Filing for AY 2024-25 is coming soon
Filing for AY 2024-25 is coming soon
Keep calm and sign up for early access to our super filing platform

Deductions under Section 80GGB

Updated on: Apr 26th, 2023

|

7 min read

social iconssocial iconssocial iconssocial icons

To encourage more contributions towards political parties, there is a provision of exemption from taxation under Section 80GGB. This section of the Income Tax Act 1961 mainly deals with donations and contributions made by Indian Companies towards political parties or electoral trusts.

Tax Deductions under Section 80GGB

As per Section 80GGB of the Income Tax Act, 1961, any Indian company or enterprise that donates to a political party or an electoral trust registered in India can claim a deduction for the amount contributed. The political party receiving the donation must be registered under the Section 29A of the Representation of the People Act, 1951. An electoral trust is a non-profit company created under Section 8 of the Companies Act, 2013. An electoral trust can receive voluntary contributions from other companies and then reallocate it to the duly registered political parties.

Eligibility Requirements for Section 80GGB Tax Benefits

With exceptions listed below, all Indian businesses registered under the Companies Act of 2013 are allowed to deduct donations made to recognised political parties or electoral trusts under Section 80GGB:

1. A government agency

2. A company that has only been in operation for three years.

3. Cash donations are not eligible for tax breaks. The only extra donation methods that qualify for a tax deductible under Section 80GGB are demand draughts, cheques, and electronic payments.

Contributions must be made to a recognised political party, according to Section 29A of the Representation of the People Act (RPA), 1951. Contributions to the electoral trust are also tax deductible under section 80GGC.

Deduction Limit Under Section 80GGB of the IT Act

1. There is no maximum amount that can be deducted from taxes. A qualifying firm may deduct from its taxes any sum provided to a registered political party (under Section 29A of the RPA, 1951).

2. Donations made by corporations are totally tax-deductible under section 80GGB of the Income Tax Act.

Contributions Under Section 80GGB

Contributions under Section 80GGB of the IT Act include:

1. A business donation, payment, or subscription paid to a person engaging in any activity that has the potential to influence or otherwise alter public support for a political party or other political aim.

2. The amount spent by a company on advertisements in any publications—whether brochures, tracts, keepsakes, or pamphlets—produced on behalf of political parties, either directly or indirectly. In the form of a political donation, the publication may not be directly linked to a political party but yet act in its advantage.

Rules and Conditions to Claim Section 80GGB Deductions

Section 80GGB specifies the rules and conditions related to donations being made to political parties in India. Following are the essential points that you must remember:  

  • Cash contributions are not allowed under Section 80 GGB. Therefore, the respective contributions to political parties must be made through other modes of payments such as Cheque, Demand Draft or Electronic Transfer.
  • There is no maximum applicable limit on the contributions made to political parties, under Section 80 GGB of the Income Tax Act. But as per the Companies Act 2013, companies can contribute up to 7.5% of their annual net profit (three years average). It is necessary that the respective company discloses the amount contributed and the name of the political party in its Profit and Loss account for the said financial year.
  • If the amount has been contributed via electoral bonds, then there is no requirement for mentioning the name of the party in the Profit and Loss Account of the company. Only the amount paid has to be mentioned.
  • As per the latest guidelines, any advertisement from a company on a platform owned by a Political Party would be considered as a contribution under Section 80 GGB. It is therefore eligible for income tax deduction. This includes social media, magazines, newspapers, etc.
  • There is no limit on the amount being contributed to a political party, but it is necessary for a company to pay the amount via an acceptable route and keep a documentary record of the same.
  • There are certain exceptions to the contributions made under Section 80 GGB:  
    • A Public Sector Enterprise
    • A company that has an age of three years or less.

Key Points Related to Contributions Made to Political Parties in India

If your company is contemplating contributing to a political party in India, it is essential for you to understand a few points. Here are the key aspects that you must remember as specified in the Income Tax Act 1961: –

  • Any company or enterprise that is registered in India is allowed to make contributions to any political party they wish to.
  • A company is allowed to make contributions to any number of political parties that it wishes to support. All contributions made under Sec 80GGB will be combined for the income tax deduction.
  • The political party that is receiving the donation must be duly registered under Section 29A of the Representation of People Act, 1951.
  • The electoral trust receiving the donation amount must be duly registered and recognized by the competent authorities.
  • Under no circumstances are cash payments allowed under Section 80GGB. The only acceptable modes of payment include cheques, demand draft, electronic transfer, or a pay order towards the bank account of the political party. This is to ensure transparency in political funding and to keep track of the money received and spent.
  • The Company can claim 100% deduction against the amount donated to a political party under section 80GGB. Therefore, you are free to make donations to political parties as per your preference and claim deductions in your income tax for the same. It is essential that you keep a proper record of the amount being paid and comply with all the regulations specified in the Income Tax Act 1961. If you do not follow the set procedure, your claim for deduction might be rejected by the competent authorities.

Frequently Asked Questions (FAQs)

Which documents are required to claim deduction under section 80GGB?

You need the receipt of donation, which shall include name, address, PAN, TAN, registration number of donor and mode of payment, amount.

What is the maximum deduction available under section 80GGB?

Companies can claim up to 100% of their donation as long as it is less than their total taxable income. However, Companies Act 2013 states that the contribution cannot be more than 7.5% of their annual net profit (average of 3 years).

Can a corporation contribute or donate to several political parties?

Yes, a corporation or an enterprise can make donations or contributions to several political parties. It depends on the company to decide how many companies they wish to contribute or donate to. 

Is foreign funding allowed under Section 80GGB of the Income Tax Act, 1961?

No, foreign funding is not allowed under Section 80GGB of the IT Act, 1961.

inline CTA
File your returns in just 3 minutes
100% pre-fill. No manual data entry
CONTENTS

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption