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Under Section 80GGC of the Indian Income Tax Act, any contribution to a political party or electoral trust is eligible for a tax deduction. The whole amount you pay as a contribution can be claimed by you as a deduction provided it does not exceed your taxable income.
There are many sections under the Income Tax under which you can obtain deductions from your total taxable income. Some of the popular sections include Section 80C, 80D, etc. Another important section that many people do not know about is Section 80GGC.
This section states that any donation to a political party or electoral trust 80GGC is eligible for a tax* deduction. The whole amount that you donate will be eligible for a tax deduction.
The 80GGC limit is placed on the amount of taxable income that you have. It means the tax deduction under 80GGC cannot be more than your taxable income. Thus, it is one of the sections that allow you to get a tax deduction up to your taxable income amount.
Read on to find more details about Section 80GGC.
Section 80GGC Explained
India has many different political parties, and almost all of these parties rely on donations from their supporters to fund their campaigns. The Indian Income Tax Act has, therefore, dedicated a section that allows people to make donations to their preferred political party. Under Section 80GGC of the Act, you can donate money to a certain political party and claim a deduction on the amount you have donated.
Eligibility Criteria Under Section 80GGC
As stated above, any individual taxpayer can claim deductions up to a certain limit for donations to a political party (80GGC). Under the Income Tax Act, it is the political party donation tax exemption. If you wish to claim the amount that you have donated as an 80GGC deduction, the contribution must be made by demand draft, cheque, online banking, debit card, credit card, or wire transfer. If you donate using cash, you will not be able to seek any 80GGC deduction.
Note that a political party is termed an individual Indian citizen’s body or an association that is registered with the Indian Election Commission and is deemed an election body.
An electoral trust is a Section 8 firm or a non-profit entity created in the country to get voluntary contributions from an individual and distribute these contributions to political parties. The main role of any electoral trust is to obtain contributions and then distribute these to respective political parties.
Section 80GGC - Details
You can contribute to the growth of the nation by providing monetary support to the political party that you prefer. The limit of donation under section 80GGC has been fixed at 10% of your gross income in a year.
The best thing about this section is that you can claim an amount ranging from 50% to 100% on the donation that you have made to the political party. For example, in case you have donated ₹2 lakhs to your favourite party, you can get a deduction of ₹2 lakhs from your taxable income.
The taxable income reduces with every contribution that you make to any party of your choice. But remember that you will not be able to claim any deductions for cash donations.
To get a deduction under the Section 80GGC, you need to provide proofs that can be verified. If you do not have 8GGC proofs, you will not be able to claim any deductions.
Moreover, you must make donations to individuals and parties that are legitimate if you wish to receive a deduction. The 80GGC deduction limit is fixed, and it cannot be more than your annual taxable income.
80GGC Claim - Exceptions
There are some exceptions that are applicable for deductions under this Section to ensure that the conduct of political parties and individuals is fair. These include:
Cash Donations
If you make your donations via cash, you will not be able to claim any deductions. It is because a person might not have made any donations, yet he might claim a deduction. Hence, the exception helps make the laws stringent and avoids exploitation.
Donations Made Using Other Ways
In some cases, a person might provide some services to any party due to kindness or as a favour. In this case, the person might think of it as a donation, but the IT Act does not consider it as one. Hence, if you contribute in the form of a favour or in some other way, there is no monetary deduction that you are eligible for.
Conclusion
Thus, under 80GGC, you can claim a deduction if you make a contribution to your favourite party. You must understand that there are certain rules in place while you make a donation for you to be able to receive a donation. Make sure that you follow all the rules so that you can claim an 80GGC deduction on the amount that you have contributed.
There are other sections, such as Section 80C, under which you can claim a deduction up to a certain limit. Ensure that you are aware of all the tax deductions that you can avail of legally to reduce your taxable income.
