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

Which of the following is a condition for a political party to exclude its voluntary contributions from total income under Schedule VIII of the Income-tax Act, 2025?

The condition is that the party's accounts are audited by an accountant. Schedule VIII lists this along with books, donor records, donation modes, treasurer report and return filing, whereas the 95% distribution rule applies only to electoral trusts.

  1. AIts accounts are audited by an accountantCorrect
  2. BIt distributes 95% of donations to other parties
  3. CIt is registered under the Companies Act
  4. DIt receives no contribution exceeding ₹20,000

Explanation

Condition (c) requires the accounts of the political party to be audited by an accountant. The 95% distribution is a condition for electoral trusts. Registration is under section 29A of the Representation of the People Act, 1951, not the Companies Act. Records, not a ban, are needed for contributions above ₹20,000.

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