their cash held in the old currency in banks till the 30th of December provided they can satisfactorily explain the source of income and their books of accounts reflect the entries prior to 8 November. 

If there is any discrepancy in the books or records of political parties, they are as liable to be questioned by the Income Tax authorities as is anyone else. They enjoy no immunity whatsoever. 

There is no question of sparing anyone, and the political class is no exception. Infact PM Modi is setting a new example of propriety in public life, by asking all MPs & MLAs of BJP to submit their bank account details post demonetization. We would like to urge the other parties to do the same and prove their intentions against corruption."

Income Tax Searches lead to Admission of Undisclosed Incomes of Rs. 2600 Crore since 8th November, 2016.

The Income Tax Department has continuously been carrying out investigations since the de-monetisation of Old High Denomination (OHD) currency announced by the Government on 8th November, 2016. While Searches have been carried out in 291 cases across the country, 295 cases have been covered by survey action. In addition to these, open enquiries have been effected in more than 3000 cases. Approximately Rs. 393 Crore including Rs. 316 Crore cash and Rs. 77 Crore worth of jewellery has been seized. Of the cash seizure, about Rs. 80 Crore is in new currency. As a result of these investigations, approximately Rs. 2600 Crore of undisclosed income has been admitted by the taxpayers.

The success of the Department in unearthing undisclosed incomes and detecting large scale malpractices is due to its focused enforcement actions based upon high quality data analytics under various categories thereby identifying and prioritizing high risk persons/groups. This, coupled with the professional manner of conducting the investigations in a swift and confidential manner, has helped the Department make an impact in a short time.

Filing of Revised Income Tax Returns by the Tax Payers Post De-Monetisation of Currency

Under the existing provisions of Section 139(5) of the Income-tax Act, 1961 (‘Act’), Revised Return can only be filed if any person, who has filed a return under Section 139(1) of the Act or in response to notice u/s 142(1), discovers any omission or any wrong statement therein. Post demonetization of the currency on 8th November, 2016, some taxpayers may misuse this provision to revise the return-of-income filed by them for the earlier assessment year, for manipulating the figures of income, cash-in-hand, profits etc. with an intention to show the current year’s undisclosed income (including the unaccounted income held in the form of demonetized currency in current year) in the earlier return.

It is hereby clarified that the provision to file a revised return of income u/s 139(5) of the Act has been stipulated for revising any omission or wrong statement made in the original return of income and not for resorting to make changes in the income initially declared so as to drastically alter the form, substance and quantum of the earlier disclosed income.

It is brought to the notice of tax payers that any instance coming to the notice of Income-tax Department which reflects manipulation in the amount of income, cash-in-hand, profits etc. and fudging of accounts may necessitate scrutiny of such cases so as to ascertain the correct income of the year and may also attract penalty/prosecution in appropriate cases as per provision of law.

Source:

Press Information Bureau
Government of India
Ministry of Finance

Direct and Indirect Tax Collections up to November, 2016

Direct Taxes

The figures for direct tax collections up to November, 2016 show that net collections are at Rs. 4.12 lakh crore which is 15.12% more than the net collections for the corresponding period last year. Till November, 2016,48.67% of the Budget Estimates of direct taxes for FY 2016-17 has been achieved. 

As regards the growth rates for Corporate Income Tax (CIT) and Personal Income Tax (PIT), in terms of gross revenue collections, the growth rate under CIT is 11.22% while that under PIT (including STT) is 22.41%.However, after adjusting for refunds, the net growth in CIT collections is 8.75% while that in PIT collections is 23.89%. Refunds amounting to Rs.1,05,561 crore have been issued during April-November, 2016, which is 17.35% higher than the refunds issued during the corresponding period last year

Indirect Taxes

The figures for indirect tax collections (Central Excise, Service Tax and Customs) up to November 2016 show that net revenue collections are at Rs 5.52 lakh crore, which is 26.2% more than the net collections for the corresponding period last year. Till November 2016, 71.1% of the Budget Estimates of indirect taxes for Financial Year 2016-17 has been achieved.

As regards Central Excise, net tax collections stood at Rs. 2.43 lakh crore during April-November, 2016 as compared to Rs.1.69 lakh crore during the corresponding period in the previous Financial Year, thereby registering a growth of 43.5%.

Net Tax collections on account of Service Tax during April-November, 2016 stood at Rs. 1.60 lakh crore as compared to Rs.1.27 lakh crore during the corresponding period in the previous Financial Year, thereby registering a growth of 25.7%.

