Tax payers who donated to unrecognised political parties under Income Tax department's radar

The Income Tax department has sent notices to a number of taxpayers who made donations to political parties that are registered, but not recognised by the Election Commission. The notices were sent both to individuals and corporates for donations made in FY21 and FY22.

As per The Economic Times, the income tax department is investigating if such payments to lesser-known political parties were used to evade tax and launder money.

Donation to political parties

About 5,000 notices are sent under Section 80GGC of the Income Tax Act.

"So far, about 5,000 notices have been sent for FY21 and FY22. We will be sending more notices in the coming days," a senior official told ET. "The donations were made to about 20 registered, but unrecognised, political parties", the official said.

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The official further told the publication that the donations did not match the declared income, and it is suspected these parties may have returned some of the amount in cash. In some cases, taxpayers have donated up to 80% of their income to a political party that's not even properly registered.

"We have sent notices where donation was not in proportion to income," a senior official told The Economic Times.

An unrecognised poltical party is the one that is registered but has not contested in any election or have not acquired the vote percentage threshold in assembly or Lok Sabha polls.

A taxpayer can deduct 100% of the donated amount to a registered electoral trust or political party subject to total deduction not exceeding the individual's total income.