Section 80GGC of Income Tax Act

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Section 80GGC of Income Tax Act

Section 80GGC of the Income Tax Act provides a deduction for taxpayers who have made donations to political parties. The quantum of contribution can be extended upto a maximum of 10% of the Gross Total Income. The provision benefits the taxpayers as the contributions can be claimed as a deduction at the time of filing Income Tax returns. Also, the taxpayers availing these deductions are accorded with tax-saving opportunities including deductions such as House Rent Allowance (HRA), Medical Allowance, and so on. This article is an overview of Section 80CGC.

Section 80GGC

This section was introduced as part of the Finance Act of 2009.  It was formed in a way as to instil a culture of transparency into electoral funding and avoiding instances of corruption. Deductions under this section fall under the purview of Chapter VIA Deductions, thereby conveying that the total amount of deduction would not exceed the total taxable income of the taxpayers.

Who Qualifies for the Provision?

Deduction under this section can only be availed by taxpayers having a taxable income for the relevant financial year. The list of eligible taxpayers includes individuals, as well as artificial judicial persons (but excluding corporate taxpayers). The section is not applicable to:

  • Local authorities
  • Artificial judicial persons who are recipients of any funds from the government
  • Companies

The deductions under this section cannot be applied on Tax Deducted at Source (TDS) on an individual’s salary. Section 80GGC is only extended to employees who are recipients of salary, but not any other income from other businesses. The deductions can be claimed by the taxpayers at the time of filing of returns.

Norms of Contribution

Section 80GGC endorses a taxpayer to make donations to any of the following entities:

  • An electoral trust.
  • Any political party registered under Section 29A of the Representation of the People Act, 1951.

Quantum of Deduction Permitted

Donations to the following entities would qualify for a complete tax deduction:

  • Electoral trust.
  • Political parties registered under Section 29A of the Representation of the People Act, 1951.

If the taxpayer claims for the same, the taxable amount of the concerned taxpayer is lowered in proportion to the contribution made.

Procedure for Availing Deductions

The taxpayers who are desirous of claiming deductions under this provision may mention the amount of their contribution in the relevant income-tax return form. These particulars must be mentioned in the space provided for Section 80GGC. The section finds its place in ‘Chapter VI-A Deductions’ in the Income Tax Return Form. The taxpayers must ensure that the donations are transferred to the political parties through legitimate banking portals such as internet banking, cheques, debit cards, credit cards, demand draft or other pertinent means so as to claim deductions. Transfer of funds by using cryptocurrency such as bitcoin cannot be used to claim a deduction under this section.

Disqualified Remittances

Section 80GGC of the Income Tax Act prohibits deductions for contributions made to political parties under the following circumstances:

  • The donations are remitted by means of cash.
  • Donations or contributions to political parties are made in kind and do not fall under the purview of Section 80GGC, which incorporates gifts whether made in cash or kind.

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