Demonetisation: Tax evaders may not find political parties an option

Hyderabad: Understandably, among the many debates going on since after the demonetisation announcement by Prime Minister Narendra Modi are how tax evaders may be able to escape the objective of the note ban by turning ‘black money’ into white.

The possibility of someone circumventing the stated objective of demonetisation by floating a political party or using existing ones to convert black money into white is among the topics being discussed widely.

Though these propositions may seem farfetched, the existing laws governing political parties and their functioning do give a scope for this. However, under the existing laws, an individual cannot float a political party overnight. He or she needs a minimum of 100 electors to do so.

However, if an ‘association’ of 100-plus tax evaders come together to float a political party, the law cannot stop them. Nevertheless, pumping in their money to the account of this newly-floated political party and turn it ‘white’ after a few months is debatable.

The second option for a tax evader would be to make ‘contributions’ to any political party in ‘packages’ of less than Rs 20,000, any number of times. Political parties need not give account for, or reveal the source of, donations lower than Rs 20,000 to either the Election Commission or the Income Tax department.

The latest details, made available by the Association for Democratic Reforms, of the contributions received by political parties give a glimpse of how the system works. Unknown sources of income of national parties: The Contribution Statements, submitted by political parties declaring names and other details of donors contributing above Rs 20,000 are the only known sources of income.

Incomes declared in the I-T returns, but without revealing the source of income from donations below Rs 20,000 are the unknown sources of income by political parties. These include sale of coupons, relief funds, miscellaneous income, voluntary contributions, contribution from meetings etc. The details of donors of such contributions are not available in public domain.

A whopping Rs 1,130 crore, (income specified in the I-T returns whose sources are unknown) is about 60 per cent of the total income of parties. Nationalist Congress Party is the only party that did not receive donations below Rs 20,000 during financial year 2014-15.

However, Bahujan Samaj Party claims that it did not receive any donation above Rs 20,000, hence no details of donations are in public domain. The BJP declared the highest total income and highest income from donations above Rs 20,000 of Rs 434 crore (50 per cent of the donations) from donors whose details are unavailable. The CPM declared that of the Rs 59.275 crore it received, only 6 per cent came from donors whose details are declared in the donations report.