As per the Income Tax Act, 1961, a political party is recognized as an entity and is required to file its income tax returns every year. The provisions for filing the return of income of a political party are as follows:
1. Types of Political Parties: As per the Election Commission of India, there are two types of political parties – national and regional. National parties are those that are recognized by the Election Commission of India as a national party, and regional parties are those that are recognized by the Commission as a state party. Both types of parties are required to file their income tax returns.
2. Form of Return: A political party is required to file its income tax return in ITR-7 Form. This form is specifically designed for entities that are required to furnish their return of income under Section 139(4A) of the Income Tax Act.
3. Due Date: The due date for filing the return of income of a political party is on or before 31st July of the assessment year. The assessment year is the year immediately following the financial year in which the income is earned.
4. Audit of Accounts: The income and expenditure account of a political party is required to be audited by a chartered accountant. The audit report along with the income and expenditure account is required to be submitted along with the income tax return.
5. Exemption: A political party is exempt from paying income tax on its income if it satisfies certain conditions. The income of a political party is exempt if it is registered under Section 29A of the Representation of the People Act, 1951, and it has furnished a declaration under Section 13A of the Income Tax Act.
6. Penalty: A political party that fails to file its income tax return on or before the due date is liable to pay a penalty of Rs. 5,000 for every day of default.
7. Scrutiny Assessment: The income tax department has the power to conduct scrutiny assessment of the income tax return of a political party. During scrutiny assessment, the income tax department may call for additional information or documents, and may also ask the political party to explain any discrepancies found in its income tax return.
political parties are required to comply with the provisions of the Income Tax Act, 1961, and file their income tax returns on or before the due date. Failure to do so may attract penalties and scrutiny assessments.
