TaxSaral

Section 12 · was Sections 13A & 13B in the 1961 Act

Exemption for Political Parties and Electoral Trusts

Income of registered political parties — from membership fees, voluntary contributions, and property — and approved electoral trusts distributing funds to political parties is fully exempt from income tax, subject to audit and return filing compliance.

Who it applies to: Registered political parties under the Representation of the People Act, 1951, and approved electoral trusts receiving and distributing donations to political parties.

Key points

  • All income of a registered political party — membership fees, voluntary contributions, property income — is fully exempt from tax
  • Electoral trusts that distribute received funds to registered political parties also get full exemption
  • Books of accounts must be maintained and audited by a Chartered Accountant
  • Return of income must be filed even though total income is zero (exempt)
  • Cash donations of ₹2,000 or more are NOT eligible — must be by cheque, draft, or electoral bond

Worked example

Regional Political Party Tax Computation

A registered state-level political party receives ₹3 crore in voluntary contributions, ₹25 lakh membership fees, and ₹15 lakh rent from a party-owned building during TY 2026-27.

Voluntary contributions:          ₹3,00,00,000
Membership fees:                  ₹  25,00,000
Rental income:                    ₹  15,00,000
──────────────────────────────────────────────
Total income:                     ₹3,40,00,000
Exemption under Section 12:       ₹3,40,00,000
──────────────────────────────────────────────
Taxable income:                   ₹          0
Tax payable:                      ₹          0

Result: Zero tax liability. The party must still file a return, maintain audited books, and ensure no single cash donation is ₹2,000 or more to preserve the exemption.

Related sections

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Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative; verify with a Chartered Accountant before filing.