Taxation · Income of Other Persons included in Total Income of Assessee

Income Not Included in Total Income: Political Parties and Electoral Trusts

Updated 5 October 2026

Certain income of a registered political party (house property, other sources, capital gains and voluntary contributions) and voluntary contributions received by an approved electoral trust are not included in total income, only if the stated conditions are met. Test each condition one by one. A breach, such as cash above ₹2,000, means a condition fails.

Understand Income Not Included in Total Income: Political Parties and Electoral Trusts

Most persons are taxed on their total income. Parliament gives a special relief to political parties and electoral trusts, because they are not run for profit. Their funds come mainly from donations and are meant for political activity.

A political party here means a party registered under section 29A of the Representation of the People Act, 1951. Four categories of its income are left out of total income: income from house property, income from other sources, capital gains, and voluntary contributions received from any person. Voluntary contributions are not a separate head of income. They are a category of receipt that the relief covers. Business income and salary are not covered by this relief.

The relief is not automatic. It depends on four conditions:

The party keeps books of account and other documents that let the Assessing Officer properly deduce its income.
The party keeps a record of the name and address of every contributor who gives more than ₹20,000. The party reports these contributions to the Election Commission under section 29C of the Representation of the People Act, 1951.
No contribution above ₹2,000 is received other than by account payee cheque, account payee bank draft, electronic clearing system or another prescribed electronic mode.
The party furnishes its return of income by the due date.

The section 29C report is not a separate condition. It is only the way the contributions above ₹20,000 are reported to the Election Commission.

An electoral trust is a trust set up to receive voluntary contributions and pass them on to political parties. It is meant to be a transparent channel between donors and parties. The voluntary contributions it receives are excluded from its total income if it is approved under the Electoral Trusts Scheme and distributes at least 95% of the aggregate donations received during the year, including any surplus brought forward from the preceding year, to registered political parties.

These are the provisions relating to political parties and electoral trusts under the Income-tax Act, 2025. In the exam, do not worry about the section number unless the question asks. Quote a section only if you know it from the ICAI study material. Focus on four checks: who is the person, what is the income, which conditions apply, and whether each condition is met.

This topic is mostly theory and short application. Marks come from naming the condition correctly and applying it to the facts given. Always check the thresholds (₹20,000 and ₹2,000) and the 95% rule against the numbers in the question.

Key rules to remember

Political party: income covered: Exempt: income from house property + income from other sources + capital gains + voluntary contributions; Only if the party is registered under section 29A of the Representation of the People Act, 1951 and all conditions are met. Business income is not covered.
Political party: books and record of contributions: Books of account and documents to deduce income + name and address of the contributor for each voluntary contribution of more than ₹20,000; These are the first two conditions. Under section 29C of the Representation of the People Act, 1951, the contributions above ₹20,000 are reported to the Election Commission. That report is the way they are reported, not a separate income-tax condition.
Political party: mode of receipt: No contribution above ₹2,000 may be received other than by account payee cheque, account payee bank draft, electronic clearing system or another prescribed electronic mode; This is the third condition. A cash receipt above ₹2,000 breaches it. The party then does not satisfy the conditions, and the exclusion for the voluntary contributions is not available. Receipts of ₹2,000 or less in cash are acceptable.
Political party: return of income: Return of income furnished by the due date; This is the fourth condition. A chartered accountant audit is not one of the conditions for this relief.
Electoral trust: distribution: Minimum to distribute = 95% × (aggregate donations received during the year, including any surplus brought forward from the preceding year); The distribution must go to political parties registered under section 29A. Treat the surplus brought forward from the preceding year as part of the aggregate on which 95% is computed.
Electoral trust: conditions: Trust approved under the Electoral Trusts Scheme + distribution of at least 95% to registered political parties; Voluntary contributions only are excluded. Check the study material for any further detail.

How to solve Income Not Included in Total Income: Political Parties and Electoral Trusts questions

Use this method for any question on exemption of a political party or electoral trust.

