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CS Executive · Tax Laws and Practice · Incomes which do not form part of Total Income

A registered political party received a donation of ₹ 5,000 in cash from a supporter during the tax year. All its other conditions under Schedule VIII are met. What is the consequence under the Income-tax Act, 2025?

The exemption is lost for that tax year and the income is charged to tax. A cash donation of ₹ 5,000 exceeds the ₹ 2,000 limit for non-banking-channel receipts, breaching a Schedule VIII condition. The ₹ 20,000 threshold only governs contributor records.

  1. AOnly the ₹ 5,000 cash donation becomes taxable; other exemptions continue
  2. BThe exemption fails for the party's income in that tax year and such income is charged to taxCorrect
  3. CThe donation is exempt because it is below ₹ 20,000
  4. DThe party loses its registration under section 29A permanently

Explanation

Condition (d) prohibits receiving any donation exceeding ₹ 2,000 otherwise than by account payee cheque, draft, electronic mode or electoral bond. Under section 12(2), where conditions are not satisfied, such income is charged to tax for that year. The ₹ 20,000 limit relates only to record-keeping of contributors, so it does not help.

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