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Section 80GGC of the Income Tax Act,1961 allows deduction in respect of any donations made to political parties. The amount of deduction allowed under Section 80GGC is either a hundred per cent or fifty or fifty per cent depending upon the taxpayer and also the contribution made. The deduction under Section 80GGC should be made either to an electoral trust or political party. The amount of deduction should not exceed the total tax that is payable by the taxpayer.

By investing under Section 80GGC, tax benefits can be availed and at the same time, a strong political system can be encouraged in the country. According to this section, an individual can donate up to 10% of the gross total income according to his/her willingness to political parties. This deduction can be claimed, even after availing of tax benefits like house rent allowance, medical allowance also. A company cannot claim a deduction under this section by donating an amount to political parties. No government organisations are eligible to donate any amount to political parties and claim a deduction under this section.

Features of Section 80GGC

  • The deduction under this section can be availed by individuals only who are non-corporate assesses or taxpayers
  • The deduction under this section is not applicable on tax deducted at the source of an individual’s salary. Only individuals who are employed and do not have a source of income other than the salary provided by the employer are eligible to claim a deduction under this section.
  • Since this section falls under Chapter VI A deductions, the deduction cannot be more than the tax liability of the individual. This is ensured by the government so that no individual can claim an undue benefit from this section.
  • The government has introduced this section in the Finance Act, of 2009. This was done to encourage transparency and honesty in the electoral system and to reduce corruption in the same. The government thus ensures that maximum donations made are by individuals and are made not with a view to evade taxes but enhance the political system in our country. The government also allows deductions to be made to multiple parties and not just one party so that no bias is made for one political party and the donations are honest.

Eligibility to Claim Deduction under Section 80GGC

  • The taxpayer or the assessee should be an individual or a person. The assessee or a person should choose a mode of payment for the donation to be done to political parties.
  • The taxpayer or assessee should not be an artificial juridical person. The artificial juridical person is a public corporation established under a special act of the legislature that has a personality of its own. The artificial juridical person even though it is partially supported by the government is not allowed to claim a deduction under this section.
  • The deduction under this section cannot be availed by companies. However, companies can make donations to political parties and there are exceptions to companies that cannot make donations to political parties. For example, a government company cannot make donations to political parties. Also, companies that are funded by the government either fifty per cent or a hundred per cent cannot make a deduction to political parties.
  • The deduction under Section 80GG, cannot be availed by local authorities. These authorities may make a donation to political parties but are not entitled to claim a deduction under this section.

Procedure to Claim Deduction under Section 80GGC

The procedure to claim a tax deduction under Section 80GGC is quite easy and made convenient by the government. Section 80GGC is included in chapter VI A deductions of the Income Tax Act,1961. The taxpayer or assessee can file the income tax return as per the procedure that is normally required by the taxpayer. The income tax return will have a separate space for specifying the amount paid as a deduction under section 80GGC. The assessee can write the amount that id donated in the given space.

The mode of payment of the assessee has to be verified and cash donations made to the political parties do not qualify as deductions under this section. The mode of payment may either be bank transfers, cheques, debit card payments, credit card payments or even demand drafts.

For salaried employees, the details of donations made have to be known and sent to the employer to include the same under Form 16 which is given by the employer to the employee for filing the income tax return. The deduction made by the individual should be accepted and acknowledged by the political party. The party must provide a receipt of the deduction received by the individual. The PAN and TAN of the political party have to be provided by the individual while claiming a deduction under this section.

For deductions made by employees of an organisation, the employer should provide a certificate that the donation was made by the employee. The employee can thus claim a deduction if the employer provides a certificate that the deduction was made from the employee’s account only.

Thus, the employee should furnish his PAN, TAn, registration number with the party, name of the donor, mode of payment and amount paid to the political party to claim a deduction.

Difference Between 80GGB and 80GGC

According to Section 80GGC, an individual can claim a deduction for an amount paid to political parties provided all the conditions are met. A hundred per cent deduction is allowed to individuals in this case.

According to Section 80GGB, companies that are Indian or any Indian company can claim a deduction for an amount it donates to political parties.

Both the sections are similar in nature, but the assessees differ in both the sections and thus the deduction amount that is qualified.

Exceptions to Section 80GGC

  • The major disqualification for this section is the payment of donation through the mode of cash or kind. Both these modes of paying donations have been disqualified by the government from the financial year 2013-14
  • The maximum deduction that is allowed is the tax payable by an assessee. In no case can the deduction be more than the tax payable by the assessee.
  • If sufficient documents are not provided at the time of filing tax and claiming the deduction, the government and the assessing officer can deny the claim to deduction under this section.
  • In the case of employees, a certificate is mandatory from the employer otherwise the claim will be rejected.

FAQS

1. What documents are required to claim a deduction under Section 80GGC?

The taxpayer must submit the receipt received from the political party for the donation and contribution made towards the party. The taxpayer should also submit the income tax return that is filed by the assessee that contains all the details of the contribution made.

2. Can corporations or companies make political contributions?

yes, companies and corporates can make political contributions under Section 80GGB of the Income Tax Act,1961.

3. Maximum amount of deduction allowed towards contribution made to a political party?

a deduction of a hundred per cent is allowed towards contributions made to political parties.

4. Does Section 80GGC come under the chapter VI A deductions?

Yes, section 80GGC is covered under the chapter VIA deductions of the Income Tax Act,1961.

5. Which form has to be submitted for claiming deduction?

Form 10BA has to be submitted by the taxpayer to avail of a deduction under section 80GGC.

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