Donated Excess 500k to political party under Investigation

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Taxpayers who have donated more than Rs. 5,00,000/- to political parties under strict Income Tax surveillance

This scrutiny by the Income Tax authorities highlights potential misuse of Section 80GGC, which allows individuals to claim a 100% deduction on donations made to political parties. The investigation seems to revolve around round-tripping—where individuals issued large donations via cheques or bank transfers but allegedly received the same amount back in cash, minus a commission. This essentially laundered unaccounted cash while providing donors with illegitimate tax deductions.

Key Points of Investigation: on Taxpayers who have donated more than Rs. 5L to political parties under strict Income Tax surveillance

Large-Scale Tax Evasion: Nearly 9,000 individuals donated at least ₹5 lakh in FY 2020–21 and claimed deductions under 80GGC. This provision allows unlimited donations to political parties, making it a potential loophole for tax evasion.
Money Laundering Mechanism: Reports indicate that certain political entities functioned as money laundering conduits, charging a 1-3% commission. Donors issued cheques, claimed tax deductions, and later received cash refunds, effectively washing black money.
I-T Department’s Inquiry: The department has sent notices seeking detailed explanations from donors. Key questions likely include:
- Source of funds for donations.
- Proof of actual donation (bank statements, receipts).
- Political affiliation and purpose of donation.
- Details of refunds (if any) received in cash.
Implications for Donors & Political Entities: If found guilty of tax fraud, individuals may face penalties, interest, and potential prosecution. Political outfits acting as laundering channels may come under ED and IT Act scrutiny.

This investigation underscores increasing vigilance on political funding, a topic that has long been opaque in India. With electoral bonds now scrapped, authorities appear to be cracking down on indirect money-laundering routes. It will be interesting to see how enforcement agencies proceed against both donors and political outfits involved in this scheme.

Crackdown on fake political donations

Tags: political party

8 months ago

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