Section 80GGB: Tax Benefits to Indian Companies on Political Donations

What is Section 80GGB of the Income Tax Act?

Section 80GGB of the Income Tax Act, 1961 is meant for providing tax deductions to Indian companies, on making donations to the political parties who are registered or an electoral trust. As there is no specified limit for the same, any amount contributed can be claimed for a tax deduction.

Eligibility Criteria

Everyone except the following can claim a deduction for the donations made to political parties and electoral trusts under section 80GGB -

• A government agency
• A company that has been operating fo only 3 years
• Cash donations are not eligible for section 80GGB deduction
• Contributions must be made only to recognised political parties according to section 29A.

Expenses Covered Under Section 80GGB

The following expenses are covered under Section 80GGB:

• Donations made to registered political parties recognised under section 29A.
• Donations made to electoral trusts
• All the donations made must have proper proof indicating the amount of donation and the recipient details.

Documents Required to Claim Deductions Under Section 80GGB

To claim deductions under this section, companies need to provide:

• IDs issued by the government
• Registered address
• Permanent Account Number (PAN)
• Registration number of the electoral trust or political party
• Mode and amount of payment
• Receipt for the donation

Amount of Deduction Under Section 80GGB

100% of the donation amount can be claimed as deduction under section 80GGB, with no upper limit on the total amount of deduction that can be claimed. For example, if A Ltd. donates Rs.8 lakhs to a registered political party, it can claim a full deduction of Rs.8 lakhs from its income while filing ITR.

The Income Tax Act, 1961 has not fixed any upper limit for the contributions made by the companies. Any amount donated by a valid company is 100% tax-deductible under Section 80GGB (As per amendment under Finance Act,2017). Also, under Section 182 of the Companies Act,2013, it is not compulsory for companies to disclose the name of the party to which they have donated. Any other expenses like television advertisements, advertising, radio jingles, and the latest social media posts which are sponsored by a political party can also be considered as a donation under the Section.

If any company in India is putting an advertisement in any magazine that is run and owned by a political party, then also this amount will be exempted from tax as per Section 80GGB. As long as there is proof of the expenditure, any amount can be donated.

What is the Meaning of Registration of Political Parties under Section 29A?

Registration of political parties comes under the rules and regulations of the provisions of Section 29A of the Representation of the People Act, 1951. A party who seeks registration under this Section with the Commission will have to apply to the commission within 30 days, following its date of formation as per the guidelines prescribed by the Election Commission of India.

This is done by the guidelines conferred by Article 324 of the Commission of India and Section 29A of the Representation of the People Act, 1951. The applicant party is asked to publish the proposed name of the party in two local daily newspapers and two national daily newspapers, on two days in the same newspapers, to check for objections, if any.

You are free to make donations to political parties of your choice and preference and also claim income tax benefits for the same. The only thing that you should keep in mind is that there should be a record maintained by you and you should comply with all the regulations specified in the Income Tax Act 1961. If the specified set of procedures is not followed, the claim for deduction might be rejected by the Income Tax Department of India.

If you want to claim deduction under section 80GGB, make sure to file your ITR by 31st July. And if you find ITR filing complicated, don’t worry! You can simply connect with our tax experts who can not only help you with tax filing but also help you maximize your tax savings and provide post-filing notice assistance. Book an eCA Now!