Even as the Supreme Court has termed electoral bonds “unconstitutional”, hundreds of taxpayers are concerned about whether they will now be able to claim tax deductions for the bonds they have used this year for political party donations or not. Though chances are that the tax deduction claims can be availed, experts say it will be clear only after CBDT’s clarification.
The electoral bonds made by individuals or entities were tax-exempt under Section 80GG and Section 80GGB under the Income Tax Act, 1961.
According to a Financial Express report citing a government official, firms, individuals, and others can avail of the income tax benefits of 100 per cent tax deduction this fiscal while filing their returns before July 31, 2024, i.e for Assessment Year 2024-25.
However, a Moneycontrol report quoted Vaibhav Sankla, founder of global tax advisory Billion BaseCamp, as saying, “We will have to wait for CBDT (Central Board of Direct Taxes) to clarify whether the tax deductions can be claimed for the current financial year on bonds purchased prior to February 15, 2024.”
The MC report also cited chartered accountants saying that since the tax deduction claim in the income tax return (ITR) ended the anonymity in any case, it is likely that past deduction claims in previous years would not be disturbed since it does not run counter to the SC’s reasoning on anonymity.
“The lack of transparency ends the moment a person comes forward and claims the electoral bond purchase in the tax return for claiming the deduction. But it needs to be seen whether the tax deduction claimed for these bonds purchased this year (prior to the verdict) and even in earlier years remain unimpacted,” said Ameet Patel, partner at tax consultancy Manohar Chowdhry & Associates, according to the report.
The SC Verdict on Electoral Bonds
In a landmark judgment on political funding, the Supreme Court on Thursday termed the electoral bonds scheme as “unconstitutional”, as it violates the Constitutional right to freedom of speech and expression as well as the right to information.
Pronouncing the verdict, the Supreme Court said the electoral bond scheme is violative of the ‘right to freedom of speech and expression’ under Article 19(1)(a) of the Constitution.
“The electoral bonds scheme and the impugned provisions to the extent that they infringe upon the right to information of the voter by anonymising contribution through electoral bonds are violative of Article 19 (1)(a),” the CJI said while pronouncing the verdict.
The bench said the fundamental right to privacy also includes the citizens’ right to political privacy and affiliation.
It also held as invalid the amendments made in various laws, including the Representation of Peoples Act and the Income Tax laws.
The apex court directed that the SBI shall stop issuing electoral bonds and submit details of bonds purchased since April 12, 2019 till date to the Election Commission. It should also submit details of political parties which have received contributions through electoral bonds since April 12, 2019 till date to the poll panel.
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