Section 80GGB of Income Tax Act

ON THIS PAGE: What is Section 80GGB? | Rules and Conditions to Claim Section 80GGB Deductions | Key Points Related to Contributions Made to Political Parties in India | Exclusions Under Section 80GGB | FAQs about Section 80GGB

What is Section 80GGB? 

 Section 80GGB of the Income Tax Act, 1961 has provisions for tax deductions specifically for Indian companies or enterprises that make contributions or donations towards a registered political party or an electoral trust. There is no hard limit on the tax deduction towards the donation but a company can only donate up to 7.5% of its annual net profit.

This section of the Income Tax Act was introduced to encourage companies and corporations to invest and contribute more towards political parties and electoral trusts. Only donations towards political parties that have been registered under Section 29A of the Representation of the People Act, 1951 are eligible for an 80GGB deduction. An electoral trust is a non-profit organisation that receives donations from companies and distributes them to all registered political parties.

Rules and Conditions to Claim Section 80GGB Deductions

The following is the eligibility criteria to claim tax deduction under Section 80GGB of the Income Tax Act:

1. No cash contributions are allowed under Section 80GGB. Any contributions made in cash will not be eligible for a tax deduction. Other methods of payment such as cheques, online transfers, etc, must be used.

2. There is no maximum limit to the amount of tax deduction or the contribution made to political parties. However, a company can only donate or contribute up to 7.5% of its net annual profit towards a political party or electoral trust.

3. If the contributions are made towards an electoral bond, there is no need to disclose the political party to which the donation has been made. Only the amount of money paid as donations must be disclosed.

4. An advertisement from a private company or corporation on a media platform (newspaper, magazines, social media, etc) owned by a political party will be considered for tax deduction under Section 80GGB.

Contributions Made to Political Parties in India: Key Pointers

Any company looking to make a donation towards a political party or electoral trust must be aware of the following points:

1. Any company or corporation registered in India can make donations to any political party.

2. Any company can make any number of donations towards multiple parties. All the donations will be eligible for tax deduction under Section 80GGB.

3. Donations must be made to political parties registered under Section 29A of the Representation of the People Act, 1951 to be eligible for a tax deduction.

4. Any company can claim a 100% tax deduction on the amount they have donated towards a political party and there is no upper limit. However, the company making the donation must keep all records intact and follow all the regulations laid out in the Income Tax Act, 1961 for donations towards political parties.

Exclusions Under Section 80GGB

There are also some exclusions to donations made under Section 80GGB of the Income Tax Act, 1961.They are:

1. A public sector enterprise is not eligible for an 80GGB tax deduction.

2. A company that has been in operation for 3 years or less will not be eligible for income tax deduction under Section 80GGB.