Cap on cash donations to political parties is fine, but there’re still scope to bypass laws, say Ex-ECs


New Delhi: The cap of Rs 2,000 per person on cash donations to political parties is a welcome move but the provisions can be made more stringent as parties can still find ways to bypass laws aimed at cleansing electoral system of black money, former Chief Election Commissioners feel.

Sceptical that parties can always hoodwink laws, they also suggest that efforts should be made to make donations to political parties totally “cashless” to usher in more transparency.

The former CECs, who had proposed a slew of electoral reforms in their tenure at the Nirvachan Sadan, said the Election Commission should also be given power under electoral laws to “deregister” parties which have not contested elections for a long time as they are being used as a conduit to convert black money.

As part of a major move proposed in the Budget to cleanse the electoral system of black money, henceforth, political parties can receive only up to Rs 2000 in cash donations.

Announcing this, Finance Minister Arun Jaitley said political parties will be entitled to receive donations by cheque or digital mode from their donors.

As of now, the limit to accept political donations in cash is Rs 20,000.

The poll panel had recently asked the government to reduce the cap from the present Rs 20,000 to Rs 2,000 by changing Representation of the People Act and the Income Tax Act.

“It is a welcome step though not an ideal one… It is 90 percent perfect. After all, somewhere you have to start,” said former CEC H S Brahma, who was succeeded by incumbent Nasim Zaidi.

He said while the cap has been reduced to Rs 2,000 now, “tomorrow, it can be zero. There are several ways to donate money now — online, cheques, so why use cash at all in coming days… It is a good beginning for the democracy and electoral reforms.”

Another former Chief Election Commissioner N Gopalaswami was a little sceptical. “What if the same story repeats…(political parties can claim) 80 per cent or 90 per cent people gave us cash, they gave us less than Rs 2,000. Then we are back to square one,” he said.

He said the first step has been taken to reduce the cap on cash donations, by next year it will be clear if substantial receipts of political parties have some from cash donations.

He said if more than 10 per cent of the donations are received in amounts less than Rs 2000, “then the entire amount should be taxed”.

The idea, N Gopalaswami said, “is that the cash part of it must be controlled.”

He said most parties “can claim that they receive Re 1 as donation… Therefore, the cash flow should be checked and methods like electronic transfer and cash payment could be used”.

He also suggested that EC should get powers under law to deregister parties which have not contested polls for long and only remain on paper. They, he feared, are often used to convert black money.

The EC has already asked government to give it powers to deregister parties. As of now, it can only ‘delist’ parties for not contesting polls. It had recently delisted 255 parties.

Another former CEC S Y Quraishi said the move is “good” but would have been “better” had the Commission proposed ending all cash donations and pressing for a “cashless” system.

Asked whether it would usher in more transparency, he said it will entail “more paperwork” for parties as they would seek to show most donations at under Rs 2,000.

Seeking to check the use of black money and curb money laundering in politics, the Election Commission has recommended that the government amend laws to allow exemption from tax only to parties that win seats in elections and ban anonymous contributions of Rs 2,000 and above to parties.

Section 13A of the Income Tax Act, 1961 confers tax exemption to political parties for income from house property, income by way of voluntary contributions, income from capital gains and income from other sources.

Only income under the head ‘salaries and income from business or profession’ is tax chargeable, for political parties.

The Commission had proposed that exemption of income tax should only be extended to political parties that contest elections and win seats in Lok Sabha or assembly polls.

There is also no constitutional or statutory prohibition on the receipt of anonymous donations by political parties.

But there is an “indirect partial ban” on anonymous donations through the requirement of declaration of donations under section 29C of The Representation of the People Act, 1951. But such declarations are mandated only for contributions above Rs 20,000.

As per the proposed amendment, sent by the commission to the government, “anonymous contributions above or equal to the amount of Rs two thousand should be prohibited”.


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