The Income Tax (IT) Department's nationwide investigation into Registered Unrecognised Political Parties (RUPPs) has uncovered a scheme involving more than 1.6 lakh suspicious donors and fraudulent political contributions totalling more than ₹5,500 cr that were purportedly transferred through 36 shell parties over a three year period.
Officials with knowledge of the investigation believe that the plan entailed "round tripping of funds," in which funds given to these political parties were returned to the original donors in cash after a tiny commission was deducted, enabling them to fraudulently claim deductions under Section 80GGC of the Income tax Act. According to the officials, the exchequer suffered enormous losses totalling thousands of rupees as a result.
"This often involves round-tripping, where funds are returned to the original donors who then claim fraudulent tax deductions, resulting in a direct loss of thousands of crores in tax," a government source said.
Over 150 locations connected to intermediaries, RUPPs, and professionals, including chartered accountants, were included in the department's concerted effort across many regions on July 14. 1.53 L I-T returns that claimed fraudulent deductions of ₹4,478 cr were revealed by the exercise.
