As per Indian Income Tax Act, the following points must be kept in mind while in respect of donations paid to political parties:-

  1. Any Indian company is allowed to pay the donation to any political party or parties.
  2. Any person except local authority and an artificial juridical person who is funded by government, wholly or partly.
  3. No payment must be made in cash. The payment can be made by cheque/draft/pay order/direct transfer in account of political parties.
  4. The political party must be registered under section 29A of Representation of the People Act, 1951 or an electoral trust.
  5. There is no limit of payment, made to political parties.
  6. 100% deduction is allowed from the income of the assessee in respect of the donation made to political parties.
  7. up to financial year 2016-17, the political parties were accepting donation up to Rs.20000/= in cash but with effect from 01.04.17 no political party will accept cash donation more than Rs.2000/=. Moreover, the political parties have to disclose the identity of donors in respect of donations more than Rs.2000/=.

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