The Telegraph
Since 1st March, 1999
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Tax break plan for party donors

New Delhi, May 9: The Centre today announced its intention to legitimise political funding and exempt donations from income-tax.

“Political funding in the country will be, for the first time, legitimised and donations to political parties would be 100 per cent exempt from income-tax under the Act,” law minister Arun Jaitley told legal correspondents. “This will be a first major step in cleansing the political system and almost all political parties have welcomed the step.”

Jaitley said the parties will have to pay tax on a donation of Rs 20,000 and above. “Further, every political party will pay tax in terms of their expenses on train and air tickets, copter charges, transportation and all other expenses.”

The minister said he would have brought a Bill in Parliament to effect changes in the income-tax and company laws but could not as he was “short of time”.

If the budget session of Parliament, which ended today, “had been extended even by one day, I would have brought a Bill”, he said.

The proposed changes envisage that donations by an individual and a Hindu Undivided Family to a political party would be 100 per cent exempt from income-tax. A corporate or industrial donation would be covered by the company law which, too, would be changed to provide tax relief.

“Government corporates cannot give donations to political parties and, hence, there is no question of them being exempt from any tax. But it is applicable to all other private industries.”

According to Jaitley, the move “will encourage donations through cheques and help in eradication of the play of black money to a major extent in politics. Political parties, too, would be happy to receive donations in cheques as they have to, in turn, pay in cheque their office staff, copter charges and other expenses”.

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