Donation of Political Parties under Section 80GGC

Introduction

In India, political parties play an essential role in the democratic process by contesting elections and governing the country. Political parties need financial resources to conduct their operations and campaigns, which are often acquired through donations from individuals, companies, and other institutions. The Income Tax Act of 1961 and the Representation of the People Act of 1951 govern contributions to political parties in India. Political parties must keep track of any funds they receive and submit them to the Indian Election Commission.

What is Section 80GGC?

Section 80GGC of the Income Tax Act, 1961, provides a tax deduction to individuals for donations made to registered political parties or electoral trusts registered under the Representation of the People Act, 1951. By offering tax benefits on donations, the section encourages people to support political parties as well as engage in the political process.

Eligibility Criteria for Section 80GGC Tax Deductions

To claim a tax deduction under Section 80GGC of the Income Tax Act, taxpayers must fulfill the following eligibility requirements:

• Section 80GGC permits an individual taxpayer to seek a tax deduction. So, when filing Income tax returns, an employee who receives income through salary and does not receive any additional income from other businesses is eligible for a tax deduction.

• A local authority cannot be a taxpayer or appraiser.

• An artificial judicial person who receives certain or full funding from the government cannot be the taxpayer or assessor.

• Companies cannot choose to use the tax deductions provided by this section.

Important insights on the donation of political parties under Section 80GGC

Tax deductions are available for contributions made by an individual to political parties or electoral trusts under Section 80GGC of the Income Tax Act of 1961. The following are some key aspects:

1. Eligible donations: Under Section 80GGC, contributions made to any registered political party or electoral trust are tax-deductible. However, cash donations over Rs. 2,000 are not eligible for a tax deduction.

2. Payment methods: Donations to political parties or electoral trusts may be given in cash or by any other payment method, including cheque, draft, or electronic transfer.

3. Maximum limit: Under Section 80GGC, a deduction of up to Rs. 20,000 may be requested. This limit applies to the total sum of donations made to one or more political parties or electoral trusts during the fiscal year.

4. Form 10BB: The individual must submit a declaration in Form 10BB to the political party or electoral trust to which the donation was made to claim a deduction under Section 80GGC. A receipt for the donation must be issued by the political party or electoral trust.

5. Disclosure in the Income Tax Return: The individual’s income tax return must include a disclosure of the amount of the donation claimed as a deduction under Section 80GGC.

How to Claim the 80GGC Deduction?

An individual must take the following actions to claim the tax deduction allowed by Section 80GGC of the Income Tax Act:

1. Donate: First, donate to a registered political party or electoral trust through a cheque, demand draft, or electronic transfer. Donations made in cash exceeding Rs. 2,000 are not eligible for a tax deduction under Section 80GGC.

2. Obtain Form 10BB: Request Form 10BB from the political party or electoral trust to which the donation was made. This declaration must be obtained to claim the deduction under Section 80GGC.

3. Submit the declaration form: Include all necessary information on Form 10BB, such as the name of the political party or electoral trust, the amount of the donation, and any other relevant information.

4. Get a receipt: The political party or electoral trust is required to provide a receipt for the donation made, which must include the donor’s name, the donation’s amount, and other necessary information.

6. Claim the deduction in the ITR: Enter the amount of the donation made in the relevant section of the ITR form to claim the deduction under Section 80GGC when completing the income tax return (ITR).

7. Attach Form 10BB and receipt: Attach Form 10BB and the receipt issued by the political party or electoral trust along with the ITR.

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Conclusion

Remember that contributions paid to political parties or electoral trusts cannot be deducted under any other section of the Income Tax Act. The maximum amount that can be deducted under this section is Rs. 20,000. Additionally, Section 80GGC does not allow for the deduction of donations made to unregistered political parties or candidates.