Political donations are a way for individuals to express their support for a certain party or candidate. Such donations are an important source of funding to function their operations and the government also allows deduction on such donations. Section 80GGC of the Income Tax Act allows taxpayers to avail of tax benefits for their contributions to political parties. Hence, if you meet certain eligibility criteria you can claim an 80GGC deduction while filing the ITR.
Eligibility Criteria for Claiming 80GGC Deduction
The following persons are eligible to claim a deduction under section 80GGC:
- AOP (which is not fully or partially funded by government)
- Artificial Judicial Person (which is not fully or partially funded by the government)
However, the following persons are not eligible to claim a deduction under section 80GGC:
- Local authorities
- Artificial Judicial Person who receives full or partial funding from the government
Eligible entities for the Deduction
To claim the deduction u/s 80GGC, the taxpayer must make a donation or contribution to the below-mentioned entities:
- Political party
- Electoral trust
Note: With respect to sections 80GGB and 80GGC a ‘Political Party’ is defined as a political party registered under section 29A of the Representation of the People Act, 1951.
Section 80GGC Deduction Limits
- The taxpayer can claim the entire (100%) contribution amount made through legitimate banking portals such as Internet banking, Credit/Debit cards, Online payments, etc. as a deduction under this section.
- This deduction falls under Chapter VI A meaning that the total amount of tax deduction must not exceed the complete assessable income of the person.
Exceptions to 80GGC Deduction
- The donation made to political parties or electoral trusts must not be in the form of cash. Hence, if the donations are made in the form of cash then it is not eligible under this section.
- Furthermore, any donation made in the form of gifts or kind cannot be claimed as a deduction under this section.
How to Claim the Deduction?
Eligible persons can claim an 80GGC deduction while filing ITR if all the above-mentioned conditions are fulfilled. The taxpayer can claim the deduction in any of the ITR forms, i.e, ITR 1, ITR 2, ITR 3, and ITR 4 depending upon their income sources.
Supporting Documents Required
As proof of the donation, the political party will issue a receipt. It must contain the name and address of the party, the amount donated, and the PAN and TAN of the party. Further, the mode of payment and donor name should also be mentioned.
Note: Individuals must submit the details of the donations to the employer for inclusion of such information in form 16. If not, then the details must be mentioned in the designated column while submitting tax returns.
Under section 80GGC deduction is allowed only to an assessee, being any person whereas under section 80GGB deductions can be availed by any Indian company.
Yes, one can claim a deduction on donations made to multiple political parties, u/s 80GGC.
There is no restriction on the 80GGC deduction limit. Hence, one can avail a deduction of 100% of the amount contributed, provided that the same is made by any mode other than cash.
No, you need not submit any proof while claiming the deduction at the time of filing the return as you only need to enter the amount of the donation. However, if the AO demands the required proofs, you need to present the same at that time.