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Ceiling on Companies for Funding Political Parties Lifted

Rules have been tweaked in the recently introduced Companies Act 2013 where all restrictions have been removed on corporate houses willing to make donations to political parties. There is no longer any ceiling as against an upper limit of 7.5 per cent of average net profit of a company fixed for political contributions earlier.

According to an order issued by the corporate affairs ministry on November 7, it has exempted electoral trusts from the obligation of Section 293A of the Companies Act that has now been replaced by Section 182 (1) of the Companies Act 2013.

The exemption granted to electoral trusts makes a company free from any compulsion to restrict its contributions. Several corporate houses have registered electoral trusts and make contributions to political parties through them.

Recently, the Central Board of Direct Taxes (CBDT) had notified registration of electoral trusts for the purpose of making political contributions. In the modified rules, the CBDT had allowed all contributions made to political parties exempt from income tax.

It had also made it mandatory for these trusts to contribute at least 95 per cent of their receipts to political outfits in that particular financial year to enjoy tax exemption.

Coming ahead of the parliamentary elections, the relief granted to electoral trusts is seen as facilitating electoral trusts which have just been registered to make contributions. Earlier, an electoral trust had to be in existence for at least three years or more.

Times of India, New Delhi, 04-12-2013

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