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CA Final · Direct Tax Laws & International Taxation · Assessment of Trusts and Institutions, Political Parties and Other Special Entities

Jan Kalyan Party, a political party registered under section 29A of the Representation of the People Act, 1951, earned rental income from a building and interest on fixed deposits during a tax year. It maintains books of account, keeps records of contributions above ₹20,000, gets its accounts audited, files its return on time and submits the treasurer's report. No donation above ₹2,000 was received otherwise than by prescribed modes. Under the Income-tax Act, 2025, what is the tax treatment of the rental and interest income?

The rental and interest income is not included in total income. Schedule VIII exempts a registered political party's house property, other sources and capital gains income and voluntary contributions when all the listed conditions are met, and here every condition is satisfied.

  1. ANot included in total income, since all the conditions in Schedule VIII are satisfiedCorrect
  2. BIncluded in total income, as political parties get no exemption on house property income
  3. CIncluded in total income, as exemption covers only voluntary contributions
  4. DNot included only if the interest is reinvested within the tax year

Explanation

Schedule VIII item 1 covers income under house property, other sources and capital gains, plus voluntary contributions, for a registered political party meeting conditions (a) to (f). All conditions are met, so the income is excluded. There is no reinvestment condition.

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