Political parties get full exemption from income tax

The Direct Taxes Code seeks to extend income tax exemption to income of a political party which is computed under the heads 'income from house property' or `capital gains' or `income from residuary sources' or any income by way of voluntary contributions received by it from any person, provided the political party keeps and maintains books of account and other documents that would make the income assessable.

Besides political parties the list of exempted categories for income tax purposes include the following:

1. Agricultural income;
2. Any sum received by an individual as a member of a Hindu undivided family if- (a) the sum has been paid out of the income of the family, or (b) in the case of any impartible estate, the sum has been paid out of the income of the impartible estate belonging to the family;
3. Any sum received by a person, being a participant in an unincorporated body, towards his share as per the agreement of association, in the total income of the unincorporated body which is separately assessed;
4. The amount of family pension received by the widow or children or nominated heirs, as the case may be, of a member of the armed forces (including para-military forces) of the Union, if the death of such member has occurred in the course of operational duties, in such circumstances and subject to such conditions, as may be prescribed;
5. Any income arising to a foreign company, as the central government may, by notification in the Official Gazette, specify in this behalf, by way of royalty or fees for technical services received in pursuance of an agreement entered into with that government for providing services in or outside India in projects connected with security of India;
6. Income of the European Economic Community derived in India by way of interest, dividends or capital gains from investments made out of its funds under such scheme as the central government may, by notification in the Official Gazette, specify in this behalf;
7. Any amount of interest - (a) on deposits with any scheduled bank, made with the approval of the Reserve Bank of India, by a bank incorporated in a country outside India and authorised to perform central banking functions in that country; (b) on securities held by the Issue Department of the Central Bank of Ceylon constituted under the Ceylon Monetary Law Act, 1949; (c) on a loan advanced by the Nordic Investment Bank to a project approved by the central government in terms of the memorandum of understanding entered into by the central government with that bank on 25 November 1986; or (d) on a loan granted by European Investment Bank in pursuance of the framework agreement for financial co-operation entered into on 25 November 1993 by the central government with that bank;
8. Income accruing or arising to a person, if - (a) the person is a member of a Scheduled Tribe as defined in clause (25) of article 366 of the Constitution; (b) the person resides in - (i) the states of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura, or (ii) any area specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution, or (iii) the areas covered by notification No TAD/R/35/50/109, dated the 23 February 1951, issued by the governor of Assam under the proviso to sub-paragraph (3) of Paragraph 20 of the Sixth Schedule of the Constitution as it stood immediately before the commencement of the North-Eastern Areas (Reorganisation) Act, 1971, or (iv) the Ladakh region of the state of Jammu and Kashmir; and (c) the income is in the nature of dividend or interest on securities or from any source in the areas or sates specified in sub-clause (b);
9. Income accruing or arising to a Sikkimese, other than a Sikkimese woman who, on or after 1 April 2008, marries an individual who is not a Sikkimese - (a) from any source in the state of Sikkim; or (b) by way of dividend or interest on securities;
10. Such income and amount thereof, as notified by the central government in this behalf, arising to a body or authority, if - (a) it has been established or constituted or appointed under - (i) a treaty or an agreement entered into by the central government with two or more countries; or (ii) a convention signed by the central government; (b) it is not established or constituted or appointed for the purposes of profit; and (c) it is notified by the central government in the Official Gazette for the purposes of this clause;
11. The amount of accumulated balance, as on 31 March 2011, in the account of an employee participating in an approved provident fund and any accretion thereto;
12. The amount of remuneration received by an individual who is not a citizen of India, if the following conditions are fulfilled:- (a) such individual is an official, by whatever name called, of an embassy, high commission, legation, commission, consulate or the trade representation of a foreign state, or as a member of the staff of any of these officials, for service in such capacity; (b) the remuneration of the corresponding officials or, as the case may be, members of the staff, if any, of the government resident for similar purposes in the country concerned enjoys a similar exemption in that country; and (c) the members of the staff are subjects of the country represented and are not engaged in any business or profession or employment in India otherwise than as members of such staff;
13. The amount received by an individual who is not a citizen of India by way of remuneration as an employee of a foreign enterprise for services rendered by him during his stay in India, if the following conditions are fulfilled - (a) the foreign enterprise is not engaged in any trade or business in India; (b) his stay in India does not exceed in the aggregate a period of ninety days in such financial year; and (c) such remuneration is not liable to be deducted from the income of the employer chargeable under this Code;
14. The amount received by, or due to, any individual being a non-resident, who is not a citizen of India, by way of remuneration, if the following conditions are fulfilled: - (a) such remuneration is for services rendered in connection with the employment on a foreign ship; and (b) his total stay in India does not exceed in the aggregate a period of 90 days in the financial year;
