EC asks for ban on anonymous donations to political parties above Rs2,000

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New Delhi: Amid an ongoing debate seeking greater transparency on political funding, the Election Commission (EC) has recommended to the government that anonymous donations above or equal to Rs2,000 should be prohibited. In a document called “Proposed Electoral Reforms” published this month, the EC has also recommended that exemption of income tax should only be extended to political parties that contest elections and win seats in Lok Sabha or assembly polls.

PTI had reported the recommendations of the EC in a news report on Sunday.

If accepted, these recommendations would give more power to the EC to keep a check on anonymous donations which are right now capped at Rs20,000, as well as help crack down on political parties that are formed only with “an eye on availing the benefits of income tax exemption”.

Section 29C of The Representation of the People Act, 1951 states that political parties should declare their donations but only those above Rs20,000. The Law Commission’s report in 2015 on electoral reforms had put a cap and said that up to Rs20 crore or 20% of the party’s entire collection, whichever is lower, can be anonymous.

“Anonymous contributions above or equal to the amount of Rupees two thousand should be prohibited,” the EC, led by chief election commissioner Nasim Zaidi, has recommended. The recommendations have been made to the law ministry which could further propose an amendment to the RPA Act.

According to a senior official of the poll watchdog, who did not want to be named, the EC has always maintained its stand that the declaration of anonymous donations should get reduced. “There have been reports as to how a major proportion of several political parties show their donations under the Rs20,000 category. We have flagged this earlier too because we feel reducing this to Rs2,000 will bring greater transparency,” the official added.

Experts feel recommendations like these will help promote greater transparency in funding of political parties, but point out that several proposals on electoral reforms over the years have not been accepted because of a lack of will among political parties.

“The declared donations explain only about 20-25% of income declared under IT returns for prominent political parties that contest polls. The balance of it is unknown and so is the information for nearly 2,000 political parties which do not put it out in the public domain. The whole thing about political funding is a black box and any recommendations like these will help in promoting transparency,” said Jagdeep Chhokar, founding member of New Delhi-based Association for Democratic Reforms (ADR).

“Lack of desire among political parties to be transparent about their funding is a key problem. It is a fountainhead of corruption specially when the whole country is suffering from black money,” he added.

Additionally, the EC has made another key recommendation which could help the growing number of smaller political parties. It has said that only those political parties which contest and win either Lok Sabha or legislative assembly elections and win seats should be allowed tax exemption.

Section 13A under the Income Tax Act, 1961 gives tax exemption to political parties for income from house property, income by way of voluntary contributions, income from capital gains and income from other sources.

“Many political parties get registered, but never contest election. Such parties exist only on paper. The possibility of forming political parties with an eye on availing the benefit of income tax exemption also cannot be ruled out. It would only be logical that the Commission which has the power to register political parties is also empowered to de-register in appropriate cases,” the EC said, while explaining the reason behind the recommendation.