Section 80GGC: Tax Benefits on Donations to Political Parties & Trusts

Section 80GGC allows tax deductions for political party donations, offering additional savings alongside exemptions like medical and house rent allowances. This section was introduced to enhance transparency in electoral funding and eliminate corruption from the process.

It also incentivises individuals to financially support the political system by offering tax deductions for such donations, thereby reducing their tax liability.

Eligible Investments under Section 80GGC

For deductions under Section 80GGC, a political party is referred to as an entity registered under Section 29A of the Representation of the People Act, 1951.

Here are the eligibility criteria you need to fulfill to enjoy tax deductions on political party donations under Section 80GGC:

Any individual, HUF, firm, Association of Persons (AOP), and Body of Individuals (BOI)
Any artificial juridical person not funded by the government (wholly or partly)
Contributions must be made using a demand draft, cheque, debit or credit card, or wire transfer

Deductions and Limits of Section 80GGC

The Section 80GGC limit for deductions is 100% of the donations made to a registered political party. However, this section falls under Chapter VI-A, which means that you can claim this deduction, provided it does not exceed your total taxable income.

Here are a few more factors you need to consider before opting for Section 80GGC deductions:

Contributions or donations in kind or cash are not eligible for deduction
Insufficient documents during tax filing can lead to denial of deduction claim u/s 80GGC

Documents Required for Section 80GGC

Here are the documents you need to submit to avail of deductions available under Section 80GGC:

Income Tax Return (ITR) form to be submitted before the specified date
Proof of donation in the form of a receipt

The receipt must contain the following details:

PAN of the political party
Tax Deduction Account Number (TAN) of the political party
Donor name
Address of the political party
Fund registration number
Payment method

Procedures to Avail of Tax Deductions u/s 80GGC

All you have to do is file the ITR and provide the contribution made under Section 80GGC. However, if you are a salaried individual, you need to provide the details of the donation to your employer.

This will allow them to include the information when submitting Form 16. You can claim a deduction only when your employer certifies that a deduction took place from your bank account.

Moreover, the party should acknowledge your contribution if you wish to avail of this tax deduction. For this, you will need to provide the political party’s PAN and TAN.

Which donations are not eligible for deductions under Section 80GGC?

Any donations made in kind or through gifts and cash are not eligible for deductions u/s 80GGC.

Can I claim tax deductions u/s 80GGC if I make donations to multiple political parties?

Yes, you can claim tax deduction under this section even if you make donations to multiple political parties.

What is an electoral trust?

An electoral trust is a firm or a non-profit entity created under Section 8 for receiving voluntary contributions to distribute to the political parties.

Can corporations claim a deduction for political contributions under Section 80GGC?

No. Corporations, local authorities, or artificial juridical persons funded by the government (wholly or partly) can’t claim tax deductions on political donations u/s 80GGC. However, corporations can get similar benefits u/s 80GGB of the Income Tax Act of 1961.

What is the limit under section 80GGC?

Under Section 80GGC, the maximum limit for deduction is 100% of donations to a registered political party. It falls under Chapter VI-A, permitting the deduction as long as it doesn't surpass your total taxable income.

What is 100% deduction under 80GGC?

Section 80GGC of the Income Tax Act permits individuals to claim a tax deduction for donations or contributions made to any political party or electoral trust. The deduction is applicable for donations made in the preceding year, with a limit set at 100% of the donated amount.

How do I show 80GGC in income tax?

Taxpayers seeking deductions under Section 80GGC can claim them by reporting their contributions in the designated Section 80GGC header within the Income Tax Return form.