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Regular post-retirement income | Additional tax benefit on investments up to ₹50,000 u/s 80CCD (1B) - EEE Category | Regulated by PFRDA (Pension fund regulator under Ministry of Finance, Govt. of India)

Indian businesses may deduct tax payments made to registered political parties or an electoral trust under Section 80GGB of the Income Tax Act of 1961. Any amount donated to a political party may be claimed as tax deductible because Section 80GGB has no set limit

Deductions from taxes under Section 80GGB

Any Indian enterprise or firm that makes a donation to an electoral trust or a political party registered in India is eligible to claim a deduction for the donation amount under Section 80 GGB of the IT Act, 1961. The Representation of the People Act of 1951's Section 29A stipulates that the political party receiving the funding must be registered. A nonprofit organisation created in line with Section 8 of the 2013 Companies Act is an electoral trust. Other companies may freely contribute funds to an electoral trust, that may then distribute those funds to recognised political parties under the law.

Eligibility Requirements for Section 80GGB Tax Benefits

All Indian businesses registered under the Companies Act of 2013 are eligible to deduct donations they make to qualified political parties or electoral trusts under Section 80GGB, with the following exceptions: 

  • A government enterprise

  • A business that has only been operating for three years.

  • Donations made in cash are not eligible for tax benefits. Demand draft, cheques, and electronic payments are the only additional donation methods that are acceptable for a tax deduction under Section 80GGB.

Note: According to section 29A of the Representation of People Act (RPA), 1951, contributions must be provided to a recognised political party. Tax deductions under section 80GGC are also available for contributions given to the electoral trust.

Deduction Limit Under Section 80GGB of the IT Act

  • The amount that can be deducted from taxes has no upper limit. A qualifying firm may deduct any sum given to a registered political party (under Section 29A of the RPA, 1951) from its taxes.

  • Companies are entirely tax-deductible for donations made under section 80GGB of the Income Tax Act.

Contributions under Section 80GGB

Contributions u/s 80GGB of the IT Act include- 

  • A donation, payment, or subscription made by a business to a person engaged in any activity that has the potential to have an impact on or otherwise affects public support for a political party or other political objective.

  • The amount spent by a business on any advertisements in any publications—whether they be brochures, tracts, mementos, or pamphlets—that are produced on behalf of political parties, whether directly or indirectly. In the form of a donation made for political reasons, the publication may not be explicitly connected to a political party but yet work to that party's favour.

Key Information Regarding Indian Political Parties' Donations

If your enterprise wants to donate to an Indian political party, there are some things you need to understand. The major points from the IT Act of 1961 that you should bear in mind are as follows- 

  • Any organisation that is registered in India is free to donate to whichever political party it chooses.

  • A company is free to support as many political parties as it wants with donations. Any contributions that are made under this section will be eligible for the income tax deduction.

  • The party that is receiving the funding must be legitimately registered in accordance with the Representation of the People Act of 1951.

  • An electoral trust that has been duly registered with and recognised by the appropriate authorities may receive the gift amount.

  • Cash payments are not permitted under Section 80GGB in any occasion. Cheques, demand draft, electronic transfers, or pay orders to the party's bank account are the only forms of payment that are accepted. This is done to maintain financial accountability and promote political finance openness.

  • The firm is permitted to deduct all contributions given to political parties in full under Section 80GGB. As a result, you have the freedom to give to the political parties of your choice and write those gifts off from your taxes. You are required to follow all guidelines set forth in the Income Tax Act of 1961 and keep thorough records of all payments made. If you don't use the recommended technique, the authorities may deny your request for a deduction.

Difference Between Section 80GGB and Section 80GGC

The assessee is the primary distinction between the two categories. The assessee in Section 80GGB is a single taxpayer. On the other hand, the assessee in Section 80GGB is a business or enterprise.

With respect to the supporting evidence and representation needed in the financial accounts, both sections are comparable.

The taxpayer must submit the receipt obtained by the political party for deductions under both sections of the Income Tax Act of 1961.

Frequently Asked Questions

✔️Can a corporation contribute or donate to several political parties?

Yes, a corporation or an enterprise can make donations or contributions to several political parties. It depends on the company to decide how many companies they wish to contribute or donate to. 

✔️Is foreign funding allowed under Section 80GGB of the Income Tax Act, 1961?

No, foreign funding is not allowed under Section 80GGB of the IT Act, 1961.

✔️Do I need to submit a proof to claim deductions under Section 80GGB?

Yes, you must submit a proof of your contributions or donations made towards a political party or an electoral trust in order to claim a deduction under Section 80GGB of the Income Tax Act, 1961.

✔️What is the deduction limit u/s Section 80GGB of the IT Act?

There is no limit on the deductions under Section 80GGB. The entire contribution made as per the eligibility criteria can be claimed under this section.

✔️What percentage of the annual net profit can a corporation contribute to a political party?

According to section 80GGB of the Income Tax Act, 1961, a company can donate or contribute a maximum of 7.5% of its annual net profit.