1Identify the person: a political party registered under section 29A of the Representation of the People Act, 1951, or an electoral trust. If the body is neither, this relief does not apply.
2List each item of income given in the question and classify it by head: house property, other sources, capital gains, voluntary contributions, business, or anything else.
3For a political party, mark which items fall in the covered list. Business income and any other income not on the list remain in total income.
4Run the four-condition checklist: books and documents; name and address of contributors above ₹20,000 (these are reported to the Election Commission under section 29C); no contribution above ₹2,000 except in a permitted non-cash mode; and return furnished by the due date.
5For an electoral trust, compute aggregate contributions plus surplus brought forward from the preceding year, take 95%, and compare it with the amount distributed to registered parties.
6Check that the trust is approved under the Electoral Trusts Scheme.
7Conclude clearly: state whether the conditions are met, the amount excluded, and the amount (if any) that stays in total income. If a condition is breached, the exclusion is not available and the contributions are included in total income.
8Write the answer in provision, facts, conclusion order, with the threshold figures quoted.

Quickest way: Checklist method for MCQs and short answers

When to use it: Use this when the question lists facts and asks if the income is exempt, or which condition is violated.

Underline the figures in the question: ₹20,000, ₹2,000, 95%, and the modes of payment.
Spot the one fact that breaks a condition. Typically it is a cash receipt above ₹2,000, a missing name and address for a donor above ₹20,000, a return not furnished by the due date, or distribution below 95% for a trust.
If such a fact exists, say that the condition is not met, the exclusion is not available, and the contributions are included in total income. Do not invent a partial exclusion. If no fact breaks a condition, conclude the income is excluded.
For MCQs, eliminate options that say business income is exempt for a party, or that the electoral trust may keep all contributions.
In a written answer, use three lines: the rule, the fact from the question, and the conclusion. Give the computation of the 95% figure on its own line so it earns step marks.

Common mistakes in Income Not Included in Total Income: Political Parties and Electoral Trusts

Treating all income of a political party as exempt.
Students remember that political parties get relief and forget the list of covered incomes.
Fix: Remember the four items: house property, other sources, capital gains and voluntary contributions. Business income is not on the list.
Applying the ₹20,000 limit to the mode of receipt.
Both ₹20,000 and ₹2,000 appear in the rules and they get mixed up.
Fix: ₹20,000 is for recording the contributor's name and address; these contributions are reported to the Election Commission under section 29C of the Representation of the People Act, 1951. ₹2,000 is the limit for cash. Write them next to each other in your notes with their purpose.
Computing 95% on current-year contributions only for an electoral trust.
Students ignore the surplus brought forward from the preceding year.
Fix: Add the surplus brought forward from the preceding year to the current-year contributions first, then take 95%.
Forgetting the books, donor records or return conditions for a political party, listing the section 29C report as a separate condition, or adding a CA audit as a condition.
Students focus on contributions and modes of payment and forget the procedural points, or assume an audit is needed because other exemptions require one.
Fix: Use the four-condition checklist: books and documents, donor records above ₹20,000, mode of receipt, and return by the due date. Treat the section 29C report only as the way the ₹20,000 contributions are reported. Do not list a CA audit as a condition for this relief.
Saying the electoral trust can give money to any person or charity.
Students mix it up with other trusts that apply income for charitable purposes.
Fix: An electoral trust must pass on the money to political parties registered under section 29A, as per its Scheme.
Writing only the conclusion with no reasoning.
Students feel the topic is simple and skip the steps.
Fix: State the condition, apply it to the facts, then conclude. This is how the descriptive marks are earned.

Worked examples

Example 1

A political party registered under section 29A of the Representation of the People Act, 1951 receives voluntary contributions of ₹30,00,000 in the year. Its books and documents are properly maintained, donor details are recorded for every contribution above ₹20,000 and reported to the Election Commission under section 29C, it furnishes its return of income by the due date, and all but one contribution came by account payee cheque or electronic mode. One donor gave ₹5,000 in cash. Discuss whether the conditions for excluding the voluntary contributions are met.

