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written by | February 28, 2022

Know all about Deductions under Section 80 GGB

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Supporting a political party provides a tax benefit in addition to displaying solidarity or sharing ideologies with the party. Campaign contributions are offered to support the costs of the political party's expenditures, which are mostly for electoral campaigns. Any Indian firm or enterprise that contributes to a political party or an electoral trust registered in India can claim a deduction for the amount donated under Section 80GGB of the Income Tax Act, 1961. A non-profit corporation established under Section 8 of the Companies Act of 2013 is known as an electoral trust. Other firms can make voluntary donations to an electoral trust, which can subsequently be redistributed to legally registered political parties.

Did you know?

Even if you are not receiving a House Rent allowance but are paying rent, you can still get a tax deduction on the rent paid under Section 80GG of the Income Tax Act, 1961.

Main features of Section 80GGB

  • The primary goal of Section 80 GGB is to increase accountability during election expenditures and thereby aim at eliminating corruption. Furthermore, it motivates taxpayers to make greater voluntary donations to political parties.
  • Only certain assessees are eligible for tax deductions.
  • The deduction is categorised under Chapter VI-A deduction, which means that the overall sum that can be deducted as tax exemption cannot exceed the total taxable income.

Eligibility criteria for deductions under section 80GGB

  • With the exception of local governments and fictitious legal entities that are entirely or partially sponsored by the Govt authorities, anybody can claim Section 80GGB
  • A citizen, a Hindu Undivided Family (HUF), a corporation, an AOP or BOI, and an Autonomous Juristic Individual are all eligible to make a campaign contribution under Section 80GGB. The government must not have financed the last member on the list for the same.
  • Contributions to several political parties, instead of just one, can be used to obtain tax deductions.
  • While the whole contribution is acceptable for a deduction, it is important to note that the form of contribution should never be in cash.

Also read: What Are The Donations Eligible Under Section 80G and 80GGA?

Basic rules for deductions under Section 80GGB

To get an understanding of tax deductions for contributions to political parties made by firms or enterprises, the first step is to learn the fundamental regulations. There are specific factors to keep in mind while donating to political parties as a firm or an entity, according to the Indian Income Tax Act, 1961.

 1. Any Indian corporation can make donations to political party it chooses. 

2. Donors have the option of donating to numerous organisations.

3. Except for members of the local government or artificial juridical persons that are otherwise partially or entirely sponsored by the government, anybody can accept the contribution.

4. No cash transactions are permitted; only cheque, bank draft, direct transfers, and money orders drawn on the individual political parties' accounts are permitted. This is done to maintain track of how much money has been donated to the political party.

5. The receiving political party must be registered under Section 29A of the Representation of the People Act, 1951, or subscribe with an electoral trust.

6. There are no limits on the amount of money that corporations can donate to political parties.

7. The corporation obtains a 100% deduction from the assessee's income based on the contribution amount paid to political parties under Section 80GGB.

8. The Income Tax authorities will summarily reject your claim if you do not follow the stated standards for the 80GGB deduction.

Deduction under Section 80GGB of the Income Tax Act

 Under Section 80GGB of the Indian Income Tax Act, 1961, a business or a corporation may give a contribution to a political party or parties and claim the same as a tax deduction. This section consists of the technicalities and regulations governing the contributions made by Indian corporations to any political party or parties, as well as election trusts. As long as the political party is registered under section 29A of the People Act, 1951, these donations can be made in any documented form other than cash. 

 Any costs incurred by the political party, such as marketing, media advertising, broadcast tunes, and, most recently, social networks, are considered contributions under this provision. As per this rule, any Indian corporation that advertises in a publication controlled by a political organisation is tax-free under section 80GGB. There are no limits on how much money can be contributed to a corporation that produces documentation of the spending. 

Maximum Tax Deduction Limit under Section 80GGB

According to the Income Tax Act, there is no limit set for seeking a tax deduction under Section 80GGB. A standard deduction is available for the entire amount contributed to a political party. However, a corporation or business can only give up to 7.5% of its net income to a political party in the previous three years and seek benefits under this clause.

Requirement for a company to make a single contribution to a political party

Every business enterprise has the freedom to decide on the amount it wishes to donate and the political party or parties. Once a contribution is made, businesses must record it in their financial filings, including the title of the parties to which the money was given. If the corporation does not want to reveal the identity of the political party, it might give the same using electoral bonds.

Also read: All About Section 80GG Denoting Claim Deduction for Rent Paid

Key Pointers on Political Party Contributions in India

 Any corporation considering donating to a political party or electoral trust should keep the following in mind: 

1. Any Indian-registered firm or corporation can donate to any political party.

2. Any corporation can donate to various parties in any number of different ways. Under Section 80GGB,   all donations will be eligible for a tax refund.

