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Electoral Trust

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==Contributed by==
 
==Contributed by==
 
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary Abraham, IES(2006)]
 
* [http://www.ies.gov.in/myaccount-profile-view.php?memid=338 Rosemary Abraham, IES(2006)]
 +
*Email- [mailto:rosemary.a@nic.in rosemary.a@nic.in]
  
 
[[Category:concepts|ElectoralTrust]]
 
[[Category:concepts|ElectoralTrust]]

Revision as of 06:58, 8 April 2015

Electoral Trust is a Section 25 Company or a non-profit company created in India for orderly receipt of the voluntary contributions from any person and for distributing the same to the respective political parties, registered under Section 29A of the Representation of People Act, 1951.


Objective

The objective of the Electoral Trust is not to earn any profit or pass any direct or indirect benefit to its members or contributors. The sole objective is to distribute the contributions received by it to the political party concerned. This is a mechanism for bringing transparency and sanity in the political party funding.

Central Board of Direct Taxes (CBDT) notified(Notification No. 9/2013/SO 309(E)), the operational guidelines- Electoral Trust Scheme 2013- on 31 January 2013, to lay down a procedure for grant of approval to an electoral trust. It is mandated that such electoral trusts have to be registered as a Section 25 Company and should bear the phrase “electoral trust” in its name. In the new Companies Act 2013, provisions corresponding to Section 25 are given at Section 8.


Recognition of Electoral Trust

The electoral trust will have to apply to CBDT on or before 31 July of the previous year relevant to the assessment year for which the approval is sought. Approval may be given for one year or 3 years at a stretch, as specified in the approval communication. Approval can be withdrawn by the CBDT if it is satisfied that the Electoral Trust ceased to exist, or is not genuine or have not complied with the specified conditions. CBDT is empowered to call for information from the electoral trust.


Fund raising by political parties

Section 29B of the Representation of People Act, 1951, provides that subject to the provisions of the Companies Act, every political party may accept any amount of contribution voluntarily offered to it by any person or company other than a Government company. Here the word “person” does not include Government company, local authority or artificial juridical person wholly or partiallyfunded by the Government.

Further, no political party shall be eligible to accept any contribution from any foreign source defined under the Foreign Contribution (Regulation) Act, 2010. The Citizen’s charter issued by the Ministry of Home Affairs has clarified that foreign contribution cannot be accepted by a candidate for election, member of any legislature, political party or office bearer thereof.

Section 182 of the Companies Act, 2013 specifies that a company which has been in existence for more than three years can contribute to political parties upto 7.5% of its average net profit earned during the three immediately preceding financial years, provided the same is approved through a resolution passed at a meeting of the Board of Directors of the Company. A company can also make contributions within the above limits and restrictions to Electoral Trusts.

Tax treatment of political contributions

The tax treatment for the contributions made by companies and persons / individuals for political party funding is specified in Section 80GGBand Section 80GGC, respectively of the Income Tax Act,1961.

In case of an Indian company,any sum contributed by it in the previous year to any political party or an electoral trust shall be deductible from the income tax liability. Same is the case for any contributing “person”, provided, the person is not a local authority or artificial juridical person wholly or partly funded by the Government.

However, no deduction shall be allowed in respect of any sum contributed by way of cash.This provision was made to the Income Tax Act, vide the Finance Act, 2013, with effect from 1-4-2014.



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