Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: VAT Audit :: VAT RATES :: ARTICLES ON INPUT TAX CREDIT IN VAT :: cpt :: ACCOUNTING STANDARDS :: form 3cd :: ACCOUNTING STANDARD :: due date for vat payment :: TDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TAX RATES - GOODS TAXABLE @ 4% :: articles on VAT and GST in India :: list of goods taxed at 4% :: Central Excise rule to resale the machines to a new company :: empanelment
General »
 Number of companies paying tax over Rs 100 crore declines in 2013-14
 Tax and the dilemma of the self-employed
 Banks warn share tax hike threatens Paris' post-Brexit appeal
 PMC may decide on property tax rebate for IT firms this week
 I-T Dept is giving out certificates of appreciation. Have you received yours?
 Government works on ironing out benefits refund mechanism for exportersa
  Tax officials are using an IDS provision to question transactions beyond six-year-limit
 Tax-free bonds rally like midcap funds
 Senior citizens do not have to pay advance tax on salary and interest income
 GST: Audit commissioners to get adjudication powers
 Interest on NRE rupee account can be exempt from tax under FEMA

Made huge profit selling your property & want to avoid paying tax? Form a political party
May, 10th 2014

Made a huge profit selling your property and wondering how to avoid paying tax? Form a political party and "donate" your sale proceeds to it. And if you were worried the taxman will come knocking, just relax, it is perfectly legit. You and your party can claim 100% tax exemption too. "Many political parties are fronts for income tax fraud," says former chief election commissioner N Gopalaswami . That explains the burgeoning political party registrations. There are about 1,600 political parties in India, but only 100-150 actually contest elections. According to the Election Commission website, on March 10 there were six national parties, 23 state-level parties and 1,593 registered and unrecognised parties. On March 21, the Commission registered 24 more parties.

Then in five days, 10 more were listed — including a Rashtriya Aam Party (Aam being the flavour of the season). According to a back-of-theenvelope estimate by Gopalaswami, three new parties are registered every week. Election Commissioner HS Brahma confirms the trend. During a Confederation of Indian Industry meet in March, he said 90% of the parties registered with the Commission are created to evade tax. According to him, the party founders use the money thus channelled to buy jewellery, houses and plots, among other things.

"Sections 80GGGB and 80GGGC of the Income Tax Act give you 100% tax deduction for contributions made to a political party or an electoral trust," says Vivek Mallya, partner at Bangalore-based auditing firm Bhat, Mallya & Associates. Till 2014, even cash contributions were non-taxable . Parties are exempt from taxes under Section 13 of the Act. Is there a limit to the amount that can be contributed? None, says Mallya . While contributions made under Section 80G of the I-T Act have a limit up to 10%, the sky is literally the limit for what you can give to a party. If I-T officials suspect foul play, they cannot do much. "Their hands are tied until the General Anti-Avoidance Rules are in place," says Mallya. Until 2016, Sections 95 to 97 of the I-T Act, which deal with this, do not apply. Former CEC Gopalaswami remembers a party once registered with "Mathru Bhakti" in its name.

"I told my officials, Lakshmi (the goddess of wealth) is also a matha. So the party is formed to worship her." There was a party that claimed to have spent the same money for three consecutive years and the Election Commission launched an inquiry. "The party office was a single room, one chair and a table," Gopalaswami remembers. An I-T inquiry found that the money had been used to buy jewellery and shares. Commission officials say that it is difficult for it to investigate the veracity of every registered party. A quick check in Bangalore revealed a party that operates from an apartment and was formed "about six to seven years ago" according to its founder, who requested anonymity . "I do not run it anymore," said the party "founder".

"I wanted to close it down after two years, but one Mr Reddy said he wanted it, because he found some investors," he said. "So, I transferred it to him." Reddy, he says, runs it from Mysore and he is not sure from where. Another operates from a lawyer's office. It is essentially a one-man party and claims to be contesting this time from 16 constituencies. But the party's candidates were not listed as candidates even in a single constituency. Tax saving is not the only reason parties are formed. There are some which are registered under names that sound very similar to prominent candidates. Many of these are registered to split votes and some of them pull out when serious candidates pay them enough. Says senior BJP leader Suresh Kumar : "This time in Chikmagalur there were four Shobhas (namesake of BJP candidate Shobha Karandlaje ) and I myself faced this when I contested. Some of these parties emerge only during elections and are willing to withdraw for a fee.

Their standard line is 'We want to support you, but we have already spent so much money so could you compensate that?'" . The "fee" ranges from Rs 5 lakh to Rs 40 lakh, according to Kumar. "Fortunately , over time, we know their credentials and their capacity for damage ," he says. But doesn't the Election Commission have the power to de-register such parties? Apparently not. In 1998, the Commission asked for powers to regulate and de-register parties . It reiterated the demand in 2004 and 2006. In 2006, it demanded that only parties contesting elections be given tax breaks. None of the requests have been granted so far.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Team

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions