"Political party is not a commercial venture. Please remember in a democracy, it is the people who must fund the political parties. If you want a party-based democracy, political parties must be funded by people," he said here while responding to a question on why political parties are exempted from paying income tax.
In a Budgetry proposal, Finance Minister Arun Jaitley had announced a cap of Rs 2,000 on cash donations to political parties.
The veteran Congress leader, who is a Rajya Sabha MP from Maharashtra, was in a western suburb to campaign for the high-stake BMC elections slated for February 21.
Chidambaram observed the political funding is a "gift of people to the political system," when assumption is that money these parties receive is accounted for and taxes have already been paid on it.
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The lowering of cash ceiling on political donations to Rs 2,000 from previous Rs 20,000 was announced by Finance Minister Arun Jaitley in Budget 2017-18.
Earlier, the Election Commission had urged the government to amend laws to ban anonymous contributions of Rs 2000 and above made to political parties.
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