New Delhi: Experts told News18 that the Finance Ministry's statement that political parties depositing old notes in the bank will not face scrutiny from tax authorities can now allow them into 'authorised' conduit for people who want to launder their black money.
Revenue Secretary Hasmukh Adhia on Friday said that if the money is a deposit in the account of a political party, they are exempt from paying tax and neither will they face scrutiny from tax officials.
“This can only happen in India where political parties think they are above the law,” Jay Prakash Narayan, the founder of the Lok Satta Party, told News18. “Real estate and corruption are the biggest generators of black money, what is the government doing to address these?” he added.
Observers said this will not only allow political parties to deposit their unaccounted money, but theoretically speaking, others with black money can approach them and get their money whitewashed.
“It's not a loophole, it’s a huge gaping hole,” Jagdeep Chhokar, former director in-charge of the Indian Institute of Management and founding member of the Association of Democratic Reforms told News18.
“It is an open signal that political parties have become authorised conduits for the conversion of black money to white,” he added.
A person could approach a political party and give his black money in old currency to be deposited in the bank account of the party. The person can then create invoices for “services rendered” and gets a cheque payment, after the party deducts a certain amount as commission. Thus, the black money in old currency notes is laundered into white.
There are laws in place that regulate donations to political parties. All cheque payments to parties are tax exempt. For cash payments below Rs 20,000, the donor’s name doesn’t have to be declared, though the amount has to be entered in the books of account.