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deductions under section 80GGB

Deductions for Contributions Made Under Section 80GGB

Last Update Date : August 14, 2018

deductions under section 80GGB

India holds the elections on a massive scale with almost 814 million voters. To win the hearts of millions you need to have an attractive campaign of mammoth proportions, which requires a large amount of funding’s from various corporates. These contributions by the corporates are subjected to tax deductions u/s 80GGB while calculating total income and, companies should be answerable by maintaining records of the same. However, contributions made in cash are not allowed to stop the use of false records for tax exemptions and manipulations done by companies. This guide will cover the deductions under section 80GGB.

What is Section 80GGB?

This section is responsible for guiding companies on contributing to political parties. It provides exemptions to the donations made by a company, to a party or parties. Basically, donations to any political parties or Electoral Trust by any company lies under this section.  All Indian companies can contribute to any political Party(s)/Electoral Trust. The cashless amount donated to any political party registered u./s 29A, is eligible for 100% deductions.

Deductions and Exceptions u/s 80GGB

Cash contributions are not allowed., therefore amounts made by Cheque/draft/pay order/direct transfer to the account of political parties are promoted and accepted.

There is no specified limit mentioned in the Income Tax Act for contribution, but under Companies Act, 2013, companies can contribute 7.5% of their average net profits of the past three financial years. It is mandatory for companies to disclose total contributions made by them u/s 182 in their profit & loss account with the name of political party. If electoral bonds are used then mentioning the name of the party is not required.

Exceptions u/s 80GGB

The following entities are not allowed to contribute to political parties:

  • Any company with younger than 3 years;
  • A government company;

What is Electoral Trust?

Electoral Trust is a Section 25 company or a non-profit company created in India that receives voluntary contributions made to it, that also allocates it to the respective political parties, registered under Section 29A of the Representation of People Act, 1951. Example- Bajaj Electoral trust, Satya Electoral Trust, General Bajaj Electoral trust etc.

Section 80GGC

Section 80GCC grants tax exemption to the contribution made by an individual or a non-company person to donate avoiding cash payments.  Few exemptions and eligibility criteria must be satisfied to achieve deduction in tax.

Key-Points to Remember While Donating to Political Parties in India

  • Any company is granted freedom to contribute to any political party they want to.
  • There is no limit as such to how many parties they want to support and hence can donate in more than one parties.
  • Every contribution is accepted except those involving Local Authority and Artificial Judicial Authority funded fully or partly by Government.
  • No cash payments are accepted and allowed instead individuals/companies can use demand draft, cheque or transferring in party’s account directly.
  • The receiving political party must be registered under section 29A of the Representation of the People Act, 1951.
  • As per Income Tax Act there is no such limit to which a company can contribute donations to a registered political party.
  • u/s 80GGB, 100% contribution donated is exempted from tax, out of total income of the individual given that he does not exceed his taxable income.

There are not many restrictions for contributing donations but at the same time, maintaining transparency in records is of utmost importance. For all your tax queries and filing of your income taxes by maximizing available tax deductions, consult the experts at H&R Block.

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