The Income Tax Department has recovered ₹1,400 crore from 63,000 donors who evaded large amounts of tax by making donations to registered unrecognised political parties (RUPPs) over the past two years, from 2022 to 2024.
RUPPs are political parties that fail to secure the required percentage of votes in Assembly or Lok Sabha elections to qualify as either state or national parties.
Both RUPPs and donors to political parties enjoy tax exemptions — RUPPs on receiving donations and donors on giving them.
businessline on March 21 exposed that over 3,264 RUPPs received more than ₹10,000 crore in electoral donations during 2022-23 and 2023-24, with most of these political parties allegedly allowing themselves to be misused as instruments of money laundering.
More than 4 lakh suspected taxpayers claimed deductions under Section 80GGC of the Income Tax Act over the last two years.
Launching a crackdown after identifying the growing trend of dubious electoral funding through intelligence gathering and data analytics, the Income Tax department began a ‘nudging exercise’ over the past two months, starting at the end of January this year. The exercise involved sending messages and emails to suspected donors, urging them to either pay the tax they had evaded or face consequences, sources aware of the developments exclusively told businessline.
More than ₹1,000 crore in deductions claimed under the Income Tax Act were withdrawn by many of the 63,000 donors. They did so by filing revised tax returns for the last two years within the prescribed timelines stipulated by the Union Finance Ministry, sources explained.
The remaining donors, who missed the deadline for filing revised tax returns within the allowed period, collectively paid an additional ₹400 crore in penalties by March 31, 2025, to compensate for the evasions they had committed over the past two years, sources pointed out.
The Central Board of Direct Taxes, under which the Income Tax Department operates, is determined to improve tax compliance among other taxpayers as well, without resorting to coercive actions.
However, sources stressed that if taxpayers avoid this, action will be taken as per the relevant provisions of the Income Tax Act, which may include scrutiny assessments of their income tax returns.
In 2023-24, donors claimed tax exemptions under Sections 80GGB and 80GGC of the Income Tax Act for amounts exceeding ₹10,975 crore.
In the same year, RUPPs declared only ₹4,858 crore as donations received, raising questions about the intent behind not declaring the remaining ₹6,116 crore, which constitutes approximately 55.81 per cent of the total money received.
The large-scale misuse of electoral funding was equally evident in 2023-24.
Tax exemptions claimed by donors under the Income Tax Act amounted to ₹9,610 crore, while the declared donations received by RUPPs totalled only ₹6,556 crore, sources stated.
The remaining ₹3,053 crore, which accounts for 31.7 per cent of the total donations, was diverted as black money for purposes other than elections, sources observed.
The probe revealed that immediately after receiving donations, the money was siphoned off to shell companies through a complex web of hundreds of bank accounts.
In the last two decades, RUPPs have sprouted phenomenally, growing from 694 in 2001 to 3,264 as of March 2024, exploiting legal loopholes and lax monitoring by the Election Commission of India (ECI) and the Chief Election Officers of States and Union Territories.Top of Form
