Section 13A and Section 13B of Income Tax Act 1961: Political Parties and Electoral Trusts
Sections 13A and 13B of the Income-tax Act, 1961 dealt with tax exemption for specified income of registered political parties and voluntary contributions received by electoral trusts. From 1 April 2026, the Income-tax Act, 2025 replaced the 1961 Act for Tax Year 2026-27 onwards. The corresponding current provision is Section 12 read with Schedule VIII of the Income-tax Act, 2025.
Current law: Section 12 and Schedule VIII of the Income-tax Act, 2025
For Tax Year 2026-27 onwards, Section 12 of the Income-tax Act, 2025 governs income of political parties and electoral trusts that is not included in total income. Section 12 operates together with Schedule VIII, which specifies the eligible income, the eligible person and the conditions that must be satisfied. If the applicable Schedule VIII conditions are not satisfied for a tax year, the relevant income is chargeable to tax for that year.
| 1961 Act provision | Current corresponding provision | Subject |
|---|---|---|
| Section 13A | Section 12 read with Schedule VIII, Sl. No. 1 | Specified income of a political party registered under Section 29A of the Representation of the People Act, 1951 |
| Section 13B | Section 12 read with Schedule VIII, Sl. No. 2 | Voluntary contributions received by an electoral trust |
The Income Tax Department has also notified the Income Tax Rules, 2026. Rule 289 contains rules for the functioning of an electoral trust, including permitted contributors and prescribed modes for receiving contributions.
Section 13A: special provision relating to income of political parties
For periods governed by the Income-tax Act, 1961, Section 13A provided that specified income of a political party would not be included in its total income if the statutory conditions were satisfied. The covered categories included income chargeable under the heads Income from house property, Income from other sources and Capital gains, as well as income by way of voluntary contributions received from any person.
Who qualified as a political party?
For Section 13A, a political party meant a political party registered under Section 29A of the Representation of the People Act, 1951. Registration under that election law was therefore central to eligibility for the income-tax treatment.
Main conditions under Section 13A
The political party was required to keep books of account and other documents sufficient for the Assessing Officer to properly deduce its income. It was also required to maintain the prescribed record of qualifying voluntary contributions, including donor particulars where applicable, and its accounts had to be audited by an accountant within the meaning prescribed by the Income-tax Act.
The provision also imposed restrictions on the mode of receipt of donations exceeding Rs. 2,000, requiring specified banking or electronic modes. In addition, the party had to comply with the contribution-report requirement under Section 29C(3) of the Representation of the People Act, 1951 and furnish its return of income within the applicable statutory time.
Section 13B: voluntary contributions received by an electoral trust
Section 13B of the Income-tax Act, 1961 provided that voluntary contributions received by an electoral trust would not be included in its total income if the prescribed conditions were met.
95 per cent distribution condition
The electoral trust was required to distribute to political parties registered under Section 29A of the Representation of the People Act, 1951, during the relevant previous year, 95 per cent of the aggregate donations received during that year together with any surplus brought forward from an earlier previous year.
Compliance with electoral trust rules
The trust was also required to function in accordance with rules made by the Central Government. Under the current Income Tax Rules, 2026, Rule 289 governs the functioning of electoral trusts for the corresponding exemption under the Income-tax Act, 2025.
Electoral bonds: important Supreme Court ruling
The older text of Section 13A contained references to contributions through electoral bonds. On 15 February 2024, the Supreme Court of India in Association for Democratic Reforms v. Union of India, 2024 INSC 113, struck down the Electoral Bond Scheme and the Finance Act, 2017 amendments to Section 13A(b) and other connected statutory provisions identified in the judgment as unconstitutional. The Court also directed disclosure of information relating to electoral-bond contributions.
Accordingly, historical statutory text referring to electoral bonds should not be read as meaning that the Electoral Bond Scheme remains an operative donation mechanism. Readers dealing with an earlier year should examine the law applicable to that year together with the Supreme Court judgment and subsequent official directions.
Related provisions and compliance
| Provision / source | Relevance |
|---|---|
| Section 29A, Representation of the People Act, 1951 | Registration of associations and bodies as political parties. |
| Section 29C, Representation of the People Act, 1951 | Contribution-report obligations of political parties. |
| Section 12 and Schedule VIII, Income-tax Act, 2025 | Current income-tax framework for specified income of political parties and electoral trusts. |
| Section 263, Income-tax Act, 2025 | Current return-of-income provision referred to by Schedule VIII for political parties. |
| Rule 289, Income Tax Rules, 2026 | Current rules for functioning of an electoral trust. |
Official resources
For current compliance and authoritative updates, see the Income Tax Department - Income Tax Act 2025, the Election Commission of India - Political Parties/Candidates, the Election Commission contribution reports, and the Supreme Court judgment dated 15 February 2024 on electoral bonds.
This article explains the statutory framework for general legal and tax information. For a particular tax year, verify the provision and rules applicable to that year, including transitional provisions after commencement of the Income-tax Act, 2025.