Show the solution

Rule: voluntary contributions of a registered political party are excluded only if the conditions are met. One condition is that no contribution above ₹2,000 is received other than by account payee cheque, account payee draft, electronic clearing system or another prescribed electronic mode.
Check the conditions: books and documents maintained, yes. Donor details recorded above ₹20,000, yes. Return furnished by the due date, yes.
Check the mode of receipt: the ₹5,000 was received in cash. This is above ₹2,000 and was not received in a permitted mode. So this condition is breached.
Conclusion: because the mode-of-receipt condition is breached, the party does not satisfy the conditions. The exclusion for the voluntary contributions is not available. The voluntary contributions of ₹30,00,000 are therefore included in total income and taxed.

Answer: The mode-of-receipt condition is breached, because ₹5,000 was received in cash and it is above ₹2,000. The party does not satisfy the conditions, so the exclusion is not available. The voluntary contributions of ₹30,00,000 are included in total income and taxed.

Example 2

A registered political party, which meets all the conditions for the relief, has the following income for the tax year: income from house property ₹2,10,000, interest (income from other sources) ₹1,00,000, capital gains ₹4,00,000, voluntary contributions ₹10,00,000 and business income ₹1,50,000. Find the income that stays in total income. Ignore deductions under Chapter VI-A.

Show the solution

Rule: house property income, income from other sources, capital gains and voluntary contributions of a registered political party are excluded if the conditions are met. Business income is not covered.
Excluded: ₹2,10,000 + ₹1,00,000 + ₹4,00,000 + ₹10,00,000 = ₹17,10,000.
Not covered: business income of ₹1,50,000.
Total income = ₹1,50,000.

Answer: ₹17,10,000 is excluded. The business income of ₹1,50,000 stays in total income, so total income is ₹1,50,000.

Exam tips

Memorise the three numbers: ₹20,000 for recording donor details, ₹2,000 for the cash limit, and 95% for the electoral trust.
In MCQs, look for the trap option that treats business income of a political party as exempt.
In written answers, list every condition and tick it against the facts. Step marks come from showing each check.
Do not write a CA audit as a condition for a political party's relief. Show the return by the due date as the fourth condition, and mention section 29C only as the way contributions above ₹20,000 are reported to the Election Commission.
For an electoral trust sum, show aggregate, then 95%, then compare with the distribution. Do not jump to the answer.
Refer to these as the provisions on political parties and electoral trusts under the Income-tax Act, 2025, quote a section number only if you know it from the ICAI study material, and use the term 'tax year', never 'assessment year'.

Practice questions from Income of Other Persons included in Total Income of Assessee

Income Not Included in Total Income: Political Parties and Electoral Trusts: frequently asked questions

Which incomes of a political party are excluded from total income?

Income from house property, income from other sources, capital gains and voluntary contributions are excluded. The party must be registered under section 29A of the Representation of the People Act, 1951, and must meet the conditions. Business income is not covered.

What is the cash limit for contributions to a political party?

A political party should not receive any contribution above ₹2,000 other than by account payee cheque, account payee draft, electronic clearing system or another prescribed electronic mode. Cash up to ₹2,000 per contribution is acceptable. Receiving a larger cash amount breaks the condition, and the exclusion for the voluntary contributions is then not available.

How much must an electoral trust distribute?

An electoral trust must be approved under the Electoral Trusts Scheme and must distribute at least 95% of the aggregate donations received during the year, including any surplus brought forward from the preceding year, to registered political parties. Distribution below 95% means the condition is not met.

Do I need to remember section numbers for this topic?

In most questions, the marks depend on the conditions and the application, not the section numbers. Refer to the provisions on political parties and electoral trusts under the Income-tax Act, 2025. Quote a section number only if you know it from the ICAI study material.