In a major move to crack a whip on the funding of political parties in India, Finance Minister Arun Jaitley, in his Union Budget speech on Wednesday, said parties cannot accept cash donations which amount to more than Rs 2,000.

“Maximum cash donation any party can receive will be Rs 2,000 from one source,” said Arun Jaitley.

The move has received a positive influx from everyone including the political parties who have either hailed the decision or chose to stay lip tight over the announcement.

Jaitley’s statement is a feather taken out of the recommendation that Election Commission had prescribed to the Centre last month. Nasim Zaidi had proposed that the limit for accepting anonymous donations should be slashed from to Rs 2,000 from Rs 20,000.

While political funding still remains a contentious issue with parties receiving crores of rupees through ingenious ways, Jaitley’s move points in the right direction while missing out on various knotholes.

Firstly, the political parties should start maintaining accounts for all the donations they receive. Once these books are maintained their accounts should be scrutinised and audited annually. This will strengthen transparency and give enough time to the authorities and Election Commission to identify the defaulters within time.

These modifications will be implemented only after amending the Representation of the People Act, 1951. So far, the party seeking registration under this Act requires submitting pan card copy of office bearer along with their ITR returns of last three years.

An attempt was made in the past by amending the provisions of the Representation of Peoples Act, the Companies Act and the Income Tax Act to incentivize donations by individuals, partnership firms, HUFs and companies to political parties. Both the donor and the party were granted exemption from payment of tax if the accounts were transparently maintained and returns were filed with the competent authorities.

Secondly, the political parties should not let go away when a big share of their total income comes from ‘unknown donors’. At present, political parties are not required to reveal the name of individuals or organisations donating less than Rs. 20,000.

All the political parties should now be asked to maintain a computerised record of all these donors with the data accessible for scrutiny by the Election Commission or any competent authority.

A recent finding by Association for Democratic Reforms (ADR), says that the political parties in India have received Rs 7,833 crore funding from unknown sources between the years 2004 to 2015. With such high significance of money swamped towards political parties, it is imperative to have a record of each penny received in funding.

Lastly, Election Commission needs to crack down on all the ‘bogus’ parties operating only on paper. The Election Commission, last year in December, had identified and deregistered 255 fake political parties operational in India.

The Income Tax Act, 1961, gives tax exemptions to the political parties for house property, voluntary contributions, capital gains and other sources. In the wake of such rebates, one cannot deny that there can be a nexus between ‘real’ and ‘fake’ parties.

In addition, as supported by EC that only parties that contest and win seats in elections, should be allowed to redeem income tax exemption.

At present, there are seven national, 58 State and 1,786 registered unrecognised parties in a list released by EC.

PM Narendra Modi’s demonetization move in November last year is embarked as an attempt to counter black money and corruption. However, the political parties were so far left untouched by this clean-up process.

Mounting on Jaitley’s announcement this is a ripe moment for the political parties to act on what they preach.

First Published | 1 February 2017 6:36 PM
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