CBDT Uncovers ₹9,169 Crore Money Laundering Scheme Involving Unrecognised Political Parties

The Central Board of Direct Taxes (CBDT) has uncovered a large-scale money laundering operation involving Registered Unrecognised Political Parties (RUPPs), chartered accountants, and intermediaries, amounting to ₹9,169 crore. Over assessment years 2022-23 and 2023-24, tax deductions far exceeding legally declared political receipts were claimed. Specifically, ₹6,116 crore was involved in AY2022-23 and ₹3,053 crore in AY2023-24. This operation facilitated tax evasion by routing money through RUPPs, which are political entities not achieving state or national recognition. Donors transferred large sums to these parties via intermediaries, receiving cash refunds later, while intermediaries earned commissions. The Election Commission of India has recently delisted over 800 RUPPs due to such exploitative practices. CBDT's probe teams utilized bank statements, case files, and digital communications to map this sophisticated system, which also involved fabricated donation receipts and forged documents to conceal the trail. Separately, a CBDT 'nudge campaign' encouraging tax compliance led to the withdrawal of ₹2,746 crore in total deductions from taxpayers contacted.

Impact: This revelation highlights significant gaps in financial oversight and political funding regulations, potentially leading to stricter compliance measures and increased scrutiny on financial professionals. It could affect investor confidence in corporate governance and the transparency of financial dealings in India. The scale of the fraud suggests a need for enhanced regulatory oversight of RUPPs and their financial transactions. Impact Rating: 7/10.

Difficult Terms: * **Central Board of Direct Taxes (CBDT)**: The apex direct tax administration body in India, responsible for formulating policy relating to direct taxes. * **Registered Unrecognised Political Parties (RUPPs)**: Political parties that are registered with the Election Commission of India but do not meet the criteria for recognition as State or National parties. * **Money Laundering**: The illegal process of making large amounts of money generated by criminal activity appear to have come from a legitimate source. * **Chartered Accountants**: Professionals qualified to manage financial accounts, conduct audits, and provide tax advice. * **Intermediaries**: Individuals or entities that act as a go-between in a transaction. * **Tax Deductions**: Amounts that can be subtracted from an individual's or company's gross income to reduce their taxable income. * **Political Receipts**: Funds or donations received by a political party. * **Assessment Years (AY)**: The period during which income earned in the previous year is assessed for tax purposes. For example, AY 2022-23 refers to the assessment of income earned during the financial year 2021-22. * **Representation of the People Act**: A set of laws passed by the Parliament of India to provide for the conduct of elections to the Houses of Parliament and to the Houses of State Legislatures, the disqualifications and corrupt practices and other matters connected thereof. * **Nudge Campaign**: A strategy employing psychological principles to gently guide individuals towards making better decisions, often used in tax compliance efforts.