Contributions to political parties are governed by Section 182 of the Companies Act, 2013. A company that is not a Government company and which is in existence for at least last three financial years may contribute up to 7.5% of its average net profits during the last three years to a political party/parties registered under the representation of Peoples Act, 1951. This is subject to further elaborations and restrictions in the said section.
Following permission to establish Electoral Trust companies under the Income Tax Act, a company can also make contributions within the above limits and restrictions to ‘Electoral Trust Companies’ and reflect these contributions in their books of accounts. The Electoral Trust Companies are, however, required to indicate the amounts passed on to them by companies and contributed by them to a political party or parties in the manner laid down in section 182(3) of the Companies Act, 2013. There is no proposal to review the above arrangements.
The relevant provisions of the Companies (Donations to National Funds) Act, 1951 have already been incorporated in the Companies Act, 2013. Section 181 and 183 of the Act allows companies to contribute to bonafide and charitable funds and to national funds etc. In view of this, Ministry of Corporate Affairs has initiated to repeal the Companies (Donations to National Funds) Act, 1951.