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Section 80GGC of Income Tax Act - Deduction on Donations to Political Party
One supports a political party not only to express solidarity or shared beliefs with the party but also for a tax deduction. Political contributions are made to cover the expenses made by the political party, mainly for election campaigns. This contribution is eligible for deduction while computing the total income of the individual. The proof of the expenditure should be maintained for the confirmation of such procedures. Individuals who opt for tax deductions by supporting political parties, therefore, have the advantage of saving a good portion of the tax under Section 80GGC along with other exemptions/deductions like House Rent Allowance, Medical allowance, and the like. This Section was introduced through the Finance Act in 2009.
What is Section 80GGC?
Section 80GGC has been specified under the Income Tax Act of 1961 to benefit those who donate to political parties. The individual must follow certain conditions and criteria to receive the said benefits. One must note the eligibility criteria and the deduction limit for availing of the tax deduction.
Section 80GGC specifies the deduction under the Income Tax Act, that is allowed from the total gross income of specified assessees for contributions to a political party or an electoral trust. This entire amount is eligible for tax deduction provided that it is not deposited in cash,or any other kind but rather by other means. Political party must be registered under section 29A of the Representation of the People Act, 1951. Any donation/contribution made to any other political party would not qualify for deduction u/s 80GGC.
One can identify the main features of Section 80GGC as follows:
- The objective of the Section was mainly to allow for transparency in the electoral funding and, therefore, try to make it corruption-free. Moreover, it also encourages more voluntary contributions by taxpayers to political parties.
- The tax deductions are made available only to specified assessees
- The deduction falls under Chapter VI-A deductions, which implies that the total amount that can be claimed for the tax deduction cannot be more than the total taxable income.
What is the eligibility criteria u/s 80GGC?
Any person can claim section 80GGC except any companies or local authority, or artificial juridical persons who the government wholly or partly funds. The following groups are specified under Section 80GGC to make the political contribution- an individual, a Hindu Undivided Family (HUF), a firm, an AOP or BOI and an Artificial Juridical Person which is not wholly or partly funded by the government.
The tax deduction benefits can also be availed by donating to multiple political parties rather than only one.
Deduction limit- While the entire contribution is eligible for the deduction, it should be ensured that the mode for the donation should never be in cash. The payment should be made through an electronic clearing system or through banking channels.
Features of Section 80GGC
- Eligible Donations: Section 80GGC allows individuals to claim deductions for donations made to registered political parties or electoral trusts. The donations must be made through any mode other than cash.
- Deduction Limit: The deduction available under Section 80GGC is limited to the amount donated.
- Required Documentation: To claim the deduction, individuals need to obtain a receipt or a certificate from the political party or electoral trust to which the donation is made. This receipt should contain details such as the name of the donor, amount donated, and the registration number of the political party or electoral trust.
- Not Applicable to Companies: It's important to note that Section 80GGC is applicable only to individuals and not to companies, firms, or any other entity.
- Overall Deduction Limit: The deduction claimed under Section 80GGC is separate from other deductions available under the Income Tax Act. It does not fall under the overall limit of deductions specified in Section 80C to 80U.
Deductions Under Section 80GGC
- Section 80GGC of the Income Tax Act does not specify any limit for deductions on contributions made to electoral trusts or registered political parties.
- Under Section 80GGC, any amount contributed to an electoral trust or a registered political party (as per Section 29A of the Representation of the People Act, 1951) can be claimed as a tax deduction. The donations made u/s 80GGC are 100% tax deductible.
Exceptions under Section 80GGC
Donations or contributions made in cash or kind are not eligible for tax deductions. This amendment to the Section was brought into effect from the financial year 2013-14 onwards.
The contribution to the political party should not be made in cash or kind. One may use other means for the donation through the bank like a cheque, demand draft, via-transfer, debit or credit card, or internet banking.
The entire contribution is allowed for a tax deduction if it is not more than the taxable income of the eligible assessee.
