Section 80GGC Of The Income Tax Act: Features, Eligibility And Exceptions
The Indian government introduced Section 80GGC of the Income Tax Act to protect the interests of those who make donations to political parties. However, one needs to meet some criteria and adhere to certain rules for claiming deduction. These are explained briefly below. Also, keep reading to know about exceptions, procedures to avail deduction, and other information.
What Does Section 80GGC of the Income Tax Act State?
Section 80GGC came into force as a part of the Finance Act 2009 to avoid corruption instances and bring a culture of transparency in electoral funding. Under this Section, taxpayers donating to a political party can claim a deduction on their total income. This means a contribution made under Section 80GGC of the Income Tax Act 1961 is entirely eligible for a deduction. However, the deduction amount cannot exceed their total income tax amount.
What Are the Features of Section 80GGC?
Here are some features of Section 80GGC:
- Only a taxpayer or a non-corporate assessee can avail 80GGC deduction.
- The deduction under this Section falls under Chapter VIA deductions.
- The objective of this Section is to bring transparency into electoral funding.
- It is not applicable on TDS charged on an individual’s salary. Instead, it is only for those whose salary is their only income, and there is no income from other businesses.
What Are the Eligibility Criteria to Claim 80GGC Deduction?
For claiming 80GGC deduction, one must fulfil the following criteria:
- Taxpayers availing deduction must be either an individual or a person
- A local authority cannot claim 80GGC deduction
- Companies can’t enjoy benefits under this Section.
- An artificial judicial person receiving funds from the government cannot be an assessee or taxpayer claiming 80GGC deduction.
Also Read: How To Use Challan 280 To File Income Tax?
Exceptions to Section 80GGC of the Income Tax Act
A few exceptions do not fall under the purview of Section 80GGC of the Income Tax Act. These include the following:
- If taxpayers make a donation in kind or cash to political parties, it will not be eligible for 80GGC deduction. The Section introduced this exception in their guideline after the amendment of 2013-14.
- If the contribution amount exceeds the taxable income of an assessee, they might not get their full deduction u/s 80GGC as per the guidelines.
- If any mode other than cheque, debit/credit card, internet banking, or demand draft is used to make donations, taxpayers shall not get any deduction.
What Is the Process to Claim 80GGC Deduction?
Those looking to claim 80GGC deduction must file ITR, including the amount of contribution made to political parties. It will come under Chapter VIA of the Income Tax Return form.
Also, taxpayers must submit details of the contribution to their employer for them to record under Form 16. Note that taxpayers can also provide details in the specified column while filing ITRs.
Ensure to get a receipt from the political party that has their name and address on it. The receipt should also have the contribution amount made by the assessee, along with the TAN or PAN details of the party. Later, the employer deducts the contribution amount from their employee directly as donations. Employees can claim a deduction against these donations after presenting the certificate from their employer.
Also Read: Tax Saving Options Other Than Section 80C Of The Income Tax Act
Final Word
If you are one such taxpayer who contributes to political parties for electoral funding, then you can claim 80GGC deduction from the Income Tax Act. However, make sure to check the eligibility criteria and exceptions to avoid confusion.
Frequently Asked Questions
1. What Is the Difference Between 80GGC and 80GGB?
Both Sections have a similar effect when calculating total taxable income. However, there is a big difference in their eligibility criteria.
Section 80GGC is for a specified group of taxpayers only. At the same time, Section 80GGB is for companies. So, under the latter, companies who contribute to political parties can claim a full deduction against the amount.
2. Can a government organisation claim deduction for contributions made to political parties?
No, government companies are not allowed to make contributions to political parties and neither can they claim a deduction as per guidelines mentioned under Section 182 of the Companies Act, 2013. So, every company has to abide by it to comply with the legal rules.
3. Are donations made to political parties tax-deductible in 2022?
Yes, taxpayers donating to political parties will be allowed a full deduction on their contribution amount in 2022. However, one must make sure that they are contributing via the preferred payment mode. Also, the donation must not be in cash or kind.
4. What percentage of the contribution is eligible for deduction u/s 80GGC?
Under Section 80GGC of the Income Tax Act, the limit up to which a taxpayer can claim a deduction against a donation to political parties varies between 50% and 100%. Also, there is a limit on how much an individual can donate out of their income. It amounts to 10% of their gross earnings.
5. Can an Indian company claim a deduction for the amount contributed to political parties?
As per the guidelines mentioned under Section 80GGC of the Income Tax Act, 1961, any enterprise or company in India can claim a deduction for the total amount contributed to a political party. However, it must not exceed their taxable income.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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