Prashant Kishor’s ₹99 Crore Donation: Tax Implications Explained
Political strategist Prashant Kishor donated ₹98.76 crore from his personal earnings to his Jan Suraaj party over three years, raising questions about tax deductibility. While Kishor paid ₹20 crore income tax on his ₹241 crore earnings (2021-2024), experts clarify whether he could claim deductions for his political contributions.
Key Takeaways
- Political donations are tax-exempt only under the old tax regime
- Deductions require non-cash payments and properly accounted income
- New tax regime offers no deductions for political contributions
Are Political Donations Taxable?
Typically, political donations are exempt from income tax under specific conditions. However, the tax regime you choose determines eligibility for deductions.
“Donation to political parties is totally exempt from tax but not under the new tax regime,” says Chirag Chauhan, a Mumbai-based Chartered accountant.
“Genuine Donations to political parties are allowed as deduction under Income tax Act. However, if you are using the same as mechanism of tax evasion, same is not allowed,” says chartered accountant Pratibha Goyal, partner of PD Gupta & Company, a Delhi-based CA firm.
Income Source Matters
The income used for donations must come from explained sources. Unexplained contributions face severe tax penalties under Section 69C.
“Political donations made from properly accounted income, whether tax-paid or exempt, do not attract tax liability. But if such contributions come from unexplained sources, they may be treated as unexplained expenditure under Section 69C and taxed at 60% plus surcharge and cess,” says O.P. Yadav, Tax Evangelist, Prosperr.io and Former Principal Commissioner of Income Tax.
Old vs New Tax Regime
Under the old tax regime, donors can claim 100% deduction for non-cash political donations through Sections 80GGC (individuals) and 80GGB (companies). These deductions are subject to overall Chapter VI-A limits.
However, the new tax regime offers no such benefits. Companies under special tax sections (115BA, 115BAA, 115BAB) also cannot claim these deductions.
“Under the Old Tax Regime, non-cash contributions to political parties or electoral trusts qualify for deduction under Sections 80GGB and 80GGC subject to the overall Chapter VI-A limit of not exceeding the gross total income. This deduction is unavailable under the New Tax Regime and also for companies taxed under Sections 115BA, 115BAA, and 115BAB,” adds Yadav of Prosperr.io.
The context gains significance as Jan Suraaj reportedly outspent established parties like Congress, JD(U) and RJD on digital ads during Bihar elections, while BJP remained the highest spender overall.
