Political Parties Cornerstone of Democracy; Can't Abolish Tax Exemptions: Govt

New Delhi: The government has rejected suggestion to abolish tax exemptions given to political parties, saying these are to strike a balance between encouraging political activities and regulating their activities in the interest of democracy in the country.

Terming the suggestion of RTI activist Subhash Agrawal as not feasible, the Ministry of Finance has said, "Political institutions are cornerstones of any democratic set-up and provisions contained in the 13A, 80GGB and 80GGC of the Income Tax Act, 1961 intend to encourage and empower such institutions."

Six national political parties -- Congress, BJP, BSP, NCP, CPI and CPI(M) -- were brought under the purview of the RTI Act by the CIC because they enjoy indirect funding from the government in the form of subsidies and tax exemptions.

All the political parties brought under the RTI Act are opposing the directive of the transparency panel.

"It would not be appropriate to attempt a parallel comparison with the activities of other entities such as trusts, funds and institutions of charitable nature. The nature of activities undertaken by charitable entities is very different from that of political parties.

"As the very purpose of charitable entities and political parties are different, different provisions have been made under the Income Tax Act," it said.

The response was provided to Agrawal who wanted to know what action has been taken on his suggestion to abolish tax exemption to political parties and NGOs.

"Democratic institutions form the very basis of polity in India and it was deemed necessary that political parties be treated differentially so that impetus is given to organised political activity.

"Political parties require funds in order to carry out a variety of activities including contesting of elections, organising meetings and rallies, publishing literature among others," it said.

The response said these activities are both of a regular nature such as organising of rallies and bringing out publications and also periodic with respect to certain matters such as conduct of elections, etc.

"Accordingly, political parties have been granted certain exemptions and deductions so that they are able to utilise maximum funds for the public purpose of political activity," it said.