Registration of Political Parties in India

Registration of Political Parties in India: Guidelines, Tax Benefits, and Legal Compliance

Introduction

The process of registering a political party in India is not only about fulfilling legal obligations but also involves understanding the associated tax benefits and compliance with relevant tax provisions. This article delves into the guidelines for the registration of political parties, including the provisions under Article 324 of the Constitution of India and Section 29A of the Representation of the People Act, 1951. Additionally, it explores the tax benefits available to political parties under Section 80GGB, Section 80GGC, and Section 13A of the Income Tax Act, 1961.

Guidelines for Registration

The Election Commission of India has laid down stringent guidelines for the registration of political parties to ensure transparency and accountability. These guidelines cover various aspects of a party’s constitution, structure, and functioning, as well as its commitment to democratic principles and compliance with the Indian Constitution. Some key guidelines include:

1. Party Constitution: Political parties are required to have a constitution that adheres to certain principles, including a commitment to the Constitution of India, socialism, secularism, democracy, and the sovereignty, unity, and integrity of India. The constitution should also define the party’s name, objectives, membership criteria, organizational structure, powers of office-bearers, dispute resolution mechanisms, and financial management.
2. Internal Democracy: Parties must ensure internal democracy by holding periodic elections at different levels within the party, specifying the mode and frequency of these elections, and determining the tenure of office-bearers.
3. Financial Transparency: Parties must maintain party funds for political activities, maintain accounts on an accrual basis, and get these accounts audited annually by a qualified auditor.
4. Non-Promotion of Violence: The party constitution must include a clause explicitly stating that the party will not promote, instigate, or participate in violence.
5. Amendment Procedure: Parties should have a specific procedure for amending their constitution, which must be approved by the General Body of the party.
6. Election Commitment: Parties must declare in their constitution that they will contest elections conducted by the Election Commission within five years of registration, failing which they may be removed from the list of registered parties.

For the purpose of registration of any association or body of individual citizens of India as a political party, the association or body is required to make an application to the Election Commission of India giving therein full particulars required under sub-section (4) of Section 29A of the Representation of the People Act, 1951 and additional particulars required under the Registration of Political Parties (Furnishing of Additional Particulars) Order, 1992, separately.

The application should be neatly typed on the party’s letterhead, if any, and it should be sent by registered post/presented personally to the Secretary to the Election Commission within 30 days following the date of the formation of the party. Any application made after the said period will be time-barred under the provisions of Section 29A(2)(b) of the Representation of the People Act, 1951. All pages of the application, including annexures, should be numbered in continuation.

The application must be accompanied by the following documents/information:

(i) Party Constitution drawn on following lines:

• Name of the Party;
• Objectives of the Party;
• Membership of the Party;
• Organs of the Party;
• Office-bearers of the Party Powers and functions of each of these office-bearers;
• Rules of Dispute Resolution & Discipline;
• Basics of Rules of Conduct of Business Decision-making process; Meetings — quorum, notice, and decision making etc.;
• Party Funds & Accounts Party funds to be utilized for political activities; Accounts to be maintained on accrual system;
• Party Constitution’s Amendment Procedure;
• Merger, Split and Dissolution Procedure;
• Mandatory Provision under Section 29A (5) of RP Act, 1951.

For Registration of the Political Party, it is needed to submit the following:

1. Processing Fee: A Demand Draft of Rs. 10,000/- (Rupees Ten Thousand only) drawn in favor of the Under Secretary, Election Commission of India, New Delhi. Payable at New Delhi.
2. Extract: from the latest electoral roll of 100 members duly certified by the Electoral Registration Officer of the concerned Assembly Constituency;
3. Office Bearers’ Details required:

 a. Copy of PAN card, Income Tax Returns filed for the last three years, otherwise b. Income certificate, issued by the competent government authorities, indicating their income with the source of income. c. Affidavits, in respect of their assets and liabilities; d. Affidavits, showing information about their criminal antecedents; e. Name, Address, Phone No, and email of Office bearers. President, General Secretary, Treasurer, and/or any other Contact Person.

• Registered Office: An affidavit on stamp paper, from the owner of the premises where the office of the party office is situated, with certified copies of tangible proof, such as House Tax Receipt or Registry papers, etc., of ownership of the premises.
• Certified true copy of the resolution of the meeting along with the signature of members who attended the meeting of the formation of the party.

Legal implications for donation to Political Parties

Prohibitions and Restrictions Regarding Political Contributions

Section 182 of the Companies Act, 2013 imposes certain restrictions on political contributions by companies.

