Section 80GGC of Income Tax Act - Deduction on Donations to Political Party

What is Section 80GGC?

Section 80GGC of the Income Tax Act of 1961 benefits those who make donations to political parties. 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.

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, i.e., individual taxpayers.
• 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.
• It is not applicable to the TDS of an individual’s salary.

What are the Eligibility Criteria u/s 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.

Section 80GGC of Income Tax Act Deduction limit- While the entire contribution is eligible for the deduction, it should be ensured that the amount for the claim cannot be more than the taxpayer’s total taxable inomce.

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 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.

• 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.

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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.

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.

What is the Situation When an Individual is Ineligible to Claim a Tax Deduction Under Section 80GGC?

Given below are a few situations in which an individual is ineligible to claim a tax deduction under section 80GGC -

• An individual who has opted for the new tax regime.
• Donations made to political parties in cash are not eligible for tax deduction under section 80GGC.
• Gifts or donations given by individuals in forms other than monetary contributions are also not eligible for section 80GGC deduction.

Section 80GGC was introduced to minimize corruption and ensure transparent electoral funding.

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 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.

Did you know that you can claim a deduction for your donations to political parties? This can reduce your taxable income and increase your refund. To learn more about the tax rules and benefits of political donations, To save more of your taxes, connect with our tax experts who not only help you plan your taxes but also help with e-filing income tax returns. Don't miss this opportunity to support your favorite party and save money at the same time!

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.

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.

The ITR filing for FY 23-24 has begun. If you have donated to any political party during this FY, don’t forget to claim a deduction of the same under section 80GGC. Book an online CA to help you file your ITR and maximize your tax savings. Book Online CA now!