Discuss how tax exemptions to political parties, particularly RUPPs, have become a conduit for black money laundering in India.

Political parties enjoy full income-tax exemption on donations, conditional on filing contribution reports under Section 29C of the Representation of the People Act, 1951 [1]. Among the nearly 2,800 Registered Unrecognised Political Parties (RUPPs) — registered under Section 29A but never recognised — this concession has increasingly served tax evasion rather than electoral competition.

Why the exemption is easy to capture

• Entry is cheap: Section 29A prescribes no vote-share or contest requirement, so a party can be registered and enjoy exemption, a common symbol and star-campaigner privileges without ever facing voters [1].
• Compliance is self-reported — only donations above ₹20,000 need donor disclosure in Form 24A, filed with State Chief Electoral Officers, with little independent audit [1].

The laundering mechanism

• A shell RUPP receives "donations" from entities seeking deductions; the money is returned in cash after a commission, converting black money into a tax-deducted paper trail.
• The ECI's 2022 compliance drive found 199 RUPPs claiming ₹445 crore exemption (2018-19) and 219 claiming ₹608 crore (2019-20) — 66 of them without filing Form 24A at all [2].
• Over 2,000 RUPPs had not furnished contribution reports or audited accounts, and their lists were referred to the Department of Revenue [2].

Regulatory gaps

• Non-filing costs only the tax exemption; it does not automatically trigger deregistration, and the ECI lacks a general deregistration power under the Act [1][2].
• Action therefore rests on the narrower "inactivity" route: the ECI delisted 334 RUPPs in 2025 for contesting no election in six years, with proceedings against 476 more [3][4].

Tax exemption was designed to encourage clean, disclosed political funding; without verification it has become its opposite. A statutory deregistration power for the ECI, mandatory e-filing with cross-verification against Income-Tax returns, and audit of contribution reports would restore the transparency the exemption presumes — strengthening the free and fair elections that Article 324 entrusts to the Commission.