Many Persons or Companies support Public Political Party (PPP) because of the ideologies with the party. Apart from this, the primary reason for supporting a political party is to avail Income tax deductions.

Section 80GGB and Section 80GGC provide benefit to the taxpayer in tax deductions. Political contributions are generally made to cover the expenses of the political party mainly for election campaigns and regular expenses. An individual taxpayer or companies can make donations to the Public Political Party (PPP) as prescribed in Section 80GGB and 80GGC in any recorded mode other than cash.

The proof of expenditure must be maintained for the confirmation of such procedures. Hence individuals or companies who opt for tax deductions by supporting political parties have the advantage of saving a good portion of the tax under Section 80GGB and Section 80GGC.

What is Section 80GGB and 80GGC?

A provision of exemption in tax payments is prescribed under Section 80GGB and 80GGC to encourage the making of donations to political parties. Section 80GGB and 80GGC of the Income-tax Act, 1961 mainly deals with donations and contributions made by an individual taxpayer and Indian Companies towards Public Political Party (PPP). The cashless amount that is donated to any political party registered under Section 29A is eligible for 100%  Income Tax deductions.

Section 80GGB

Any Indian Company or enterprise can donate to a Public Political Party (PPP) and claim tax deduction according to section 80GGB of the Income Tax Act, 1961.

If the party is registered under Section 29A of the People Act, 1951, the donations can be made through any recorded mode other than cash.

  1. The expenses made in an advertisement, Television Commercials, Radio jingles, and Social media is considered as a contribution under this section.
  2. If any company advertises in any political party in its magazine, the amount will be exempted from tax.
  3. The Company must have proof of donations made to the political parties.

Section 80GGC

  1. Any individual can make donations to political parties subject to certain conditions according to Section 80GGC of the Income-tax Act, 1961.
  2. There is no upper limit to make donations.
  3. No Cash contributions are allowed under Section 80GGB.
  4. The modes of payment for making contributions to Public Political Party (PPP) must be through cheque, Demand Draft or Electronic Transfer.
  5. There is no maximum limit on the contributions made to the Public Political Party (PPP).
  6. But according to the Companies Act 2013, companies can contribute up to 7.5% of their annual net profit (three years average). After 1 April 2017 this limit is not applicable.  
  7. A company must disclose the amount contributed, and also the name of the political party in its Profit and Loss account for the said financial year.

The Donor can file their tax returns by mentioning the contributed amount in the Income Tax Return form.

  1.  Section 80GGC appears under Chapter VI-A of the Income Tax Return Form.
  2. The deductions can be availed by donating in any cashless form, including online banking, debit cards, cheques, credit cards, demand drafts, etc..
  3. Money spent on advertisements, the printing of brochures and pamphlet shall be excluded from the amount meant for a tax deduction.
  4. The political party shall issue a receipt containing the name and address of the registered political party, amount donated, along with the PAN and TAN (Tax Deduction Account Number) of the party.
  5. This donation amount is deducted directly from the salary, and the donation receipt is made in the name of the employer.
  6. When the political parties submit their income tax return, a report is made containing the details of the donors who contribute Rs. 20,000. This report must be sent to the election commission of India yearly.
  7. The details of the donations made must be submitted to the employer for incorporating it in Form 16. Otherwise, the details must be mentioned in the specified column while submission of tax returns.
  8. Under Chapter VI A of the Income Tax Act, tax deductions for the donations in political parties are meant for income from salary and rent.

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