Cap on tax exemptions for political parties not contesting elections: Arun Jaitley

New Delhi: Government plans to set a threshold criteria for political parties to enjoy tax exemptions to check money laundering by outfits that do not contest elections, Finance Minister Arun Jaitley said on Tuesday.

He said the Revenue Secretary has been asked to look into the issue in the wake of Election Commission's recommendations in this regard.

Jaitley's remarks at an event assume significance in the context of the Election Commission's recommendations to the Government to amend laws to bar tax exemption to parties that do not contest elections and win seats in Lok Sabha and Assembly polls and to ban anonymous donations above Rs 2,000 to political parties.

"I can point out one is invisible donation which Election Commission says is anonymous and the second is when political parties got exemptions. There are about 40/50/60 political parties which effectively contest elections in Centre and the states, (but) you have a large number of political parties which got registered not for contesting election but for availing tax exemption.

"Now this part is easier to tackle. I have already asked the Revenue Secretary to look into this and therefore we will have to put a threshold criteria so that we are able to eliminate those which are not real political parties but only for money conversion which have come in," Jaitley said.

He said many political parties do not contest elections but only accept donations and convert money.

"I have already told the Revenue Department to look at them and therefore some threshold criteria could be fixed and number of these could be eliminated," Jaitley added.

Jaitley underlined the need for making political funding as transparent as possible, saying donations must be smaller in size but huge in number.

"Political funding is necessary, it should be smaller in terms of denomination but larger in its spread. And therefore not creating a quid pro quo and it should be absolutely transparent," he said.

And eventually it may be worthwhile to try and make efforts only for genuine political parties to get those benefits then start moving towards donations predominantly in the manner, he said regretting that electoral reform initiated during Vajpayee Government were not followed up by the UPA.

He further said that once the country transforms into a less cash economy, the donors of the political party won't have the kind of money in future to donate.

"And they are going to straight away tell the political parties you are the ones who brought this change and therefore don't expect us to give any invisible funding. We will fund you but we will fund you by cheque. And that's how it should be," he said.