The Government of India offers several provisions under various sections of the Income Tax Act, 1961, under which taxpayers can take advantage of tax benefits by contributing to various funds. Users may claim a tax deduction for contributions made to political parties under certain sections, one of which is Section 80GGC. Here are some additional details regarding 80GGC of Income Tax Act deductions that you should be aware of.
See also: Section 80CCD of Income Tax Act
80GGC of Income Tax Act: What is it?
Any contribution made by an individual to an electoral trust or political party during the prior year may be claimed as a tax deduction under Section 80GGS of the Income Tax Act of 1961. Contributions made in cash or by local governments or legal entities are not eligible for tax deductions under Section 80GGC. In addition to claiming a deduction under this section, people can get a tax deduction for things like medical expenses and house rent allowances.
80GGC of Income Tax Act: Features
Section 80GGC’s primary characteristics are:
- Only individuals, i.e., non-corporate assessees or taxpayers, may use the deductions allowed by this section.
- Not applicable to tax withheld from an individual’s paycheck at the source (TDS).
- With the intention of increasing electoral funding transparency and eradicating corruption, this section was added to the Finance Act of 2009.
- The tax withheld from a person’s salary at the source is not subject to the deductions allowed by this section. Only employees who receive a salary and no other income from other businesses are eligible for this section’s deductions when filing their tax returns.
80GGC of Income Tax Act: Eligibility criteria
The following eligibility requirements must be met by taxpayers seeking to claim deductions under Section 80GGC:
- Any person or entity may be a taxpayer or assessee.
- A local authority cannot be a taxpayer or assessor.
- The taxpayer or assesses cannot be an artificial judge who receives full or partial funding from the government.
- Companies are unable to use the deductions provided by this section.
80GGC of Income Tax Act: Documents to be submitted to claim a tax deduction
To claim a tax deduction under Section 80GGC, a receipt for the donation made by the political party must be provided. This receipt includes comprehensive information about the donor, such as name, address, PAN, party registration number, payment amount, payment method, and other details.
80GGC of Income Tax Act: Organisations to which contributions or donations are permitted under Section 80GGC
According to Section 80GGC, a person may only donate to or contribute to the following organisations:
- A trust for elections
- Any political party recognised by the Representation of the People Act of 1951 and registered under Section 29A.
80GGC of Income Tax Act: Deductions Regarding Section 80GGC
A single person is permitted to contribute up to 10% of the gross annual income. 100% of the contribution can be deducted from taxes, which lowers the person’s overall taxable income proportionately to the contribution made.
80GGC of Income Tax Act: Process for using deduction
- Simply by entering the amount of their contribution to a political group in the space designated for Section 80GGC on the Income Tax Return form, taxpayers or assessees seeking to claim deductions under Section 80GGC can do so when filing their tax returns. The Income Tax Return form includes this Section under Chapter VI-A deductions.
- To be eligible for deductions under this section, contributions to political parties must only be made through authorised banking channels, such as online internet banking, checks, debit cards, credit cards, demand draughts, etc.
80GGC of Income Tax Act: Instances exempted under Section 80GGC
Political party donations are not generally eligible for deductions, but there are some exceptions. These exclusions include the following:
- Under this section, a donation that is sent in cash is exempt.
- Tax deductions are not allowed for donations that take the form of gifts or favours.
FAQs
Can an Indian business deduct contributions it made to a political party?
According to Section 80GGC of the Income Tax Act, an Indian company may deduct donations made to a political group or electoral trust.
Can a government agency support political parties with donations?
No, a government agency is not permitted to give money to political parties.
Which form must I submit to request a deduction?
Taxpayers who wish to take advantage of tax deductions under Section 80GGC must submit Form 10BA.