Income Tax Clarification

Government of India
Ministry of Finance
17-December-2016 18:29 IST

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 :

(i)           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;

(ii)         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;

(iii)       The accounts of each such political party is to be audited  by a Chartered Accountant; and

(iv)       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.

Government of India
Ministry of Finance
14-December-2016 13:17 IST

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.

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