Are Gujarat unrecognised political parties a front for tax-evasion?

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Story so far: The Gujarat police have registered First Information Reports (FIRs) against several Registered Unrecognised Political Parties (RUPPs), based on complaints from the Income-Tax Department alleging irregularities. With respect to the Bharatiya National Janata Dal (BNJD), the Swatantrata Abhivyakti Party (SAP), and the Garib Kalyan Party (GKP), the combined “political donations” are nearly ₹1,870 crore and the alleged transactions resulted in an estimated tax loss of about ₹560 crore to the exchequer. Another matter is related to the Satyavadi Rakshak Party (SRP), involving ₹415 crore in alleged donations and an estimated Rs.124.5-crore loss, according to news reports.

The Income-Tax Department’s examination of suspected irregularities had begun earlier. On November 12, 2025, it conducted searches at the BNJD office in Gandhinagar and premises linked to its office-bearers. The searches were carried out under Section 132 of the Income Tax Act. The agency examined financial and other records during its investigation before filing complaints with the police.

According to the complaints, taxpayers transferred money to the political parties through banking channels and received donation receipts. The donors could then seek deductions for eligible contributions to political parties under Section 80GGC of the Income Tax Act. The Department has alleged that the money was subsequently routed from these political parties through intermediary firms and finally returned to the donors in cash after commissions were deducted. The complaints allege that false accounting records and contribution reports were submitted to the authorities.

The largest case concerns the BNJD. As per reports, the party received ₹1,143.85 crore from 56,238 donors, whereas the estimated alleged tax loss was nearly ₹343 crore. In the SAP case, the alleged donations amount to about ₹519 crore, with the purported tax loss put at about ₹155 crore. The GKP case involves donations of ₹206.76 crore and a suspected tax loss of close to ₹62 crore. Together, the three donation amounts to a total of ₹1,869.61 crore. A separate instance involving the SRP concerns alleged donations of about ₹415 crore and suspected tax loss of ₹124.5 crore, as per reports.

The complaints describe an alleged process in which taxpayers first transferred money to a political party through banking channels and received donation receipts. The funds were then allegedly routed through intermediary firms, with bills or invoices showing purported purchases of foodgrains and other items used to project the transactions as authentic. The money was subsequently withdrawn in cash and allegedly returned to the original donors after commissions were deducted.

Section 80GGC allows an eligible taxpayer to claim a deduction for the full amount of a qualifying contribution made to a political party or electoral trust, subject to the conditions prescribed under the Income Tax Act. Contributions made in cash do not qualify for the deduction. The Income-Tax Department alleges that the purported donations were used to enable taxpayers to claim deductions even though money was later returned to them in cash.

The Election Commission records show that a BNJD candidate contested the May 2026 Umreth Assembly by-election and received 773 votes. The party also contested the 2017 and 2022 State Assembly elections. The SAP also fielded candidates in the 2022 Gujarat Assembly polls, while the GKP fielded three candidates in the 2024 Lok Sabha election.

The police have registered multiple cases under provisions of the Bharatiya Nyaya Sanhita relating to offences including cheating, criminal conspiracy, forgery, and use of forged documents. They will examine the money trail and other evidence to determine whether the allegations are substantiated. Roles of some chartered accountants and professionals are also being scrutinised.

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