Sunday, January 10, 2016

#Government plans to ban #foreign funding of electoral #trusts

Union Government is "actively considering" a proposal of Election Commission to debar electoral trusts from receiving foreign funding.
As per the current laws Section 4 of the Foreign Contributions (Regulation) Act (FCRA), 1976 and Section 3 of Foreign Contributions (Regulation) Act (FCRA), 2010 specify that political parties are NOT permitted to accept contributions from any foreign source or company.
Electoral Trusts, whose sole purpose under Section 13B of the Income Tax Act, 1961 is to fund registered political parties in a transparent manner, are also governed under Rule 17(CA) of the Income Tax Rules,1962.
Specifically under Rule 17CA, sub-clause (2) and (4) of the Income tax Rules, 1962, the CBDT lists the sources from whom the Trusts are permitted and NOT permitted to accept donations.Rule 17(CA) was notified by the Central Bureau of Direct Taxes (CBDT), Dept. of Revenue in 2013 on 31st January, 2013, in the exercise of the powers conferred to it by clause (b) of Section 13(b) read with Section 295 of the Income Tax Act, 1961.

Association for Democratic Reforms or ADR has recomanded that all electoral trusts should adhere to Rule 17(CA) of the Income Tax Rules, 1962 which lists the functions of the electoral trusts and the Electoral Trusts Scheme, 2013 notified by the Central Government.
The same rules which apply to those trusts formed after 31st January, 2013 should also apply to the electoral trust in existence prior to 31st January, 2013.