Section 80GGC of the Income Tax Act deals with any contributions made by an individual to a political party. Under Section 80GGC Individuals can avail of tax deductions that range from 50% - 100% of the contribution amount. As per the Income Tax Act, an individual can donate as much as 10% of his or her gross earning to any political organisation of his or her choice.
Individuals who avail of deductions under Section 80GGC have the advantage of saving on a sizeable portion of tax every financial year in tandem with other deductions such as House Rent Allowance, Medical Allowance and much more.
Features of Section 80GGC:
The main features of Section 80GGC are:
- Deductions under this section can be availed only by individuals ie: non-corporate assessees or taxpayers
- This section came into existence via the Finance Act 2009, with the objective of introducing transparency into electoral funding as well as making it corruption free
- Deductions under this section fall under Chapter VIA deductions. This means that the total amount of deduction allowed cannot be more than the total taxable income of the individual
- Deductions under this section are not applicable on tax deducted at source on an individual’s salary. Only employees who draw a salary with no other income from other businesses can avail deductions under this section while filing their returns.
Eligibility Criteria under Section 80GGC:
Taxpayers looking to avail of deductions under Section 80GGC are required to fulfil the following eligibility criteria:
- The taxpayer or assessee can be any individual or person
- The taxpayer or assessee cannot be a local authority
- The taxpayer or assessee cannot be an Artificial Judicial Person, who receives funding from the government either partially or completely
- Companies cannot avail of deductions under this Section
Entities to which Donations or Contributions can be made under Section 80GGC:
As per Section 80GGC, an individual can make a donation or contribution only to the following entities:
- An electoral trust
- Any political party that has been registered under Section 29A of the Representation of the People Act, 1951
Amount of Deduction that can be claimed under Section 80GGC:
Individuals who make donations to any political party can claim deductions of up to 100 per cent of their contribution to said party. By doing so, the total taxable income of the individual is lowered in proportion to the contribution her or she has donated to the concerned party. In other words, the entire amount of a taxpayer or assessee contribution to a legitimate political party will be allowed as deduction from his or her taxable income.
Procedure to avail of Deductions under Section 80GGC:
- Taxpayers or assessees looking to claim deductions under Section 80GGC can do so while filing their tax returns simply by including the amount of their contribution to a political party in the space provided for Section 80GGC in the Income Tax Return form. This Section appears under Chapter VI-A deductions in the Income Tax Return form.
- Donations made to political parties should be made solely through legitimate banking portals such as online internet banking, cheques, debit cards, credit cards, demand drafts etc in order to claim deductions under this section.
Exceptions under Section 80GGC:
There are certain exceptions under which contributions made to political parties will not be eligible for deductions. These exceptions are as follows:
- Any donations or contributions made in monetary form or cash are not eligible for deduction under Section 80GGC. This exception to the rule was brought into effect on the 1st of April 2014 and applies to every financial year commencing from the year 2014-2015 and beyond.
- Any donations or contributions to any political party that are made in kind are also not eligible for deduction under Section 80GGC. This includes gifts or favours of any kind.