Why the registered by unrecognized political parties in India are sometimes called "tax havens"? What has been done so far to tackle the uncontrolled growth of such parties? What more needs to be done?

As per 2014 data, there are 1,627 registered political parties in India but around 75-80 percent of registered political parties do not contest in elections. The reasons for growing registered political parties in India are-tax exemption and easy process of recognising as political party.
Section 29 A of the Representation of People’s Act, 1951 defines the registration of a political party. In India Registered political parties enjoy 100 per cent tax exemption under Section 13A of the Income-Tax Act and also Registering a political party in India in India is simple, just one need to submit an affidavit signed by 100 members and pay 10,000 to the election commission. These two reasons made registered unrecognized political parties in India are sometimes called “tax havens”.
Recent initiatives like ban on anonymous political funding and introduction of electoral bonds will helps to prevent rise of registered political parties especially for the purpose of tax exemption.
Steps to be taken

  • Making mandatory for registered political parties to participate in elections.
  • Cancelling recognition of political parties if they failed to secure minimum number of votes in the elections.
  • Bringing all political parties under the purview of Right to information act.
  • Giving more powers to election commission in handling these types of political parties.
  • Reforming prevailing first-past-the-post system in deciding of winning candidates. It prevents proliferation of more number of parties and also avoid splitting of votes.
  • Increasing transparency in donations to political parties by introducing recent initiatives like electoral bonds.
  • Conditions to be prescribed for registering political parties like that of conditions required to recognise as state party or national party.
Question for UPSC Mains:
Why the registered by unrecognized political parties in India are sometimes called "tax havens"? What has been done so far to tackle the uncontrolled growth of such parties? What more needs to be done?

Published: November 21, 2017 | Modified:June 27, 2019

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