The government on Friday said political parties depositing old 500 and 1,000 rupee notes in their accounts will be exempt from income tax provided the donations taken are below Rs 20,000 per individual and properly documented.
Revenue Secretary Hasmukh Adhia said the government is not tinkering with the tax exemption available to political parties and they are free to deposit old 500 and 1,000 rupee notes in their bank accounts. But these deposits will, however, be subject to the condition that individual donations taken in cash do not exceed Rs 20,000 and are properly documented with full identity of the donor.
A single donation of above Rs 20,000 as per the existing law has to be done through cheque or bank draft, he said.
Besides, farmers who are exempted from paying tax on agriculture income will need to furnish a self-declaration that their earnings are less than Rs 2.5 lakh in a year to make bank deposits without Permanent Account Number.
For those unable to do that, furnishing PAN will be required, Adhia said.
He said deposits in bank accounts of political parties are not to be taxed.
"If it is a deposit in the account of a political party, they are exempt. But if it is deposited in individual’s account then that information will come into our radar. If the individual is putting money in his own account, then we will get information," he told reporters in New Delhi.
Section 13A of the Income Tax Act, 1961 grants exemption from tax to political parties in respect of their income. This income could be from house property, other sources, capital gains and income by way of voluntary contributions received from any person.
These categories of income qualify for exemption without any monetary or other limit and the income so exempted is would not even be included in the total income of the political party for the purpose of assessment.
However, the tax exemption is applicable only if the political party keeps and maintains such books and other documents of the income and the accounts are audited by a chartered accountant.
Asked if PAN will be mandatory for deposits made by agriculturalist, he said: "A farmer has to give self declaration in Form 60 where he has to declare that his income is less than Rs 2.5 lakh. If he files Form 60, then PAN is not required. Those who are not able to give declaration, they have to give PAN."
Adhia said the tax authorities will not unnecessarily chase deposits of less than Rs 2.5 lakh.
"We will not go unnecessarily after those with Rs 2.5 lakh deposits. But where we find people have tried to misuse the provision by putting in multiple accounts in different banks (we will go after them)," he said.
Adhia said that within one/two months’ time banks will accumulate PAN numbers of all existing account holders except for Jan Dhan/BSBD account.
After the shock demonetisation announcement on November 8, the government allowed junked Rs 500 and Rs 1,000 notes to be deposited in bank accounts.
For individuals and companies holding unaccounted cash, it has offered new tax evasion amnesty scheme wherein 50 per cent tax will be charged on declarations and quarter of the total sum be parked in a non-interest bearing deposit for four years.
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Cap on bank withdrawals to be reviewed after Dec 30: Lavasa
The Union finance ministry on Friday said the cap imposed on withdrawal from bank accounts post demonetisation will be reviewed after December 30, the last date for depositing of old currency notes with the banks.
The government has fixed a limit of Rs 24,000 per week on withdrawal from bank accounts and Rs 2,500 per day from ATMs in view of the currency crunch following scrapping of 500 and 1,000 rupee notes.
"There will be a review which will be done after December 30 and whatever steps are required to be taken to bring things back to normalcy, I think they will be decided only after the review is complete," Finance Secretary Ashok Lavasa said at a Federation of Indian Chambers of Commerce and Industry event.
On the likely impact of demonetisation on growth, he admitted that informal sector which mostly deals in cash is facing problem.
"Going forward, as the period of December 30 ends, a very calm assessment has to be made on what kind of impact has happened," Lavasa said.
IMAGE: Union Finance Minister Arun Jaitley and Revenue Secretary Hasmukh Adhia at the 6th Goods and Services Tax Council meeting in New Delhi. Photograph: Kamal Singh/PTI Photo
