Section 80GGC – Tax Deduction on Political Donations

Section 80GGC of the Income Tax Act, 1961, allows individuals to claim a 100% tax deduction on contributions made to political parties or electoral trusts. This provision was introduced to promote transparent political funding and encourage taxpayers to contribute legally to political organizations.

For those looking to reduce their taxable income while supporting a political cause, Section 80GGC serves as an important benefit. However, there are specific rules and conditions that must be followed to avail of this deduction.

Key Features of Section 80GGC

100% Deduction: The entire donation amount is deductible from taxable income.

Applicable to Individuals Only: Only individual taxpayers can claim this deduction. Companies, HUFs, and firms must refer to Section 80GGB.

No Maximum Limit: There is no upper limit on the deduction amount, making it a significant tax-saving option.

Non-Cash Contributions Only: Donations must be made through banking channels such as cheque, demand draft, UPI, internet banking, or credit/debit cards.

Political Party Must Be Registered: The donation must be made to a political party or electoral trust registered under Section 29A of the Representation of the People Act, 1951.

Eligibility Criteria for Claiming Deduction Under Section 80GGC

To claim the tax deduction under Section 80GGC, an individual must meet the following conditions:

• The taxpayer must be an individual – Companies, HUFs, and firms are not eligible for this deduction (they can claim under Section 80GGB).
• The contribution must be made to a registered political party or electoral trust – The party must be recognized by the Election Commission of India.
• Donation must be made through banking channels – Cash donations are not eligible for deduction under Section 80GGC.
• Applicable only in the old tax regime – If the taxpayer opts for the new tax regime under Section 115BAC, this deduction cannot be claimed.

How to Claim Deduction Under Section 80GGC?

If you have made a donation to a political party and want to claim a tax deduction under Section 80GGC, follow these steps:

• Make the donation to a recognized political party or electoral trust through an acceptable mode of payment (bank transfer, UPI, cheque, etc.).
• Obtain a receipt from the political party or electoral trust. The receipt should contain the donor's name, PAN, amount donated, and the party's registration details.
• File your Income Tax Return (ITR) under the old tax regime and enter the donation amount in the relevant section.
• Maintain proof of payment (bank statements, UPI receipts, or demand draft copies) in case of an audit by the Income Tax Department.
• Important: If you choose the new tax regime (115BAC), you cannot claim a deduction under Section 80GGC.

Who is Eligible for Deduction Under Section 80GGC?

The deduction under Section 80GGC is available to individuals and entities, except for:

• Companies
• Local authorities
• Artificial juridical persons that receive full or partial funding from the government

This means that individual taxpayers, Hindu Undivided Families (HUFs), partnerships, Associations of Persons (AOPs), Bodies of Individuals (BOIs), and artificial juridical persons that are not funded by the government can claim a deduction under this section.

Additionally, to avail of this benefit, the taxpayer must opt for the old tax regime, as the new tax regime does not allow deductions under Section 80GGC.

Documents Required to Claim Deduction Under Section 80GGC

To avail of the tax deduction under Section 80GGC, the following documents are necessary:

Donation Receipt or Certificate

• Obtain an official receipt or donation certificate from the political party or electoral trust where the contribution was made.
• The receipt should include the donor’s name, donation amount, registration number, and PAN of the political party or trust for authenticity.

PAN of the Political Party or Electoral Trust

• Ensure that the entity receiving the donation has a valid PAN, as this may be required while filing your income tax return.

Income Tax Return (ITR) for the Relevant Financial Year

• The taxpayer must file their income tax return (ITR) for the relevant financial year to claim this deduction.

Deduction Limits Under Section 80GGC

Section 80GGC of the Income Tax Act allows a 100% tax deduction for donations made to registered political parties or electoral trusts under Section 29A of the Representation of the People Act, 1951.

Key Deduction Rules

No Maximum Limit: There is no upper limit on the amount you can donate and claim as a deduction.

No Cash Donations: Only payments made via cheque, bank transfer, or digital modes are eligible. Cash donations are not allowed.

Cannot Exceed Total Income: The deduction is limited to the total taxable income of the individual.

Required Proof

To claim the deduction, you must have:

• Donation Receipt from the political party/electoral trust.
• PAN of the Political Party or Trust.
• Bank Transaction Proof showing the donation.

Following these rules ensures a valid tax deduction under Section 80GGC.

1. Can I donate to any political party and claim a deduction under Section 80GGC?

No, the donation must be made to a registered political party under Section 29A of the Representation of the People Act, 1951, or to a recognized electoral trust.

2. Can I donate in cash and still claim the deduction?

No, cash donations do not qualify for deduction under Section 80GGC. Contributions must be made through cheque, demand draft, UPI, or electronic banking methods.

3. Can businesses or corporates claim a deduction under Section 80GGC?

No, only individuals can claim this deduction. Businesses, companies, and LLPs must claim under Section 80GGB.

4. Can I donate to an individual candidate and claim a deduction?

No, donations made to individual candidates do not qualify under Section 80GGC. Only contributions to registered political parties and electoral trusts are eligible.