Documents required for Section 80GGC
To be eligible to claim the tax deduction under Section 80GGC, you need to submit the following documents:-
- Receipt or Certificate: Obtain a receipt or certificate from the political party or electoral trust to which the donation is made. This document should contain details such as the name of the donor, amount donated, and the registration number along with PAN of the political party or electoral trust.
- Donation Acknowledgment: Keep a record of the acknowledgment or confirmation of the donation made. This can be in the form of a bank statement, digital payment confirmation, or any other proof that substantiates the contribution.
- PAN of Political Party/Electoral Trust: Ensure that the political party or electoral trust to which the donation is made has a valid Permanent Account Number (PAN). This information may be required while filing your tax return.
Procedure to avail of the deductions under 80GGC
The procedure to avail of the said tax deduction under Section 80GGC is fairly easy and convenient. The taxpayer can file their tax returns by including the contribution amount in the space provided under Section 80GGC in the Income Tax Return form. The Section appears under Chapter VI-A of the Income Tax Return Form. The deduction can be availed by contributing in any cashless form, including online banking, cheques, debit cards, credit cards, demand drafts, etc.
The details of the donations are to be submitted to the employer for incorporation in form 16. Otherwise, the details are to be mentioned in the specified column while submitting tax returns. The political party shall issue a receipt containing the name and address of the party, the amount donated, along with the PAN and TAN of the party. The employee can claim a deduction if he has this certificate from the employer, which confirms that the contribution was made from the employee's account.
Difference between Section 80GGC and 80GGB
Section 80GGC and Section 80GGB are very similar in their actions enforcing tax deduction benefits. However, the basic difference is to distinguish the donor types.
|SECTION 80GGC||SECTION 80GGB|
|Any person, except local authority and artificial juridical person funded by the Government||Companies are eligible to claim benefits. As per Section 80GGB of the Income Tax Act 1961, an Indian company that contributes any sum to a political party or an electoral trust registered in India can claim a deduction for the amount contributed by it.|
Meanwhile, other Sections like the Section 80G allows for deductions made in the case of contributions to charitable organizations and their likes
One must produce the following documents, which are required to avail of the tax deduction under section 80GGC.
- The receipt issued by a political party or electoral trust to produce proof of the amount contributed. It should contain the name, address, PAN, TAN, registration number of the party/trust, name of the donor, mode of payment, and the amount donated in words and numbers.
- The Income Tax Return form is required to be filled up and submitted within a specific time.
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The decision to donate to a political party should be made with due research and analysis such that the money is used up honestly in the larger welfare. It is extremely important to have a detailed record to avail of the tax deduction after contributing. All the regulations by the Income Tax Act should be duly followed to avail of the tax deduction and benefits; otherwise, the request is liable to be rejected.
Frequently Asked Questions
Q- What documents are required to avail of deduction under 80GGC of the IT Act?
One must produce the following documents, which are required to avail of the tax deduction.
- The receipt issued by a political party or electoral trust to produce proof of the amount contributed. It should contain the name, address, Pan, registration number of the trust/party, name of the donor, mode of payment, and the amount donated in words and numbers.
- The Income Tax Return form is required to be filled up and submitted within a specific time.
Q- I am an individual and have made donations to a political party. Can I claim a deduction on that?
Yes, can claim a deduction for the donation made to the political parties under section 80GGC of the Income Tax Act, 1961.
Q- Can corporations make political contributions?
Yes. An Indian company can make political contributions and can claim a deduction under 80GGB.
Q- Can I save more than 30,000 Rs by giving a donation to a political party under section 80GGC?
There is a 100% deduction available for contributions u/s 80GGC if the contribution is made by any mode other than cash and kind.
Q- How much is the tax deduction allowed on amounts donated to a political party in India?
100% of the amount so contributed, provided the same has been contributed by any mode other than cash and kind.