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.
For claiming a tax deduction on the amount contributed, the company must fulfil the following conditions -
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 the 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 which 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.
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.
For Section 80GGB, contributions shall include:
If your company has decided to contribute to the funds of a certain political party in India, you should understand the basics of Section 80GGB, according to the Income Tax Act 1961. The following are some important points to consider in this regard:
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.
Section 80GGB enables companies to claim a deduction for the amount contributed by them to the political parties.
Under the Income Tax Act of 1961, there is no provision which limits the amount of contributions made by companies. Under the Companies Act, 2013, 7.5% of the average net profits of the past 3 financial years can be only contributed as political donations. However, Finance Act 2017, removes the restriction of amount to be contributed to political parties by the companies.
Electoral trust was created for collecting voluntary contributions made by people and companies, further it is distributed to the respective political parties. It is a non-profit organization based in India. The companies which do not intend to disclose the name of their party generally contribute funds through the electoral trust.
The categories of donations under Section 80G are divided under two heads. The categories are of maximum limit as well minimum limit. These further gets divided into subcategories. Any donation which exceeds the maximum limit will be subjected for tax deduction upto 50% or 100% depending upon the categories which they belong to.
The prescribed mode of payment for donation under 80GGB should be account payye cheque or any other electronic mode.Any payment made in cash will not be allowed as deduction under this section. However, donations which are in material form such as clothes, books, medicines are not eligible for deduction under 80G.
Donation made to political parties is deductible. For individuals, Section 80GGC of Income Tax act,1961 comes under purview , where any amount donated to political parties or electoral trust can be claimed as deduction and for the companies, Section 80GGB comes under purview , where any donation made by companies to political parties or electoral trust can be claimed as a deduction.
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