Taxation of Political parties: India and UK

A comparison of taxation aspects of political parties in India and UK

India

As an individual coming from India, I was used to seeing the political class enjoying all kind of privileges. As an accountant I came to know early in my career that political parties in India are exempt from paying tax.

Also, donations made by individual or company are also allowed as deductions under section 80 GGC and 80 GGB respectively on the Indian Income Tax Act.

India recently introduced a new way of funding political parties called `Electoral bonds`. Under this new system – donor, recipient and amount all will remain unknown and yet according to the Government it will increase transparency.

I will not give any glowing example of political donation scandals in India due to limitation of memory of my computer and time at my hands.

 

United Kingdom

Political parties pay tax on their income in the UK.

Further, Donations made to political parties are not allowed as deductions in in calculating the profits of a trade as they are almost always made wholly or partly for non-trade purposes. (BIM 47405). See also Taxation query.

This is not to say political parties do not get donations in the UK and if they get they do not get influenced by them. Transparency International UK has highlighted the case of Lycamobile.

Also, see Reuters article on how wealthy individuals are donating via their companies and avoiding tax but HMRC is avoiding to look into this difficult question.

 

Conclusion

I draw your attention to the facts. Please draw your own conclusions.

 

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