Retain transfer proof, receipts to address future scrutiny

The Central Board of Direct Taxes (CBDT) has uncovered a large network involving registered unrecognised political parties (RUPPs), chartered accountants and intermediaries that allegedly laundered %9,169 crore under the guise of political donations, according to media reports.

- HIMALI PATEL

Those making political donations must learn the appropriate procedure and avoid falling prey to intermediaries who promise tax benefits based on bogus donations.

Modus operandi

Bogus political parties with no genuine activity are floated to misuse donation-related exemptions. Intermediaries route contributions to obscure parties to help donors claim deductions.

“Donors transfer funds to registered unrecognised political parties (RUPPs), which issue them donation receipts. Donors claim 100 percent tax deduction and thus evade income tax. The RUPP then illegally returns most of the money in cash, after deducting a commission,” says Ritika Nayyar, partner, Singhania & Co.

Detection mechanisms