1. A company, other than a Government company and a company which has been in existence for less than three financial years, may contribute any amount directly or indirectly to any political party:
   • Provided that no such contribution shall be made by a company unless a resolution authorizing the making of such contribution is passed at a meeting of the Board of Directors.
2. A donation or subscription or payment caused to be given by a company on its behalf or on its account to a person who, to its knowledge, is carrying on any activity which, at the time at which such donation or subscription or payment was given or made, can reasonably be regarded as likely to affect public support for a political party shall also be deemed to be a contribution of the amount of such donation, subscription, or payment to such person for a political purpose.
3. The amount of expenditure incurred, directly or indirectly, by a company on an advertisement in any publication, being a publication in the nature of a souvenir, brochure, tract, pamphlet, or the like, shall also be deemed,—

(i) where such publication is by or on behalf of a political party, to be a contribution of such amount to such political party, and

(ii) where such publication is not by or on behalf of, but for the advantage of a political party, to be a contribution for a political purpose.

4. Every company shall disclose in its profit and loss account the total amount contributed by it under this section during the financial year to which the account relates.
5. The contribution under this section shall not be made except by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account:
   • Provided that a company may make contribution through any instrument, issued pursuant to any scheme notified under any law for the time being in force, for contribution to the political parties.
6. If a company makes any contribution in contravention of the provisions of this section, the company shall be punishable with a fine which may extend to five times the amount so contributed and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months and with fine which may extend to five times the amount so contributed.

For the purposes of this section, “political party” means a political party registered under section 29A of the Representation of the People Act, 1951.

Tax Benefits for Political Parties

Indian tax laws provide certain tax benefits to registered political parties to encourage transparency and promote political activities. These benefits include exemptions and deductions under the Income Tax Act, 1961:

1. Section 80GGB

In computing the total income of an assessee, being an Indian company, there shall be deducted any sum contributed by it, in the previous year to any political party or an electoral trust:

• Provided that no deduction shall be allowed under this section in respect of any sum contributed by way of cash.

2. Section 80GGC

In computing the total income of an assessee, being any person, except a local authority and every artificial juridical person wholly or partly funded by the Government, there shall be deducted any amount of contribution made by him, in the previous year, to a political party or an electoral trust:

• Provided that no deduction shall be allowed under this section in respect of any sum contributed by way of cash.

3. Section 13A

Section 13A of the Income Tax Act, 1961, deals specifically with the tax treatment of political parties. It grants an exemption from income tax on the income derived by political parties from contributions, voluntary donations, and other sources. However, to avail of this exemption, political parties must meet certain conditions:

• Any income of a political party from sources like property, investments, or voluntary contributions is not considered as part of its taxable income.
• To qualify for this exemption, the political party must:

(a) Maintain proper financial records that allow tax authorities to determine its income.

(b) Keep a record of voluntary contributions exceeding INR 20,000, including the contributor’s details.

(c) Have its accounts audited by a certified accountant.

• (d) Accept donations over INR 2,000 only through specific banking methods or electoral bonds.
  • An ‘electoral bond’ refers to a type of bond specified in the Reserve Bank of India Act, 1934.
• If the political party’s treasurer or an authorized person fails to submit a report under the Representation of the People Act, 1951, the exemption is not available for that financial year.
• The political party must also file an income tax return as per section 139(4B) of the Income Tax Act before the due date.
• In this context, a ‘political party’ refers to a party registered under section 29A of the Representation of the People Act, 1951.

Payment Methods for Contributions

Tax benefits on donations to political parties under both Section 80GGB and Section 80GGC are not applicable to cash or in-kind contributions. Therefore, using a cheque, demand draft, or electronic transfer is the preferred method of donation if you wish to claim a tax deduction. This ensures transparency in funding during elections.

Maximum Deductible Amount

Both individuals and companies can claim a deduction of 100% of the donated amount to a political party under Section 80GGC and Section 80GGB, respectively. The entire contribution is eligible for a tax deduction if it does not exceed the taxable income of the eligible taxpayer. This significantly reduces the total taxable income, resulting in tax savings.

Conclusion

The registration of political parties in India is governed by strict guidelines to ensure transparency, adherence to democratic principles, and compliance with the Indian Constitution. In addition to these guidelines, political parties can benefit from various tax provisions, such as Sections 80GGB, 80GGC, and 13A of the Income Tax Act, which offer deductions and exemptions for contributions and income.

Disclaimer: The contents of this article are provided for informational purposes only and do not constitute legal advice or opinions. It is essential to seek legal counsel or consult with a qualified legal professional for specific legal guidance tailored to your individual circumstances or concerns. For any queries or legal assistance, please contact Actum Legal at lforlaw@yahoo.com or 8588828190. Actum Legal is your resource for legal expertise and assistance.