Discover tax deductions for contributions to political parties under Sections 80GGB & 80GGC of the Income Tax Act, 1961, including eligibility criteria and quantum of deductions.
Deduction in respect of Contribution to Political Parties under Section 80GGB & 80GGC of the Income Tax Act, 1961
Section 80GGB: Deduction in respect of Contributions given by Indian Companies.
Quantum of deduction: Entire amount of contribution to any political party or electoral trust is eligible for deduction under this section.
Notes:
(i) Contribution by way of cash is not eligible for deduction under this section.
(ii) Indian company has been defined u/s 2(26) of the Income Tax Act, 1961. Shortly it means a company incorporated under the Companies Act, 2013 or under any previous company law.
(iii) Contribution shall have the meaning as has been assigned to it u/s 182 of the Companies Act, 2013.
Section 182 of the Companies Act, 2013 (an excerpt)
> A Government company can’t directly or indirectly contribute any amount to any political party or electoral trust.
> Other companies which are in existence for not less than three financial years may directly or indirectly contribute certain amount to any political party or electoral trust. Maximum contribution in any financial year shall not exceed 7.5% of the average net profits during the three immediately preceding financial years.
> A resolution shall be passed in a meeting of Board of Directors authorizing the making of such contribution.
> An expenditure, directly or indirectly, by a company on an advertisement in any publication, where such publication by or on behalf of a political party, shall be deemed as contribution of such amount to such political party.
> An expenditure, directly or indirectly, by a company on an advertisement in any publication, where such publication not by or on behalf but for the advantage of a political party, shall be deemed as contribution for political purpose.
> Any payment made by a company to any person who is carrying on any activity which can reasonably be regarded as likely to affect public support of a political party shall be deemed to be contribution for political purpose.
Section 80GGC: Deduction in respect of Contributions given by any person to political parties.
Quantum of deduction: Entire amount of contribution to any political party or electoral trust is eligible for deduction under this section.
Notes:
(i) Contribution by way of cash is not eligible for deduction under this section.
(ii) Local authority and every artificial juridical person wholly or partly funded by the Government can’t directly or indirectly contribute any amount to any political party or electoral trust.
Author Bio
Section 80ggc
Section 80GGC of the Income Tax Act,1961 allows deduction in respect of any donations made to political parties. The amount of deduction allowed under Section 80GGC is either a hundred per cent or fifty or fifty per cent depending upon the taxpayer and also the contribution made. The deduction under Section 80GGC should be made either to an electoral trust or political party. The amount of deduction should not exceed the total tax that is payable by the taxpayer.
By investing under Section 80GGC, tax benefits can be availed and at the same time, a strong political system can be encouraged in the country. According to this section, an individual can donate up to 10% of the gross total income according to his/her willingness to political parties. This deduction can be claimed, even after availing of tax benefits like house rent allowance, medical allowance also. A company cannot claim a deduction under this section by donating an amount to political parties. No government organisations are eligible to donate any amount to political parties and claim a deduction under this section.
About Section 80GGC
Features of Section 80GGC
Eligibility to Claim Deduction under Section 80GGC
Procedure to Claim Deduction under Section 80GGC
Difference Between 80GGB and 80GGC
Exceptions to Section 80GGC
FAQS
Features of Section 80GGC
The deduction under this section can be availed by individuals only who are non-corporate assesses or taxpayers
The deduction under this section is not applicable on tax deducted at the source of an individual’s salary. Only individuals who are employed and do not have a source of income other than the salary provided by the employer are eligible to claim a deduction under this section.
Since this section falls under Chapter VI A deductions, the deduction cannot be more than the tax liability of the individual. This is ensured by the government so that no individual can claim an undue benefit from this section.
The government has introduced this section in the Finance Act, of 2009. This was done to encourage transparency and honesty in the electoral system and to reduce corruption in the same. The government thus ensures that maximum donations made are by individuals and are made not with a view to evade taxes but enhance the political system in our country. The government also allows deductions to be made to multiple parties and not just one party so that no bias is made for one political party and the donations are honest.