3. To be eligible to claim benefit, contributions must be paid to political groups that are registered under Section 29A of the Representation of the People Act, 1951.

4. There is no maximum cap on the amount that a firm can claim as a tax exemption for money contributed to a political party. The firm making the contribution, on the other hand, must retain all documentation and fulfil all of the rules provided forth in the Income Tax Act of 1961 for political donations.

Exclusions Under Section 80GGB

Contributions made under Section 80GGB of the Tax Act of 1961 are also subject to specific exceptions. They are as follows:

  •  An 80GGB standard deduction is not available to a public corporation. 
  •  A business that has been in existence for less than three years is not qualified for the Section 80GGB deduction. 
  • Tax deductions are not available for cash or kind donations or contributions. From the financial year 2013-14 onwards, this adjustment to the Section went into force.
  • It is not acceptable to make a monetary or in-kind contribution to a political party. Other options for making a bank payment include a chequebook, promissory note, wire transfer, bank card, or online banking.
  • If the total contribution does not exceed the qualifying assessee's taxable income, the full donation is tax-deductible.

Procedure to avail of the deductions under 80GGB

The method for claiming the tax deduction under Section 80GGB is simple and straightforward. The consumer can submit their tax returns by adding the amount of funding in the fields/area provided in the Income Tax Return form under Section 80GGB. The provision is included in Chapter VI-A of the Income Tax Return Form. Contributions can be made in any financial method other than cash, including internet banking, cheques, debit cards, credit cards, bank drafts, and so on.

The information of the contributions should be sent to the company in order for them to be included in Form-16. Or else, the information must be included in the designated column when filing tax returns. The political party must issue a receipt that includes the party's name and address, the amount contributed, as well as the party's PAN and TAN. This contribution is deducted from the employee's pay, and the contribution receipt is issued in the employer's name. If the employee gets this document from the company confirming that the donation was paid from the employee's pay account, they can claim a deduction.

Difference between Section 80GGC and 80GGB

The acts of Sections 80GGC and 80GGB in implementing tax deduction benefits are fairly similar. The main distinction is in identifying the different categories of contributors. 

SECTION 80GGC

SECTION 80GGB

The advantages are only accessible to certain taxpayers.

Benefits apply to corporations. Any Indian corporation that contributes any amount to a political party or an electoral trust registered in India can claim a tax deduction for the amount contributed under Section 80GGB of the Income Tax Act 1961.

However, other provisions of the taxation system, such as Section 80G, provide for deductions for charitable contributions and the like. Any Indian corporation that contributes any amount to a political party or an electoral trust registered in India can claim a tax deduction from the amount contributed under Section 80GGB of the Income Tax Act 1961.

Also read: Deductions under Section 80: Section 80C, 80CCC, 80CCD & 80D Income Tax

To qualify for a tax deduction under 80 GGB, the following documentation must be presented.

  • The invoice issued by a political party or electoral trust is evidence of a contribution amount. It must include the donor's identity, address, PAN, TAN, party/trust registration number, method of payment, and the sum contributed in words and figures.
  • It is essential to complete and submit the Income Tax Return form. The information listed above will be required.

Conclusion

This article gives clarity on all tax deductions under Section 80GGB  of the Income Tax Act. All Donations to a political party should be made after a thorough analysis to ensure that the funds are spent in the interests of the citizens. You have to maintain meticulous records in order to claim a tax deduction after making a contribution. To take advantage of the tax deductions and advantages, all of the restrictions outlined in the Income Tax Act must be followed to the letter; otherwise, the request may be denied. Contributions from Indian corporations and other individuals are permitted, though not in cash. This donation is deductible when calculating the company's or individual's net value. 

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FAQs

Q: What documentation is necessary to claim a deduction under Section 80GGB of the Internal Revenue Code?

Ans:

To qualify for a tax deduction, the following documentation must be presented.

  • The invoice issued by a political group or election trust is evidence of a contribution amount. It should include the company’s identity, address, PAN/TIN number, trust/party registration number, method of contribution, and the amount contributed in words and figures.
  • It is necessary to complete and submit the Income Tax Return form. The information shown above will be required.

Q: What is the basic point of Section 80GGB?

Ans:

Businesses can claim tax deductions for political contributions and electoral trusts under section 80GGB of the Income Tax Act. The contribution must be provided to a political party that is recognized under Section 29A of the Representation of the People Act, 1951, in order to become eligible for a tax exemption.

Q: What is the deduction limit under Section 80GGB?

Ans:

Under Section 80GGB, there is no cap on the amount that may be deducted, and corporations can claim 100% of their contributions as tax deductions. Corporations, on the other hand, can only donate up to 7.5% of their yearly net earnings.

Q: Is it necessary for me to produce details of my donations to avail for deductions under Section 80GGB?

Ans:

You must present a certification from the political group to which you contributed. The certificate should state the exact amount of your contribution.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.