The Income Tax Department continued its search operations for the second consecutive day on several political parties and related entities in Ahmedabad and Gandhinagar. The action focuses on suspected irregularities in political donations, possible circular transactions, and misuse of Section 80GGC deductions.
This development is significant not only for political outfits but also for donors, tax professionals, and taxpayers, as political-donation deductions have become a major area of scrutiny this year.
Why Were the Searches Conducted?
According to sources, the I-T Department is examining:
- Unusually large donations received by small or inactive political parties
- Possible routing of funds back to donors after showing them as political contributions
- Mismatched entries in books, bank accounts, and donor receipts
- Fake or inflated claims under Section 80GGC by taxpayers
The Department reportedly covered 20+ locations, including offices, residences, and donor premises.
Section 80GGC Under the Scanner
Section 80GGC allows individuals and HUFs to claim deductions for contributions to registered political parties only through non-cash modes.
However, recent investigations indicate:
- Donors making payments to parties and later receiving cash/benefits back
- Political parties acting as pass-through entities
- Taxpayers claiming deductions without genuine donations
These practices have triggered multiple verification notices across India.
What Taxpayers Should Do
If you have made or plan to make political donations:
✔ Ensure the party is registered under Section 29A of the RPA, 1951
✔ Donate only via banking channels
✔ Keep receipts, bank proof, and party registration proof
✔ Avoid donations to unknown or inactive entities
✔ Respond promptly if any verification notice is received
Political-donation deductions are now a high-risk category, so documentation is crucial.
For Tax Practitioners
Tax professionals should:
- Verify the genuineness of the political party
- Maintain documentation for each deduction claimed
- Re-check taxpayer profiles where unusually high 80GGC claims appear
- Expect higher scrutiny in AY 2025-26 and onwards
Impact on Political Parties
Political parties must ensure:
- Clean books of accounts
- Proper donor details and receipts
- Compliance with Election Commission reporting
- Transparency in fund utilisation
Failure to do so may result in disallowances, penalties, or further investigation.
Conclusion
The ongoing I-T operations highlight a clear message: political donations must be transparent, genuine, and fully documented. With scrutiny intensifying nationwide, both donors and political entities must ensure strict compliance.
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