15. The amount of remuneration received by an individual who is not a citizen of India, if the following conditions are fulfilled: - (a) he is an employee of the government of a foreign state during his stay in India; and (b) his stay in India is in connection with his training in any establishment or office of, or in any undertaking owned by - (i) the government; or (ii) any company in which the entire paid-up share capital is held by the central government, or any state government or governments, or partly by the central government and partly by one or more state governments; or (iii) any company which is a subsidiary of a company referred to in item (b); or (iv) any corporation established by or under a central, state or provincial Act; or (v) any society registered under the Societies Registration Act, 1860 (14 of 1860), or under any other corresponding law for the time being in force and wholly financed by the central government, or any state government or state governments, or partly by the central government and partly by one or more state governments;
16. Any amount received by an assessee under the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 (21 of 1985) in excess of the amount, if any, allowed as a deduction in any financial year on account of any loss or damage caused to him by such disaster;
17. Any payment from a provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies or from any other provident fund set up by the central government and notified by it in this behalf in the Official Gazette, of accumulated balance, as on 31 March 2011, in the account of the person;
18. Interest on Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the central government.
19. Interest on bonds - (a) issued by a local authority; and (b) specified by the central government by notification in the Official Gazette;
20. Any income received in respect of- (a) the units of a mutual fund, (b) units from the administrator of the specified undertaking, or (c) units from the specified company;
21. Any dividends in respect of which dividend distribution tax has been paid under section 99;
22. Any income of a political party which is computed under the heads "Income from house property" or "Capital gains" or "Income from residuary sources" or any income by way of voluntary contributions received by it from any person, if - (a) the political party keeps and maintains such books of account and other documents as would enable the assessing officer to properly deduce its income therefrom, (b) the political party keeps and maintains a record of voluntary contribution in excess of Rs20,000, alongwith the name and address of the contributors, (c) the accounts of such political party are audited by an accountant, and (d) the treasurer of such political party or any other person authorised by that political party in this behalf submits a report under sub-section (3) of section 29C of the Representation of the People Act, 1951 for the financial year;
23. The amount of interest on deposits in a Non-Resident (External) Account in any bank in India, if the assessee is an individual and - (a) is resident outside India as defined in clause (q) of section 2 of the Foreign Exchange Regulation Act, 1973, or (b) has been permitted by the Reserve Bank of India to maintain the aforesaid;
24. The amount of interest payable by a scheduled bank to a non-resident or to a person who is not ordinarily resident, on deposits in foreign currency where the acceptance of such deposits by the bank is approved by the Reserve Bank of India;
25. Amount received by way of - (a) daily allowance received by any person by reason of his membership of Parliament or of any State Legislature or of any Committee thereof; (b) any allowance received by any person by reason of his membership of Parliament under the Members of Parliament (Constituency Allowance) Rules, 1986; (c) any constituency allowance received by any person by reason of his membership of any state legislature under any Act or rules made by that state legislature.
26. Any amount received, whether in cash or in kind - (a) in pursuance of any award instituted in the public interest by the central government or any state government or instituted by any other body and approved by the central government in this behalf; or (b) as a reward by the central government or any state government for such purposes as may be approved by the central government in this behalf in the public interest.
27. The amount of family pension received by any member of the family of an individual who had been in the service of the central government or state government and has been awarded "Param Vir Chakra" or "Maha Vir Chakra" or "Vir Chakra" or such other gallantry award as the central government may, by notification in the Official Gazette, specify in this behalf.
28. Any sum received as compensation, from the multilateral fund of the Montreal Protocol on Substances that Deplete the Ozone layer under the United Nations Environment Programme, in accordance with the terms of agreement entered into with the Government of India.
29. Any income of an individual, if - (a) the income (i) accrues to him outside India or (ii) is received outside India, in the year, by or on behalf of such individual; (b) the income is not derived from a business controlled, or a profession set up, in India; (c) the income relates to (i) the financial year in which the individual ceases to be a non-resident; or (ii) the financial year immediately succeeding the financial year in which the individual ceases to be a non-resident; and (d) the individual was a non-resident for nine years immediately preceding the financial year in which he has ceased to be a non-resident.
30. Any amount received from the central government, a state government or a local authority by an individual, or his legal heir, by way of compensation on account of any disaster, as reduced by the amount received by the individual or his legal heir which has been allowed as a deduction under this Code on account of any loss or damage caused by such disaster.
31. The amount of interest on bonds - (a) issued by a local authority or by a state pooled finance entity; and (b) specified by the central government by notification in the Official Gazette.
32. The amount of capital gain arising on account of - (a) transfer of agricultural land situated in a rural area; (b) transfer of any personal effect; (c) transfer of Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the central government;
33. Gross rent in respect of any one palace in the occupation of a ruler, if the annual value of the palace was exempt from income-tax before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, by virtue of the provisions of the Merged States (Taxation Concessions) Order, 1949, or the Part B States (Taxation Concessions) Order, 1950, or, as the case may be, the Jammu and Kashmir (Taxation Concessions) Order, 1958.

