Filing for AY 2024-25 is coming soon
Keep calm and sign up for early access to our super filing platform

Section 80GGC of the Income Tax Act

The Income Tax Act under Section 80GGC allows individuals to claim tax deductions for donations or contributions to political parties. By using this deduction, people can support the political system while also reducing their taxes. This article discusses the details of Section 80GGC including who is eligible for the deductions, types of donations that qualify for the deductions, limits on the amount of deduction and steps in obtaining these tax benefits.

What is Section 80GGC?

Section 80GGC is a clause in the Income Tax Act that offers tax deductions to taxpayers who give donations to political parties and electoral trusts. The aim of this section, which is for transparency in election funding in India and as a deterrent to corruption, is seen in this quote. Through donations to the political system, the section suggests Indian individuals, Hindu Undivided Families (HUFs), firms and other eligible entities can support them financially and be entitled to claim deductions from their taxable income.

Who can avail 80GGC deduction?

The Section 80GGC deduction is applicable to individuals, HUFs, firms, and artificial juridical persons in case they have not partially or wholly been financed by the Government. Nevertheless, businesses, local authorities as well as other artificial juridical persons funded by the government are not eligible for this deduction.

Which contributions and donations can be deducted under Section 80GGC?

Section 80GGC allows taxpayers to claim deductions on donations or contributions made to political parties registered under section 29A of the Representation of the People Act, 1951 or to electoral trusts. It should be noted that contributions made to any other political party not registered under section 29A will not qualify for deduction under Section 80GGC.

Section 80GGC deduction limits

Although there is no specific limit on the amount of deduction that can be claimed under Section 80GGC, there are some restrictions imposed on it. For instance, the total aggregate of deductions claimed under Chapter VIA which include Section 80GGC cannot exceed the individual’s gross total income. Simply put, it means that this deduction is limited to the individual’s total taxable income.

Eligible modes of contribution and documents required

Section 80GGC of the Indian Income Tax Act, 1961 allows for deductions on donations made through bona fide banking channels like debit cards, credit cards, cheques, Demand Drafts and Internet banking. Contributions or donations made in cash are not recognized as tax deductible under this section. Kindly note that the following documents will be required while claiming deduction under Section 80GGC:

 

  1. Receipt of donation: The receipt of a donation should contain particulars such as PAN, TAN, address of political party, fund registration number, mode of payment and name of donor.
  2. Income tax return form: This is required to be filled out within stipulated time and submitted for further processing.

Exceptions to Section 80GGC deduction

Section 80GGC has a few exceptions. No tax benefit is available for cash donations to political parties that are made under the influence of this section by an individual or a firm. Contributions in the form of gifts or other non-cash possessions are also not qualified for deductions under Section 80GGC.

Difference between Section 80GGB and Section 80GGC

It is essential to distinguish between section 80GGB and section 80GGC. Section 80GGC permits a deduction for donations to political parties by individuals while section 80GGB allows Indian companies to claim deductions for contributions paid to political parties. The eligibility criteria and provisions vary between these two sections.

Ineligibility to claim a tax deduction under Section 80GGC

There are some cases where Section 80GGC disallows individuals’ ability to claim tax deductions. First, if any cash payment is used to make contributions towards political parties, it does not become deductible under this provision. In order to qualify for tax deductions one can only donate money through demand drafts, cheques or online modes. Finally, any other form of gift or donation that does not incorporate money cannot be used as a basis for claiming income tax rebate in accordance with section 80GGC.

Procedures to avail tax deductions under Section 80GGC

The process of availing tax deductions under Section 80GGC is very simple and convenient. Individuals need to enter the contribution made under Section 80GGC in the income tax return form. Salaried individuals must therefore provide the relevant details of the donation to their employers for it to be included on Form 16. Therefore, it is essential that the political party confirms receipt of donation and when claiming for deduction, indicate TAN and PAN of the political party. Further, it is imperative that there should be a certificate from the employer showing that the deduction has been made from an individual’s account to claim this deduction.

Conclusion

Section 80GGC of the Income Tax Act plays a key role in promoting transparency in election funding and encouraging citizen participation in politics by means of financial contributions. Taxpayers who donate to any political party or electoral trust can therefore claim tax deductions while participating in politics as they reduce their taxes. However, to enjoy these tax advantages under Section 80GGC, one must comply with Income Tax Act guidelines and maintain adequate documentation.

FAQ on Section 80GGC

Q1: What amount of deduction is available under Section 80GGC?

A1: Under Section 80GGC, 100% of the amount donated or contributed to political parties or electoral trusts can be claimed as a deduction. However, the deduction cannot exceed the individual's total taxable income. It is important to note that donations or contributions made in cash are not eligible for this deduction.

Q2: Can I claim deductions if I donated to multiple political parties?

A2: Yes, you can contribute to more than one political party without setting any cap on the number of such organizations. Therefore, if you make donations to several political parties you will be allowed to deduct up to hundred percent.

Q3: Can I claim deductions if I donate to any political party of my choice?

A3: You can claim a deduction only if you contribute to a political party registered with the Election Commission and considered an election body. Donations made to any other political party will not qualify for a deduction under Section 80GGC.

Q4: What is the meaning of an electoral trust under Section 80GGC?

A4: An electoral trust is a Section 8 company or a non-profit entity created in India to receive voluntary contributions from individuals and distribute them to respective political parties. The objective of an electoral trust is to distribute the contributions received to political parties.

Q5: Can government employees claim deductions under Section 80GGC?

A5: Yes, government employees can claim deductions for contributions or donations made to political parties under Section 80GGC. However, they should not be directly or indirectly associated with any political party.

Q6: Can companies make political contributions?

A6: Yes, companies and corporates can make political contributions under Section 80GGB of the Income Tax Act, 1961. However, they cannot claim tax benefits on political contributions under Section 80GGC.

author

The Tax Heaven

Mr.Vishwas Agarwal✍📊, a seasoned Chartered Accountant 📈💼 and the co-founder & CEO of THE TAX HEAVEN, brings 10 years of expertise in financial management and taxation. Specializing in ITR filing 📑🗃, GST returns 📈💼, and income tax advisory. He offers astute financial guidance and compliance solutions to individuals and businesses alike. Their passion for simplifying complex financial concepts into actionable insights empowers readers with valuable knowledge for informed decision-making. Through insightful blog content, he aims to demystify financial complexities, offering practical advice and tips to navigate the intricate world of finance and taxation.

Frequently Asked Questions

Under Section 80GGC, 100% of the amount donated or contributed to political parties or electoral trusts can be claimed as a deduction. However, the deduction cannot exceed the individual's total taxable income. It is important to note that donations or contributions made in cash are not eligible for this deduction.

Yes, you can contribute to more than one political party without setting any cap on the number of such organizations. Therefore, if you make donations to several political parties you will be allowed to deduct up to hundred percent.

You can claim a deduction only if you contribute to a political party registered with the Election Commission and considered an election body. Donations made to any other political party will not qualify for a deduction under Section 80GGC.

An electoral trust is a Section 8 company or a non-profit entity created in India to receive voluntary contributions from individuals and distribute them to respective political parties. The objective of an electoral trust is to distribute the contributions received to political parties.

Yes, government employees can claim deductions for contributions or donations made to political parties under Section 80GGC. However, they should not be directly or indirectly associated with any political party.

Yes, companies and corporations can make political contributions under Section 80GGB of the Income Tax Act, 1961. However, they cannot claim tax benefits on political contributions under Section 80GGC.

Subscribe to the exclusive updates!