Income Tax raids across India to curb bogus political donations

The Income Tax department on Wednesday carried out raids across several states on entities allegedly involved in bogus political donations.

Over a thousand income tax officials were involved in the raids that covered more than 20 registered unrecognised political parties suspected of laundering cash received in the guise of donations, thereby evading tax. Donations totalling more than Rs 2,000 crore are under the scanner, officials privy to the matter said.

The raids were carried out in Gujarat, Rajasthan, Chhattisgarh and Uttar Pradesh among other states.


The Election Commission had alerted the Central Board of Direct Taxes and recommended action against such political parties that claimed income tax exemptions but flouted rules including on filing details of the monetary contributions they received, and updating the address and names of their office bearers.

In May, the commission had struck off 87 entities from the list of registered unrecognised political parties, saying that they were found non-existent during a verification process.

According to the officials, during the searches on the premises linked to the Apna Desh Party at Sultanpur in UP, the officials found that it had received donations of Rs 370 crore. They said the party’s president, Abdul Mabood, ran a watch repair business.

In some cases in Gujarat, roles of chartered accountants are under the scanner, for allegedly helping the employees of some companies to evade taxes by making records of donations to little-known entities for a commission of 3-5%. The money was returned to the donors through hawala operators, said a senior official privy to the development.

According to the Election Commission, income tax exemptions of Rs 445 crore in 2018-19 and Rs 608 crore in 2019-20 had been availed of by 199 and 219 registered unrecognised political parties, respectively. Of these, 66 parties had claimed income tax exemption without submitting the contribution reports as mandated under law, it had said in a statement in May.

“Donations to political parties are mostly in cheques and are allowed as deduction from taxable income. Bogus political parties have been formed for this purpose who take donations in cheques, route the money via layering and ultimately withdraw them in cash and return the cash to the original donor after charging their commission,” explained an officer part of the operations.

“These entities are small-time parties used for cash generation. The ultimate beneficiaries will be found out and questioned,” the official added.

Documents related to bogus donation receipts, formation of shell entities, bogus and non-genuine purchases, facilitation of accommodation entries and other irregularities have been found during the raids, another official said.