Supreme Court Agrees to Hear Plea Challenging Income Tax Exemption for Political Parties

On Monday, the Supreme Court decided to consider a plea seeking to end the income tax exemption given to political parties and stop them from accepting donations in cash.

The petition was filed by Khem Singh Bhati, represented by Senior Advocate Vijay Hansaria and filed through Advocate Jayesh K. Unnikrishnan. They contended that Clause (d) of Section 13A of the Income Tax Act violates Articles 14 and 19(1)(a) of the Constitution. Section 13A provides the tax exemption to the political parties on income, including income from house property, income from other sources, capital gains and income earned through the voluntary contributions from any individuals.

Clause (d) of the said section allows the parties to accept anonymous cash contributions worth Rs 2,000. The petitioner argued that the names and other particulars of persons donating any amount must be disclosed by the political parties, and the said amount should be received in cash to ensure transparency.

The petitioner contended that Section 13A(d) allows the wealthy anonymous donors to divide the large donations into smaller Rs 2,000 each and use multiple ways to donate money to the political parties. They further argued that this violates voters’ right to know where political parties are getting their funding. Voters should be allowed to see all the donations made to a party to make an informed choice about the party.

The petition further said that the political parties are the central entities in a democratic form of government, and they must work in a transparent way, especially for financial transparency, to avoid any unlawful influences of money power in the policymaking of the political party. Accepting large donations from unknown sources, it said, breaks the trust that the public has in political parties.

The bench led by Justices Vikram Nath and Sandeep Mehta asked for responses from the Centre and the Election Commission on the plea and also sent notices to the political parties for their responses on the plea.

The bench initially did not want to entertain the plea and suggested the petitioner approach the High Court. However, the advocate submitted that the issue has pan-India implications and involves all recognised political parties.