Section 80GGB of the Income Tax Act

What is Section 80GGB?

Section 80GGB provides a 100% deduction on the amount donated by Indian companies to political parties or electoral trusts. This deduction is applicable only to registered entities under the Representation of the People Act, 1951, and aims to foster a culture of financial support for democratic processes.

• Section 80GGB under New and Old Tax Regime: Deductions under Section 80GGB are available under both the old and new tax regimes for the financial year 2024-25.

• Old and New Tax Regime Calculator: You can use an income tax calculator to assess how this deduction impacts your taxable income under both the old and new tax regimes.

Deduction Amount Under Section 80GGB

The deduction amount eligible under Section 80GGB is 100% of the donation amount, with no upper limit on the total amount that can be claimed. For example, if a company donates ₹5 lakh to a registered political party, it can claim a full deduction of ₹5 lakh from its taxable income.

Eligibility Criteria to Claim Deductions Under Section 80GGB

To qualify for deductions under Section 80GGB, companies must meet specific criteria:

• Type of Donor: Only Indian companies are eligible.

• Recipient Registration: Donations must be made to political parties registered with the Election Commission of India.

• Payment Method: Donations must be made via cheque, draft, or electronic transfer (cash donations are not allowed).

• Documentation: Proper receipts must be maintained.

Expenses Covered Under Section 80GGB

The following expenses are covered under Section 80GGB:

• Donations to registered political parties as defined under Section 29A of the Representation of the People Act, 1951.

• Contributions made to electoral trusts that comply with regulations set by the Central Board of Direct Taxes.

• All donations must be documented with proper receipts indicating the amount and recipient details.

Conditions to Claim Deductions Under Section 80GGB

To successfully claim deductions under Section 80GGB, companies must adhere to these conditions:

• Eligible Donor: Only Indian companies can claim deductions; individuals and Hindu Undivided Families (HUFs) are excluded.

• Registered Political Parties: Donations must be directed towards parties recognized by the Election Commission.

• Mode of Payment: Payments should not be made in cash; electronic methods or cheques are mandatory.

• Documentation Requirement: Companies must obtain receipts from the recipient parties or trusts.

Documents Required to Claim Deductions Under Section 80GGB

To claim deductions under this section, companies need to provide:

• Government-issued ID details

• Registered address

• Permanent Account Number (PAN)

• Registration number of the electoral trust or political party

• Mode and amount of payment

• Receipt for the donation

Features of Contributions Made to Political Parties Under Section 80GGB

Contributions under Section 80GGB have several notable features:

• Transparency in Funding: Encourages documented contributions rather than cash donations.

• No Upper Limit on Deductions: Companies can deduct any amount donated within their taxable income limits.

• Promotes Political Engagement: Supports democratic processes by incentivizing corporate participation in political funding.

Key Difference Between: Section 80GGA vs Section 80GGB vs Section 80GGC 

Understanding these sections helps clarify their distinct purposes:

Conclusion

Section 80GGB allows companies to claim a tax deduction on donations made to political parties or electoral trusts. It encourages corporate contributions to political funding, provided payments are made through non-cash modes. This deduction helps businesses support political causes while optimizing tax liabilities.