Incomes not included in total income of political parties and electoral trusts
[Section 12 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 12(1) of Income Tax Act 2025
12(1) In computing the total income of any political party or an electoral trust for a tax year under this Act, any income enumerated in Schedule VIII shall not be included, subject to fulfilment of conditions specified therein.
Section 12(2) of Income Tax Act 2025
12(2) Wherever the conditions referred to in Schedule VIII are not satisfied in any tax year in respect of any income enumerated in the said Schedule, such income shall be charged to tax under this Act for that tax year.
Section 12(3) of Income Tax Act 2025
12(3) The Central Government may make rules or issue notifications for the purposes of this section as specified in the Schedule VIII.
FAQs on Section 12 of the Income Tax Act 2025
1. What is the purpose of Section 12 of the Income Tax Act, 2025?
Section 12 of the Income Tax Act, 2025, provides that certain incomes of political parties and electoral trusts, as specified in Schedule VIII, shall not be included in their total income, subject to the fulfillment of prescribed conditions.
2. Who is eligible for exemption under Section 12?
Only registered political parties and electoral trusts that comply with the conditions mentioned in Schedule VIII are eligible for income exclusion under this section.
3. What types of income are excluded from total income under Section 12?
The specific types of income that are excluded are listed in Schedule VIII of the Act. These typically include:
- Voluntary contributions received from individuals or entities in compliance with electoral laws.
- Certain grants received from government sources.
- Any other income specified in Schedule VIII, subject to conditions.
4. What happens if the conditions in Schedule VIII are not met?
If a political party or electoral trust fails to fulfill the conditions prescribed in Schedule VIII in any tax year, the exempted income will be added to its total income and taxed accordingly under the Income Tax Act, 2025.
5. Can the government modify the provisions of Section 12?
Yes, under Section 12(3), the Central Government has the power to make rules or issue notifications related to the provisions of this section as specified in Schedule VIII.
6. How can a political party ensure compliance with Schedule VIII?
A political party must maintain proper records, comply with conditions specified in Schedule VIII, and submit necessary reports or disclosures as required under tax and electoral laws.
7. Are anonymous donations exempt from tax under Section 12?
No, anonymous donations that do not meet the disclosure requirements in Schedule VIII may be taxed as part of the total income of the political party or electoral trust.
8. Does Section 12 provide exemption for all types of donations?
No, only those donations that comply with the conditions specified in Schedule VIII will be exempted. Donations received in violation of electoral or tax laws will be taxable.
9. Is interest income earned by a political party from fixed deposits exempt under Section 12?
The exemption of interest income depends on whether it is specifically listed in Schedule VIII and whether the prescribed conditions are met.
10. When does Section 12 of the Income Tax Act, 2025, come into effect?
Section 12 comes into effect from April 1, 2026, and applies to tax years beginning on or after that date.
11. Can Schedule VIII be modified after the Act is in force?
Yes, as per Section 12(3), the Central Government has the authority to modify Schedule VIII through rules or notifications.
12. What are the penalties for non-compliance with the conditions in Schedule VIII?
If the conditions are not met, the exempted income will be added to the total income and taxed accordingly. Additional penalties may apply under other provisions of the Income Tax Act.
Section 12 of the Income Tax Act, 2025, provides an important tax benefit to political parties and electoral trusts by excluding specific types of income from total taxable income, subject to compliance with the conditions laid out in Schedule VIII. This provision ensures that legitimate sources of funding for political entities remain tax-exempt, promoting transparency and accountability.
However, failure to meet the prescribed conditions results in such income being taxed, reinforcing the need for strict adherence to reporting and regulatory requirements. Additionally, the Central Government retains the authority to amend or refine the rules governing these exemptions, ensuring adaptability to evolving electoral and financial landscapes.
Political parties and electoral trusts must carefully review Schedule VIII, maintain proper records, and comply with all stipulated conditions to avail themselves of the tax exemptions under this provision.
