Section 80GGC

Section 80GGC is a provision in the Indian Income Tax Act. Under this section, taxpayers can claim deductions for contributions made to political parties that are registered with the Election Commission. This helps reduce the taxpayer's overall tax liability, providing an incentive for people to participate in the democratic process through financial support to political parties.

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What is Section 80GGC?

Section 80GGC of the Income Tax Act, 1961, allows individuals to claim a tax deduction for any donations or contributions made towards any political party or electoral trust. The deduction is available for donations made in the previous year and is limited to 100% of the amount donated.

To claim the deduction, individuals must obtain a receipt or certificate from the political party or electoral trust to which the donation is made. This receipt should contain details such as the name of the donor, the amount donated, and the registration number of the political party or electoral trust.

Who is Eligible for Claiming Deductions Under Section 80GGC?

The eligibility criteria for claiming a tax deduction under Section 80GGC are as follows:

  • The taxpayer must be an individual.

  • The donation must be made to a registered political party or electoral trust.

  • The donation must be made through any mode other than cash.

  • The taxpayer must obtain a receipt or certificate from the political party or electoral trust to which the donation is made.

Entities not eligible for deduction under Section 80GGC include:

  • Companies

  • Local authorities

  • Artificial juridical entities funded wholly or partly by the government

What are the Contributions and Donations that can be Deducted Under Section 80GGC?

Only contributions and donations made to registered political parties and electoral trusts are eligible for deduction under Section 80GGC.

  1. Registered Political Party

    A registered political party is a political party that is registered under Section 29A of the Representation of the People Act, 1951. The Election Commission of India maintains a list of all registered political parties.

  2. Electoral Trust

    An electoral trust is a non-profit company that is established under Section 8 of the Companies Act, 2013. Electoral trusts are allowed to collect voluntary contributions from individuals and distribute them to various political parties.

What is the Section 80GGC Deduction Limit?

The deduction under Section 80GGC of the income tax is subject to a specific restriction. Below is the list of limits for exemption under 80GGC:

  • 100% deduction for donations to registered electoral trusts or political parties, but cannot exceed an individual's total income.

  • No deductions for cash or in-kind contributions to political parties since 2013-2014.

  • Use legitimate banking channels (e.g., internet banking, cards, cheques) for deductions under Section 80GGC.

  • Insufficient documentation may lead to denial of deduction claims.

Example:

Mr. X is an individual taxpayer with a gross income of Rs. 10,00,000. He makes a donation of Rs. 50,000 to a registered political party through cheque. Mr. X can claim a tax deduction of Rs. 50,000 under Section 80GGC. This will reduce his taxable income to Rs. 9,50,000.

However, if Mr. X had donated Rs. 1,00,000 to the political party, he would only have been able to claim a tax deduction of Rs. 10,00,000 because that is the amount of his total taxable income.

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What are the Documents required for Section 80GGC?

To qualify for a tax deduction under this section, you need to present the following documents:

  • The receipt should include particulars such as PAN, TAN, the political party's address, fund registration number, mode of payment, and donor's name.

  • Evidence of the donation in the form of a receipt.

  • The income tax return form must be filled out and submitted within a designated time frame.

What are the Exceptions to Section 80GGC Deduction?

There are some exceptions in Section 80GGC that claim to promote fairness in the conduct of individuals and parties. Here are the exceptions for the same:

  • Section 80GGC prohibits individuals from seeking tax deductions for cash donations. This is justified as individuals may not have actually made a donation, potentially leading to an incorrect tax rebate claim.

  • Individuals might offer services to political parties out of goodwill or with an expectation of a favor in return. Donations made in forms other than cash cannot be claimed as deductions under section 80GGC.

What is the Procedure to Avail Tax Deductions Under Section 80GGC?

To avail of tax deductions under Section 80GGC of the Income Tax Act, 1961, you can follow these steps:

  • Make a donation to a registered political party or electoral trust through any mode other than cash.

  • Obtain a receipt or certificate from the political party or electoral trust to which the donation is made. This document should contain details such as the name of the donor, the amount donated, and the registration number of the political party or electoral trust. Also, provide the TAN and PAN of the political party when you claim for the deduction.

  • File your income tax return as usual and include the details of the donation in the relevant section of the return.

  • Attach the receipt or certificate from the political party or electoral trust to your income tax return.

If you are a salaried individual, you can also submit the details of the donation to your employer so that they can include it in your Form 16.

What is the Situation When an Individual is Ineligible to Claim a Tax Deduction Under Section 80GGC?

Here are the instances where individuals cannot avail of a tax deduction as per Section 80GGC:

  • Only donations made to registered political parties and electoral trusts are eligible for tax deductions under Section 80GGC.

  • Section 80GGC specifically states that donations made in cash are not eligible for tax deductions.

  • Non-monetary gifts or donations are not deductible under Section 80GGC.

What is the Difference between Section 80GGB and Section 80GGC?

The main difference between Section 80GGB and Section 80GGC of the Income Tax Act, 1961, is the eligibility criteria for claiming a tax deduction. Below is the difference:

  • Section 80GGB allows companies to claim a tax deduction for any donations or contributions made towards any political party or electoral trust.

  • Section 80GGC allows individuals to claim a tax deduction for any donations or contributions made towards any political party or electoral trust.

Conclusion

Section 80GGC plays an important role in encouraging financial support for political parties while ensuring transparency in electoral funding. It specifies that cash donations and non-monetary contributions are not eligible for tax deductions. By adhering to these provisions, individuals can effectively reduce their tax liability while contributing to the democratic process.

FAQ's

  • What is the 80GGC 10% limit?

    There is no 80GGC 10% limit. The deduction under Section 80GGC is available for 100% of the amount donated to a registered political party or electoral trust. However, the deduction cannot exceed the taxpayer's total taxable income.
  • Does 80GGC come under 80G?

    No, 80GGC does not come under 80G. Section 80G of the Income Tax Act, 1961, provides for tax deductions on donations made to certain charitable institutions and organizations. Section 80GGC provides for tax deductions on donations made to registered political parties and electoral trusts.
  • How much donation is tax free?

    The amount of donation that is tax free depends on the section under which the donation is made. Under Section 80GGC, 100% of the amount donated to a registered political party or electoral trust is tax free. However, the deduction cannot exceed the taxpayer's total taxable income.
  • Is there a restriction on the number of political parties I can donate to and still claim deductions?

    No, there is no limit. You can claim a full 100% deduction for contributions made to multiple political parties.
  • Can I avail deductions for donations to any political party I choose?

    You can only claim a deduction if you donated to a political party registered with the Election Commission and recognized as an election body.

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