Persons Exempt

1.Any office, or establishment, of the Central Government or the Government of a State; 2. The Coffee Board, 3. The Rubber Board, 4. The Tea Board, 5. The Tobacco Board, 6. The Marine Products Export Development Authority, 7. The Agricultural and Processed Food Products Export Development Authority, 8. The Spices Board, 9. The Prime Minister's National Relief Fund, 10. The Prime Minister's Fund (Promotion of Folk Art), 11. The Prime Minister's Aid to Students Fund, 12. The National Foundation for Communal Harmony, 13. The Secretariat of the Asian Organisation of the Supreme Audit Institutions registered as "ASOSAI-SECRETARIAT" under the Societies Registration Act, 1860 (21 of 1860) up to the financial year ending on the 31st day of March 2008, 14. The Insurance Regulatory and Development Authority, 15. A Mutual Fund, 16. A venture capital company, 17. A venture capital fund, 18. New Pension System Trust; 19. Any approved provident fund, 20. Any approved superannuation fund, 21. Any approved gratuity fund, 22. The Deposit-linked Insurance Fund established under the Coal Mines Provident Funds and Miscellaneous Provisions Act, 1948 or the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, 23. The Employees' State Insurance Fund set up under the Employees' State Insurance Act, 1948, 24. Any electoral trust, if 95 per cent of the aggregate of all donations received by it during the financial year and the surplus, if any, brought forward from any preceding financial year is distributed to political parties; and (b) such electoral trust functions in accordance with the rules made by the central government, 25. A corporation established by a central, state or provincial Act or of any other body, institution or association (being a body, institution or association wholly financed by government) where such corporation or other body or institution or association has been established or formed for promoting the interests of the members of the Scheduled Castes or the Scheduled Tribes or backward classes or of any two or all of them. 26. Any body, institution or association wholly financed by government and formed for promoting the interest of the members of the Scheduled Castes or the Scheduled Tribes or backward classes, 27. Any corporation established by the central or state government for promoting the interests of the members of a minority community, 28. Any statutory corporation established for the welfare and economic upliftment of ex-servicemen being the citizens of India, 29. Any co-operative society formed for promoting the interests of the members of the Scheduled Castes or Scheduled Tribes if - (a) the membership of the co-operative society consists of only other co-operative societies formed for similar purposes; and
(b) The finances of the society are provided by the Government and such other societies, 30. Panchayat as referred to in clause (d) of article 243 of the Constitution, 31. Municipality as referred to in clause (e) of article 243P of the Constitution, 32. Municipal committee and district board, legally entitled to, or entrusted by the government with, the control or management of a municipal or local fund, 33. Cantonment board as defined in section 3 of the Cantonments Act, 1924; 34. Any regimental fund or non-public fund established by the armed forces of the union for the welfare of the past and present members of such forces or their dependants, 35. Any fund set up, on or after 1st day of August 1996, by an insurer under a pension scheme - (a) to which contribution is made by any person for the purpose of receiving pension from such fund; and (b) which is approved by the Controller of Insurance or the Insurance Regulatory and Development Authority, 36. An authority (whether known as the Khadi and Village Industries Board or by any other name) established in a state by or under a state or provincial Act for the development of khadi or village industries in the state, 37. Any body or authority (whether or not a body corporate or corporation sole) established, constituted or appointed by or under any central, state or provincial Act which provides for the administration of any one or more of the following, (a) public religious or charitable trusts or (b) endowments (including maths, temples, gurdwaras, wakfs, churches, synagogues, agiaries or other places of public religious worship); or (c) societies for religious or charitable purposes registered as such under the Societies Registration Act, 1860 (21 of 1860), or any other law for the time being in force, 38. Any association, authority, body, institution or trust registered under any law of the central, state or provincial government for the regulation of religious endowments, 39. The SAARC Fund for Regional Projects set up by Colombo Declaration, 40. Any income of the nature, and to the extent, notified by the central government, arising to a body or authority which -
(a) Has been established or constituted or appointed under a treaty or an agreement entered into by the central government with two or more countries or a convention signed by the central government, (b) is established or constituted or appointed not for the purposes of profit, (c) is notified by the central government in the Official Gazette for the purposes of this clause, and 41. The Central Electricity Regulatory Commission constituted under sub-section (1) of section 76 of the Electricity Act, 2003.