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Section 80GGC of the Income Tax Act: Boost Your Tax Savings Through Political Party Donations
Section 80GGC of the Income Tax Act offers unique opportunities for taxpayers to make contributions to the democratic process of the country while also availing tax deductions. This section is specifically tailored for individuals who wish to support political parties through donations. If you are looking to make a political contribution and want to know how it will affect your tax liabilities, this article will walk you through the basics of Section 80GGC of the Income Tax Act, such as eligibility, deduction limits, and how to claim the deduction.
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What is Section 80GGC of the Income Tax Act?
​Section 80GGC of the Income Tax Act provides an opportunity for the taxpayers to claim deductions on donations made to political parties or electoral trusts. It is designed to encourage political contributions by offering tax benefits to donors. Whether you are a salaried individual or someone with other sources of income, getting an understanding of Section 80GGC of the Income Tax Act can be of great help.
Eligible Deductions under Section 80GGC of the Income Tax Act
Here are the key points for eligible donations under Section 80GGC of the Income Tax Act:
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Donations to Political Parties: Any amount donated to a political party registered under Section 29A of the Representation of the People Act, 1951, is eligible for deduction under Section 80GGC of the Income Tax Act. This includes National and Regional parties which are recognized by the Election Commission of India.
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Donations to Electoral Trusts: Contributions made to the Electoral Trusts and approved by the Central Board of Direct Taxes (CBDT) are also eligible for deduction under Section 80GGC of the Income Tax Act. These trusts are formed for the maintaining transparency in funding of registered political parties.
Key Features of Section 80GGC of the Income Tax Act
​Following are the features of Section 80GGC of the Income Tax Act:
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Individuals can avail deduction under Section 80GGC of the Income Tax Act towards the donations made to political parties or electoral trusts.
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The deduction can be claimed only if donations are made by any mode other than cash.
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There is no maximum limit for availing deduction under Section 80GGC of the Income Tax Act.
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A registered political party under Section 29A of the Representation of the People Act, 1951, or a CBDT-approved electoral trust can accept donations.
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Section 80GGC of the Income Tax Act prohibits deductions for donations made directly to politicians or political parties which the Election Commission of India does not recognize.
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A valid receipt is essential for claiming deduction under Section 80GGC of the Income Tax Act.
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Since cash donations are not allowed, it promotes transparency towards the contributions made in the political funding.
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Section 80GGC of the Income Tax Act encourages political participation and support by providing tax benefits for contributions made towards the democratic process.
Conditions for Eligibility
Following conditions must be met for claiming deduction under Section 80GGC of the Income Tax Act:
Mode of payment:
Donations made via cheque, draft, or electronic transfer are only eligible for claiming deduction under Section 80GGC of the Income Tax Act. Cash donations are explicitly disallowed to promote transparency and traceability of the donations.
Documentation:
It is important to obtain a valid receipt for the donation made. The receipt should include the details such as: name of the political party or electoral trust, the amount donated, and the PAN or GSTIN of the party or trust.
No Upper Limit:
There is no upper limit on the amount that can be claimed as a deduction under Section 80GGC of the Income Tax Act. The entire amount donated can be claimed as a deduction provided other conditions are met.
Individual Donors:
Only individuals taxpayers are eligible to claim deduction under Section 80GGC of the Income Tax Act. Companies and other entities are eligible to claim similar deduction under Section 80GGB.
Ineligible Deductions under Section 80GGC of the Income Tax Act
Following types of deductions are considered as ineligible under Section 80GGC of the Income Tax Act:
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Donations made in Cash: Contributions made in cash do not qualify for deduction under Section 80GGC of the Income Tax Act.
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Personal Contributions made to Politicians: Direct donations made to individual politicians or for their personal use do not qualify for deduction under Section 80GGC of the Income Tax Act.
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Non-Recognized Parties: Contributions made to political parties that are not recognized by the Election Commission of India are not eligible for deduction under Section 80GGC of the Income Tax Act.
How to Claim Deduction under Section 80GGC of the Income Tax Act?
