What is Section 80GGC?

Section 80GGC has been specified under the Income Tax Act of 1961 for the benefit of those who make donations to political parties. There are certain conditions and criteria which have to be followed by the individual for the said benefits. One must note the eligibility criteria and the deduction limit for availing the tax deduction.

To summarise the definition of the Section 80GGC, it specifies the deduction of the Income Tax Act which is allowed from the total gross income of an individual assessee for the contributions made to a political party or an electoral trust. This entire amount is eligible for tax deduction provided that it is not deposited in cash, but rather by other means.

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, trying to make it corruption-free. Moreover, it also encourages more voluntary contributions towards the political parties by individuals.
  • The tax deductions are made only by sole individuals and not corporate entities or non-taxpayers.
  • The deduction falls under the Chapter VI-A deductions, which implies that the total amount which can stand for the tax deduction cannot be more than the total taxable income of the individual.

Eligibility Criteria

  • Section 80GGC can be claimed by any individual except any local authority or artificial judicial persons who are wholly or partly funded by the government. The following groups are specified under the 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. The latter two candidates in the list should not be funded by the government.
  • The tax deduction benefits can also be availed by making donations to multiple political parties rather than only one.
  • Deduction limit- While the entire contribution is eligible for the deduction, it should be made sure that the mode for the donation should never be in cash.

Exceptions to Section 80GGC

Here are some of the features of National Pension Scheme –

  • Donations or contributions made in cash or kind are not eligible for tax deductions. This amendment to the Section was brought into effect on the 1st of April, 2014 and has been applied from the financial year 2014-15 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 cheque, demand draft, wire 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 individual.

Procedure to avail the deductions under 80GGC

The procedure to avail the said tax deduction under Section 80GGC is fairly easy and convenient. The taxpayer can file their tax returns by including the given amount of contribution in the blank provided under Section GGC in the Income Tax Return form. The Section appears under Chapter VI-A of the Income Tax Return Form. The deductions 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 incorporating it 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, amount donated, along with the PAN and TAN of the party. A report is made of the political parties when they file their income tax returns containing the details of the donors who contribute Twenty Thousand Rupees. This report is sent to the Election Commission on an annual basis. It has also been noted that money specifically spent on advertisement, the printing of brochures and pamphlet shall be excluded from the amount meant for a tax deduction. Under Chapter 6A of the Income Tax Act, tax deductions for the donations in political parties are mainly meant for income salary, rental income, and interest salary. This donation is deducted directly from the salary, and the donation receipt is in the name of the employer. 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 salary 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
Only individual taxpayers can claim the benefits. Companies are eligible to claim benefits. As per the Section 80GGB of the Income Tax Act 1961, any Indian company or enterprise that donates political party or an electoral trust registered in India can claim for a tax exemption or deduction from the amount contributed by it.

Meanwhile, other Sections like the Section 80G allows for tax deductions made in the case of contributions done for charitable organizations and their likes.

As per the Section 80GGB of the Income Tax Act 1961, any Indian company or enterprise that donates to a political party or an electoral trust registered in India can claim for a tax exemption or deduction from the amount contributed by it.

One must produce the following documents which are required to avail the tax deduction.

  • The standard receipt issued by trust entity to produce a proof of the amount donated. It should contain the name, address, Pan Number, registration number of the trust, name of the donor and the amount donated in words and numbers.
  • The Income Tax Return form is required to be filled up and submitted. The above details would be necessary for the same.

Conclusion

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 be a detailed record to avail the tax deduction after contributing. All the regulations by the Income Tax Act should be duly followed to avail the tax deduction and benefits; otherwise, the request is liable to be rejected. These contributions are exempt from tax and make it much easier for the political parties.


Frequently Asked Questions

Q- What documents are required to avail deduction under 80GGC of the IT Act?

One must produce the following documents which are required to avail the tax deduction.

  • The standard receipt issued by trust entity to produce a proof of the amount donated. It should contain the name, address, Pan Number, registration number of the trust, name of the donor and the amount donated in words and numbers.
  • The Income Tax Return form is required to be filled up and submitted. The above details would be necessary for the same.

Q- I have made donations to a political party. Can I claim 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 government company contribute to political party?

Ans: No,a government company cannot claim deduction u/s 80GGB


Q- Can corporations make political contributions?

Ans: Yes. A corporation can make political contribution.


Q- Can I save more than 30000 rs by giving a donation to a political party under section 80ggc?

Ans: There is a 100% deduction available for contribution u/s 80GGC.


Q- Can I save more than 30000 rs by giving a donation to a political party under section 80ggc?

Ans: Yes, any amount donated is allowed as a deduction under this section.


Q- Why is a tax deduction allowed on amounts donated to a political party in India?

Ans: 100% of the amount so contributed, provided same has been contributed by any mode other than cash.


CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.