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Tax Dispute Becomes Political as India Freezes Opposition’s Accounts

WorldAsiaTax Dispute Becomes Political as India Freezes Opposition’s Accounts

India’s largest opposition party accused the national authorities on Thursday of paralyzing its political activities by blocking the party’s access to its bank accounts, in what it described as a heavy-handed response to a tax dispute just weeks before a pivotal general election.

Officials with the party, the Indian National Congress, said that eight of its 11 main accounts at four banks had been frozen, and that there was no clear indication of when the party would regain access to the money.

“We can’t support our workers; we can’t support our candidates,” Rahul Gandhi, an Indian National Congress leader, said at a news conference in New Delhi. “Our leaders can’t fly. Forget flying — they can’t take a train.”

“Our ability to fight elections has been damaged,” he said.

Campaigning is heating up for a six-week-long election that starts on April 19 and will determine the next prime minister for the world’s most populous democracy. To run election campaigns from the Himalayan mountains to India’s southern shores, political groups spend billions of dollars in what is seen as one of the world’s most expensive elections.

Under Indian law, political groups are exempted from paying income taxes on their funding from individuals and corporations, but must declare their income to the tax authorities each year. The current dispute relates to how heavily the Indian National Congress should be penalized for past irregularities.

Last month, the country’s Income Tax Department, which is controlled by Prime Minister Narendra Modi’s government, froze the Congress party’s accounts on accusations that it had been 45 days late in filing tax returns on its cash contributions for the 2017-18 financial year. The department also took from the party’s bank accounts $2 million of the $16 million that it said was owed in penalties.

The Congress party has acknowledged filing the tax returns late, but argues that the penalty should be in the thousands of dollars rather than millions.

Last week, a Delhi high court declined to interfere with the tax authorities’ order, saying that it was unable to stop the authorities from freezing the party’s accounts.

In recent years, opposition groups have accused Mr. Modi’s governing Bharatiya Janata Party of establishing a near monopoly over political funding. They accuse Mr. Modi of using the powers of his office to enrich his party and dry up funding for competitors.

Leaders in the Congress party said that freezing its accounts so close to the elections was a political move aimed at crippling India’s main opposition group and pushing the country toward one-party rule.

“The idea that India is a democracy is a lie,” Mr. Gandhi said.

Mr. Modi’s officials rejected those claims, describing them as a desperate attempt by a political opposition that is struggling in an election campaign that is likely to return the B.J.P. to power.

Ravi Shankar Prasad, a leader from the governing party, said the tax exemption for any political group remained valid only if the group declared any contributions to the national tax authorities on time.

“In utter desperation of imminent defeat, the Congress party at the highest level sought to create an alibi today,” Mr. Prasad said on Thursday.

The issue of political financing has exploded in India in recent weeks. The country’s top court recently forced the government-owned State Bank of India to release a list of all those who had made anonymous political donations through a financing mechanism known as “electoral bonds,” removing a veil of secrecy that opposition groups had long argued was helping those in power.

Mr. Modi’s party received the highest amount of the funds, more than 10 times that going to the Indian National Congress.

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