Latest Update:
The Income Tax Department has warned that the donations claimed under Section 80GGC in ITRs might be subject to verification. The taxpayers must review the claims made by them, maintain records of the donations made during the relevant years, and rectify the errors, if any, by updating their ITRs. ITRs for the years 2022-23, 2023-24 and 2024-25 should be checked by March 31, 2025.
What is Section 80GGC?
Section 80GGC of the Income Tax Act of 1961 benefits those who make donations to political parties or any electoral trusts. This section encourages individuals to financial support the political system and further claim deductions to lower the tax liability. However, this Section 80GGC deduction is allowed subject to certain conditions. The individuals must fulfill these conditions and criteria to receive the said benefits.
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 kind but rather by other means. Political parties 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.
Who is Eligible to Claim Deductions Under Section 80GGC?
Any person can claim section 80GGC except any company, local authority, or artificial juridical persons receiving funds wholly or partly from government authorities. 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 that 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.
This deduction can only be claimed under the old tax regime and not under the new tax regime. Learn more about the new and old tax regime here.
Also, donations made in cash to eligible political parties are not eligible for tax deductions under section 80GGC.
Entities not eligible for deduction under Section 80GGC include:
- Companies
- Local authorities
- Artificial juridical entities funded wholly or partly by the government
Features of Section 80GGC
Given below are the key 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.
- Required Documentation: To claim the deduction, individuals need to obtain a political party donation receipt, a certificate, or electoral trust to which the donation is made. This political party donation receipt should contain details such as the name of the donor, the 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.
- Transparency: Section 80GGC ensures more transparency in political funding and minimizes the chances of corruption.
- Capped Deduction: The maximum deduction is 100% of the donated amount. However, the total deduction claimed under this section cannot exceed your total income for the tax year.
Section 80GGC Deduction Limits
- 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 of income tax act are 100% tax deductible. However, donations made in cash are not allowed as a deduction from your income. You also need to provide proof of the donations made to claim the deduction.
- However, it is important to note that the deduction for donation is limited to the total income of the individual and cannot exceed that amount. The limit of donation under section 80GGC of the Income Tax Act has been fixed at 10% of your gross annual income.
Exceptions Under Section 80GGC
Donations or contributions made in cash or kind are not eligible for income tax deductions on political party donations. 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.
Individuals providing gifts or donations in forms other than monetary contributions cannot claim tax deductions under Section 80GGC.
The entire contribution is allowed for a tax deduction if it is not more than the taxable income of the eligible assessee.
Case Study:
A recent update from the Income Tax Department has put salaried taxpayers under scrutiny for claiming deductions under Section 80GGC for donations made to political parties.
One such taxpayer received a direct message from the ITD:
"Dear Taxpayer, It is observed that you have claimed deduction under section 80GGC of Rs 2,50,000 in your ITR for A.Y. 2023-24. It is requested that the claim may be verified and mistake, if any, may be rectified by updating the ITR for A.Y. 2023-24 by 31.03.2025."
How Will the Latest Income Tax Update Affect Taxpayers?
If your claim is genuine, no action is needed.
If the claim was wrongly made, you must file an Updated ITR (ITR-U) before March 31, 2025, to correct the mistake and avoid penalties.
Fake deduction claims are being flagged, and failing to rectify them can lead to severe consequences, including scrutiny and fines.
Therefore, it is best to file an updated return before March 31, 2025, to avoid penalties and notices. Connect with our tax experts who can help you file your updated return accurately.
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 of Donation: 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, the amount donated, and the registration number, along with the PAN of the political party or electoral trust.
- 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.
- Income Tax return for the Relevant F.Y.: You should have completed and submitted the income tax return for the relevant F.Y.
Procedure to Avail Tax 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 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 in 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 Section 80G allow for deductions made in the case of contributions to charitable organizations and their likes.
Now that you know all about section 80GGC of the Income Tax Act, deduction limits, eligibility criteria, etc, you can claim your section 80GGC by contributing to a political party. Make sure you have a detailed record of the donation made.
If you have donated to any political party during this FY, don’t forget to claim a deduction of the same under section 80GGC. If you are looking to plan your taxes or need assistance with ITR filing while maximizing your tax savings, look no further. Tax2win’s experts provide end-to-end tax solutions for your needs. You can simply book an online CA from Tax2win and ensure a hassle-free and smooth tax journey. Book Online CA now!
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