SC seeks Centre, EC reply over I-T Act provision allowing ‘unnamed’ cash donations to political parties

The Supreme Court on Monday sought the responses of the Centre and the Election Commission of India (ECI) on a plea to bring transparency in political party funding and to quash the provision in the Income Tax Act that permits them to collect “anonymous” cash donations up to a specified amount

The Supreme Court on Monday sought the responses of the Centre and the Election Commission of India (ECI) on a plea to bring transparency in political party funding and to quash the provision in the Income Tax Act that permits them to collect “anonymous” cash donations up to a specified amount.

The petition argued that cash donations received by parties over the years do not provide information about donors. (HT Photo)

A bench of justices Vikram Nath and Sandeep Mehta directed notices to be issued on the public interest litigation (PIL) filed by Delhi-based lawyer Khem Singh Bhati, who challenged the constitutional validity of section 13A(d) of the Income Tax Act, 1961. This provision, which relates to exemption on income for political parties, specifically states in 13A(d) that “no donation exceeding ₹2,000 is received by a political party other than by cheque, bank draft or electronic clearing system.”

The petition argued that cash donations received by parties over the years do not provide information about donors and claimed that this violates the fundamental right of citizens to know about the source of funding of political parties. It further sought a direction to ECI to prescribe a bar on receiving cash donations as a condition for registration of a political party and allotment of election symbol.

Senior advocate Vijay Hansaria, who appeared for the petitioner, told the court that in 2024, the Supreme Court struck down the electoral bond scheme on the ground that it violates voters’ fundamental right to information guaranteed under Article 19(1)(a) of the Constitution.

The court issued notice on the petition, seeking responses of the Central Board of Direct Taxes (CBDT), six registered national political parties and six registered state political parties, besides the Centre and ECI and kept the matter for hearing after four weeks.

The parties to which notice was issued, include Bharatiya Janata Party (BJP), Indian National Congress (INC), Communist Party of India (Marxist) (CPI-M), Bahujan Samaj Party (BSP), Aam Aadmi Party (AAP), and Meghalaya’s National People’s Party (NPP). The state political parties, include Dravida Munnetra Kazhagam (DMK), Trinamool Congress (TMC), Jharkhand Mukti Morcha (JMM), Janata Dal (United) (JD-U), Biju Janata Dal (BJD) and Samajwadi Party (SP).

The bench initially asked the petitioner to approach the high court as it observed, “Let the high court do this exercise. Why should we entertain?”

Hansaria pointed out that the issue concerns all political parties. “The issue is not confined to any one political party at one place. It concerns all political parties. Going to one high court will not serve the purpose,” he said.

The petition insisted that the political parties must disclose the name and all other particulars of the person paying any amount of money to it and no amount should be received in cash to maintain transparency in political funding.

It further urged the court to direct ECI to scrutinise the contribution reports under Form 24A submitted by all national and state recognised political parties, and to require them to deposit the amount received by way of contributions for which an address or PAN number have not been furnished.

Against political parties, the petition sought their response for defaulting under paragraph 16A of the Election Symbol Order, 1968, that allows ECI to suspend or withdraw the reserved symbol for failure to submit Form 24A contribution reports with full particulars within the prescribed period.

Based on the contribution reports received by the ECI from political parties last year, the petition noted several deficiencies to show how information about political party funding lacks transparency.

According to the plea, the information by several parties did not contain addresses and PAN numbers of donors, and several parties claimed to have received large amounts of money as bank interest; without furnishing particulars of the banks where the accounts are held. The BJP claimed ₹369 crore under this head followed by other parties, including BJD ( ₹52 crore) and AAP ( ₹38 crore) among others, as per the report submitted to ECI.

Several political parties also showed a large sum of money received in cash against subscriptions without giving any details of the donors. BSP had declared its entire income by membership fee in cash ( ₹38.18 crore in 2023-24) without furnishing details for the last 18 years, besides CPI(M) which reported ₹49 crore towards “fee and subscription”, the petition stated.

The petition further reproduced the contribution reports analysed by the Association for Democratic Reforms, which showed that for 2023-24, the share of undisclosed source of income of the total income for CPI(M) was 76% (over ₹128 crore of ₹167 crore income), 45% for DMK (over ₹81 crore of ₹180 crore), and 41% for BSP (over ₹26 crore of ₹64 crore).

Besides the exemption on political party income under Income Tax Act, donations made to political parties also enjoy tax exemption. The political parties are even entitled to government land and accommodation at nominal rate, the plea said.

The petition highlighted the fact that the number of registered unrecognised political parties (RUPP) have shown a steep rise from 694 in 2001 to 2,796 in 2021, an almost 300% jump in two decades. In the year 2019-2020, 219 RUPPs claimed exemption from payment of income tax to the tune of ₹608 crore.

In August 2025, the ECI issued a press note stating that the number of RUPPs currently is 2,854. The poll panel delisted 334 political parties for not contesting election for continuous six years or the office of the political party not being available at the registered address