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