Section 80GGC- Deductions on Donations to Political Parties

Who doesn’t want to save on taxes? Everyone does! That’s why tax deductions are so important. They benefit taxpayers by reducing their tax burden and help the government by encouraging activities that align with national goals, like charity and investment.

The Income Tax Act of 1961 offers various deduction provisions, one of which is Section 80GGC. This section allows taxpayers to claim deductions for contributions made to political parties or electoral trusts. Given India’s diverse political landscape, with many parties relying on donations to support their campaigns and promote their policies, contributions under Section 80GGC are eligible for a 100% deduction from your total taxable income.

This article is for you if you’re considering saving your tax liability by donating to a political party. Continue reading to know more about it.

Understanding Section 80GGC of the Income Tax Act

Under Section 80 GGC, a taxpayer can claim a tax benefit if they donate to political parties or an electoral trust. However, the parties must be registered. The section aims to support the political parties financially and maintain transparency and accountability of political funding.

Examples of political parties are the BJP, Congress, BSP, AAP, Samajwadi Party, etc.

Examples of Electoral Parties- are the Prudent Electoral Trust and Progressive Electoral Trust.

Eligibility to Avail Deduction Under 80GGC of Income Tax Act

One should meet certain criteria to be eligible for deduction under 80GGC. They are;

Eligibility of the Donor

• Individual Taxpayers
• Hindu Undivided Families (HUF)
• Associations of Persons (AOP)
• Bodies of Individuals (BOI)
• Firms
• Artificial Juridical Persons- Not wholly or partly funded by the government.

Ineligible Entities: The following entities cannot claim deductions:

• Companies
• Local Authorities
• Artificial Juridical Persons- wholly or partly funded by the government.

Eligible Contributions

• Political Parties
• Electoral Trusts

Mode of Payment

 The donation made through any of the following methods is eligible for the deduction:

• Demand draft
• Cheque
• Online banking
• Debit card
• Credit card
• Wire transfer

Donations done in cash are not considered for deductions under Section 80GGC.

Documents to Claim a Deduction under Section 80GGC

Some documents need to be furnished to claim a deduction;

• Donation Receipt: The donor must obtain a receipt or acknowledgement from the political party or electoral trust that confirms the donation. It should cover the details such as the donor’s name, amount donated, and date of donation made.
• ITR filing- The ITR of the relevant year must be filled and submitted.

Tax Regime

Anyone wanting to benefit from the deduction under Section 80GGC must opt for the old tax regime. The deduction is not permissible for people using the New Tax Regime.

Significance Of Section 80 GGC of Income Tax

Here is the list of the significance of section 80GGC of the Income Tax:

• Encouragement to contribute– The section encourages people to donate to political parties, allowing them to reduce their tax liability by claiming tax benefits.
• Increased Funding– This helps parties struggling to carry out their campaign works.
• No Limit on Amount: There is no upper limit on the amount of donation you can claim as a deduction under this section.
• Transparency—Proper documentation and a cashless donation are needed to claim the deduction. This helps reduce the potential for black money and illicit political funding.
• Impact on Taxable Income: Claiming this deduction reduces your taxable income, which can lower your overall tax liability.

Process of Claiming a Deduction Under Section 80GGC

Here is the step-by-step process of claiming a deduction under section 80GGC of Income Tax

• Make the Donation– Initiate a donation through an eligible mode of payment.
• Obtain Receipt– Get a receipt or acknowledgement from the political party to confirm the donation.
• Maintain Proof– Keep the statement of your transaction.
• File Your Return—Complete the appropriate form for ITR and include the amount to be deducted under Section 80GGC.
• Attach Documentation– Keep the proof of payment in case of audit by the department.

Difference Between Section 80 GGC and Section 80 GGB

The main difference between Section 80GGC and Section 80 GGB are as given below:

Section 80GGC– Only specified taxpayers can claim the benefit.

Section 80GGB– Companies are eligible to claim benefits.

Related Case on Political Party Funding

Here given below is one of the very famous cases related to political party funding:

Association for Democratic Reforms & Anr. Versus Union of India & Ors

The case “Association for Democratic Reforms & Anr. Versus Union of India & Ors.” involves a legal challenge concerning the transparency and regulation of political party finances in India.

ADR, along with other petitioners, challenged certain practices related to political party funding. The court made several rulings to enhance transparency and accountability in political party finances. One of these was requiring political parties to disclose their sources of funds and expenditures more clearly and regularly.

Conclusion

Section 80GGC serves a significant role in supporting political activities while ensuring accountability. It is very important to opt for the old tax regime if you wish to take the benefit from Section 80 GGC and follow all other regulations of the Income Tax Act. You can claim your deduction if you know all about section 80GGC of the Income Tax Act, deduction limits, eligibility criteria, etc. Make sure to keep all the records with you. If you need any further guidance on old and new tax regimes, you may visit our official website taxeye

Frequently Asked Questions (FAQs)