Section 80GGC of Income Tax

Introduction:
The 80GGC deduction under the Indian Income Tax Act allows for tax deduction on contributions made by Indian taxpayers to political parties or electoral trusts. In India, people usually support a political as per their political beliefs, however, this support can also yield the supporter of the parties certain benefits if they decide to extend the support to the party financially. To put it in a simplistic manner, donations made by citizens to the political parties can benefit them while filing their income tax return.

Under Section 80GGC of Income Tax Act, 1961, any contribution to the electoral trust or political party by any individual in the previous year can be claimed for tax deductions. However, there are certain important factors to be kept in mind while availing this benefit under Section 80GGC like having a valid evidence of donation, genuineness of the party or applicable section under which deductions are claimed or the nature of party to whom donations are made. This benefit will be available only when a particular party is registered. These deductions are given apart from other deductions like Medical Allowance or HRA etc.

Who are eligible to avail benefit under section 80GGC:
Under section 80GGC any person other than a

• Company registered under Companies Act
• Local authorities
• Artificial judicial person wholly or partly funded by the government

Therefore, it is clear that any Individual, HUF, AOP, BOI, artificial juridical person not wholly or partly funded by government or a firm are eligible to claim deduction under section 80GGC.

To whom can the donations be made:
You can make donations to any of the following in order to claim benefit under section 80GGC:

• A political Party
• Electoral Trust

Political party must be registered under section 29A of the Representation of the People Act, 1951. Any donation/contribution made to any other political party shall be denied for deduction u/s 80GGC.

To avoid potential misuse of this benefit, taxpayers having income over Rs.50lakhs annually shall face stringent scrutiny for their political party donations in order to prevent tax evasion.

Limits of Deductions under Section 80GGC:
Section 80GGC of the Income Tax Act does not specify any limit for deductions on contributions made to electoral trusts or registered political parties. The entire amount donated is eligible for deduction.

However, certain documents are required to be kept handy while availing this donation deductions which are,

• A receipt as donation proof
• Receipt must contain PAN, Address of political party, its registered address, registration number, details of donor, and nature of payment
• ITR has to be submitted within due date to claim this deduction

The donations made u/s 80GGC are 100% tax deductible.

Exceptions under Section 80GGC:
While enjoying benefits of donations to political parties, certain activities are prohibited while availing these benefits which are as follows:

• Donations or contributions made in cash or kind are not eligible for tax deductions. This amendment to the Section was brought into effect from the financial year 2013-14 onwards. Donations made through demand drafts, cheques, or online payments are the accepted modes for qualifying tax deductions.
• Individuals who provide gifts or donations in forms other than monetary contributions cannot claim tax deductions under Section 80GGC.

Difference between Section 80GGC and 80GGB:
Basic difference in availing benefits under section 80GGB and 80GGC lies in the types of donors.

Let us understand what are those point of differences:

• Under Section 80GGB of the Indian Income Tax Act, any Indian company contributing to any political party can claim deduction for the donated amount.
• Under Section 80GGC, Any person, except local authority and artificial juridical person funded by the Government can claim a deduction for the amount donated to political parties.

Conclusion:
Section 80GGC benefits are available only when they are made in other than cash or kind and to a registered political party or electoral trust only. This benefit is not available to companies. You need to have brief records about the donations made by you in order to avail the benefit of section 80GGC.
Section 80GGC benefits are available only when they are made in other than cash or kind and to a registered political party or electoral trust only. This benefit is not available to companies. You need to have brief records about the donations made by you in order to avail the benefit of section 80GGC.

About Author:
CA Chinmay Shirish Agate
Chinmay Agate is a Practicing Chartered Accountant having 4+ years of experience and expertise in the field of Direct Taxation and Auditing compliances. In the past, he worked in various CA firms and comes with wide industry experience from services, retail to manufacturing to trading where he has handled various complex assignments. He has keen interest in Forex and Derivative knowledge as well as fundamental analysis.