Parties only have to disclose donations above Rs20,000 to the election commission.
Political donations have always been a closely-guarded secret, and parties go to great lengths to protect the identity of donors. As such, the crores of rupees they raise through donations largely go unaccounted.
Parties only have to disclose donations above Rs20,000 to the election commission (EC). If a party wants income-tax (I-T) exemption, it has to submit an affidavit revealing all donations. After the submission, it receives a certificate from EC, which it has to attach while filing returns.
But most parties bypass this clause to protect donors. The manipulation is exposed when they file income-tax returns.
A case in point is the Samajwadi Party (SP).
According to reports filed by SP to EC, the party received Rs2.38 crore in contributions from 2003-06 -- Rs1.22 crore in 2003-04, Rs1.13 crore in 2004-05 and Rs3.01 lakh in 2005-06).
However, when it filed I-T returns for the same three years, it mentioned the amounts as Rs14.61 crore (2003-04), Rs27.11 crore (2004-05) and Rs40.34 crore (2005-06) - a disparity of around Rs80 crore.
In fact, SP received a staggering Rs90.62 crore in voluntary donations from 2001-02 and 2005-06 [The total income of the party for the period is close to Rs105 crore].
This implies that to the I-T department, SP has shown the money as being received in donations of less than Rs20,000 each. It did so to keep its donors secret, as parties are not required to disclose the names of donors below Rs20,000 to the department.
A tax expert said, "It is a well-known fact that parties break up donations to hide the identity of their donors. That is why you see such a massive gap in declarations to EC and the I-T department.
"It is only if the tax department issues a notice on suspicion of manipulation that a party is required to produce complete documents."
Besides voluntary donations, the largest source of income for SP, the party raised Rs7 crore through membership fees from 2001-06. It received another Rs6 crore from interest on bank deposits.
Balance sheets show the party's net worth grew phenomenally in the 2001-06 period - from Rs12.09 crore in 2001-02 to Rs12.97 crore in 2002-03 to Rs25.09 crore in 2003-04 to Rs37.45 crore in 2004-05. In 2005-06 SP's net worth doubled to Rs76.51 crore vis-à-vis 2004-05.
For the 2005-06 fiscal, the party declared to the I-T department that it had Rs72.24 crore -- Rs6.31 crore in cash and Rs65.93 crore in banks in Lucknow, Etawah and New Delhi.
Most of SP's expenditure (Rs31.15 crore) from 2001-06 was on elections (Rs11.31 crore), advertisements (Rs10.33 crore), printing and stationery (Rs1.4 crore) and travelling (Rs8.11 crore). It has not explained to the I-T department a "miscellaneous expenditure" of Rs57.43 lakh.
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