Following is the process to claim deduction under Section 80GGC of the Income Tax Act:
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Valid Donation Receipt: After making donation to the political parties or electoral trust, a valid donation receipt must be obtained which should include all the required information.
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Mode of Payment: The donation should be made in any mode other than cash. Cheque, draft, or any other form of digital payment methods can be used.
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Filing Income Tax Return (ITR): While filing the ITR, the amount of donation should be declared under Section 80GGC of the Income Tax Act as a deduction.
​Frequently Asked Questions
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What is Section 80GGC of the Income Tax Act?
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Section 80GGC of the Income Tax Act allows deduction to the individuals towards the contributions made to the political parties or electoral trusts. This section encourages financial support to the political entities while also providing tax deductions to the contributors.
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Who can claim deduction under Section 80GGC of the Income Tax Act?
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Deductions under Section 80GGC of the Income Tax Act can be claimed by individuals only. Local authorities, artificial juridical persons, either partly or fully funded by the government cannot claim this deduction.
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Are there any restrictions on the mode of payment for claiming deduction under Section 80GGC of the Income Tax Act?
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Yes. To claim a deduction under Section 80GGC of the Income Tax Act, the contributions should be made in any mode other than cash. Contributions can be made by cheque, draft, and other electronic means, to ensure easy traceability of the transaction.
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What is the maximum limit of deduction under Section 80GGC of the Income Tax Act?
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​There is no limit of deduction under Section 80GGC of the Income Tax Act. The entire amount donated to a political party or electoral trust can be claimed as a deduction.
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Who are the eligible parties to receive donations as per Section 80GGC of the Income Tax Act?
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The political parties registered under Section 29A of the Representation of the People Act, 1951, and electoral trusts approved by the Election Commission of India, are eligible to receive donations.
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Can a deduction under Section 80GGC of the Income Tax Act be claimed by a Non-Resident Indian?
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Yes. NRIs are also eligible for claiming deduction under Section 80GGC of the Income Tax Act provided all the conditions mentioned in the section are complied with.
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Can a deduction under Section 80GGC of the Income Tax Act be claimed if made in kind, such as office supplies or services?
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No. Deductions under Section 80GGC of the Income Tax Act are permitted only if made in monetary form and not otherwise.
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Can a deduction under Section 80GGC of the Income Tax Act be claimed if the contribution is made to the regional office of a political party?
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As long as the political party is registered under the appropriate laws, donations made to any branch or unit of such an eligible political party will qualify for deduction under Section 80GGC of the Income Tax Act.
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What is the specific type of form or document required to claim a deduction under Section 80GGC of the Income Tax Act?
A
As such there is no specific form type or document required for claiming a deduction under Section 80GGC of the Income Tax Act. However, a receipt should be obtained which should mention the details like name and address of the political party, amount contributed, and the mode of payment.
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How to declare the deduction under Section 80GGC in the ITR?
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The deduction under Section 80GGC of the Income Tax Act can be declared under Chapter VI-A deductions while filing the ITR. The proof of such donation should be available.
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What is the consequence if a political party or electoral trust does not utilize the contribution properly?
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If the political party or electoral trust does not utilize the contribution properly, there will be no impact on the taxpayer’s eligibility for claiming deduction under Section 80GGC of the Income Tax Act.
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Are there any compliance or reporting requirements after claiming deduction under Section 80GGC of the Income Tax Act?
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As such there is no requirement after claiming deduction under Section 80GGC of the Income Tax Act. However, it is important to preserve the receipt of the donation issued by the political party or electoral trust for any future reference or inquiry by the Income Tax Department.
Prachi Jain
Chartered Accountant
Prachi Jain is a Chartered Accountant with a passion for simplifying finance and tax-related matters through her insightful and informative blogs. With a background in finance and a deep understanding of tax regulations, Prachi has established herself as a trusted source of financial wisdom. Prachi is committed to empowering her readers with the knowledge they need to make informed financial decisions. Her expertise and dedication shine through in every blog post, helping her audience navigate the intricacies of finance and taxes with confidence. Follow Prachi Jain's blog for practical insights and guidance on managing your finances effectively.
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