Net Tax collections on account of Customs during April-November 2016 stood at Rs. 1.48 lakh crore as compared to Rs. 1.40 lakh crore during the same period in the previous Financial Year, thereby registering a growth of 5.6%.

During November 2016, the net indirect tax (with ARM) grew at the rate of 23.1% compared to corresponding month last year. The growth rate in net collection for Customs, Central Excise and Service Tax was 16.1%, 33.7% and 15.5% respectively during the month of November, 2016, compared to the corresponding month last year. However, the total indirect tax collection (with ARM) for the month of November 2016 showed a decline of 13.9% over October 2016 figures.

The net indirect tax collection up-to November, 2016 shows a growth of 26.2% (with ARM) and 8.0% (without ARM) over the corresponding period of previous year. This growth rate up-to October, 2016 was 26.7% (with ARM) and 8.0 % (without ARM).

The month-wise cumulative indirect tax growth trends (without ARM) in FY 2016-17 is shown below.

In order to facilitate the move towards cashless transactions, the Government has directed the banks to install an additional one million new PoS terminals by 31st March 2017;. 2,73,919 camps organized to open banks accounts for unorganized labour in which 24.54 lakh accounts opened.

As part of the plan to expand the digital payments eco-system and facilitate the move towards cashless transactions, the Government has decided that an additional one million new PoS terminals should be installed by 31st March 2017. Towards this end, banks have already placed orders for 6 lakh PoS machines and another 4 lakh PoS machines are likely to be ordered in the next few days. The country today has about 15 lakh PoS terminals across different merchants to facilitate card based payments.

A special drive has also been undertaken jointly with Ministry of Labour & Employment and States’ Administration to open banks accounts for unorganized labour by holding camps at various locations. A total of 2,73,919 camps have been organized so far in which 24.54 lakh accounts have been opened.

In the light of the Government’s decision to demonetize Specified Bank Notes w.e.f. the midnight of 8th November 2016, banks are making all out efforts to facilitate genuine transactions. Appropriate action is being taken against individuals involved in irregular and unauthorized activities. Since 3rd December 2016, action against 7 officials of Public Sector Banks (PSBs) have been taken.

In addition, audit has been taken-up in few branches of Public Sector Banks (PSBs). The Concurrent Audit is also being initiated as per the requirement and under the extant guidelines of RBI.

Income Tax (IT) Department carries-out swift investigations in more than 400 cases since the de-monetization of old High Denomination (OHD) currency on 8th November, 2016; More than Rs. 130 crore in cash and jewellery seized and approximately Rs. 2,000 crore of Undisclosed Income admitted by the taxpayers; IT Department refers large number of cases with serious irregularities detected Post De-monetization to Enforcement Directorate (ED) & CBI.

The Income Tax Department has carried-out swift investigations in more than 400 cases since the de-monetization of Old High Denomination (OHD) currency announced by the Government on 8th November, 2016. More than Rs. 130 Crore in cash and jewellery has been seized and approximately Rs.2000 Crore of undisclosed income has been admitted by the taxpayers.

Detecting serious irregularities beyond the Income-tax Act, the CBDT decided to refer such cases to the ED and the CBI, enabling them to examine the criminal conduct for immediate necessary action. More than 30 such references have already been made to the ED, and are being sent to the CBI.

The Bengaluru Investigation Unit of the Income Tax Department has sent maximum references (18) to ED. These are cases where undisclosed cash in new high denomination notes was seized by the Department. The Mumbai unit has referred a case where Rs. 80 lakh in new high denomination currency notes were seized. Ludhiana Unit has referred 2 cases, where seizures of USD 14000 and Rs. 72 lakh in cash were made. Hyderabad, shared a case involving seizure of Rs. 95 lakhs cash from 5 persons travelling in a Tata Indica. Pune’s reference stems from a seizure of Rs. 20 lakhs cash, including 10 lakhs in new currency notes from an un-allotted locker of urban cooperative bank, the key of which was in the possession of the CEO of the bank. Two cases referred by the Bhopal unit are of jewelers against whom evidence of large scale pre-dating of bills and flouting of PAN reporting norms were detected during searches conducted. The cases referred from the Delhi unit include the Axis Bank, Kashmiri Gate in which complicity of officers of the bank in the malpractices was detected.

The concerted and coordinated enforcement action of the Income Tax Department, ED & CBI in detecting the malpractices and taking swift action is going to continue in the coming days.