IT raids find hundreds of crores being laundered by unrecognised political parties run from shops and slums

Around 205 political parties across India issued fake donation certificates for a commission, before sending the rest of the money back to donors after passing it through a network of several entities.

FPJ Web DeskUpdated: Thursday, September 08, 2022, 07:11 PM IST
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SSC Scam: ED seizes Rs 20 cr cash after raids on WB minister Partha Chatterjee's aide | ANI

With a population of 138 crore, of which more than 90 crore are registered voters, India is the world’s biggest democracy in terms of size. The country is also home to seven national parties, and around 59 state parties, in addition to almost 2800 unrecognised political parties. Earlier this year, the Election Commission deleted 111 of such ‘non-existent’ parties to clean up its register.

Now the Income Tax department has unearthed hundreds of crores after raiding such dubious political parties in the past few days, which were functioning out of shops, slums and flats across India. They found that one such unrecognised organisation run from a watch repair shop, had received Rs 370 crore in donations in the past three years. They traced the state president of the party in Uttar Pradesh’s Sultanpur, to Ahmedabad in Gujarat.

Murkier than Indian politics

Further investigation by the I-T department revealed that party officials issued fake donation certificates for a 3 per cent commission, before sending cash back to the donor through a network of several entities. Another political party in a slum in Mumbai’s Sion had accepted Rs100 crore in donations, which were donated by its auditor, who was also traced back to Ahmedabad. About 205 such political parties received donations in the same manner, and passed cash through multiple entities to facilitate money laundering.

Parties in Gujarat and Mumbai alone had accepted more than Rs2000 crore as part of the scam, and had also helped firms or individuals secure tax exemptions. Political parties in India are exempt from paying any income tax on donations, which is why these organisations were able to give authorities a slip. In 2020, an Election Commission official had also told The Print, that most of these parties never contested elections, and were created to launder black money.

A loophole being exploited?

An affidavit filed by the EC in the Supreme Court in 2020, also revealed that 70 registered yet unrecognised parties had received funds via electoral bonds. These bonds are financial instruments, which any organisation or individual can purchase anonymously, to make donations to a political party anonymously. The scheme was introduced in 2017, and since then it has been used for sending Rs10,000 crore in donations to various parties.

Back in 2019, the RBI’s concerns about use of electoral bonds for money laundering had been dismissed by India’s finance ministry. But the presence of thousands of political parties that can be used for cleaning black money, highlights the need to scrutinise political donations.

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