Section 80GGB of Income Tax Act

Section 80GGB is introduced by the government for the companies to claim tax deduction on the donations made by them to the registered political parties or electoral trusts. There is no upper limit specified for claiming amount of donation or contribution under section 80GGB of the income tax act, 1961. Any amount of donation or contribution made to political party by a company can be claimed as deduction.

Section 80GGB: Donation to Political Parties by Companies

Entities eligible for deduction under Section 80GGB

All Indian companies registered under companies act, 2013 are eligible to claim deduction under section 80GGB except the following –

  1. Government company
  2. Company incorporated in the last 3 years
  3. Foreign individuals or foreign companies

Donations which quality for deduction under Section 80GGB

Eligible Indian companies can claim deduction under section 80GGB of the income tax act by providing donations/contributions to the following –

  1. Donations made to registered political parties under section 29A of the representation of the people act, 1951
  2. Donations made to Electoral trusts

Deduction limit under Section 80GGB

  1. Anyamount of donation or contribution made by aneligible Indian company to a registered political party under section 29 A of representation of the people act 1951 can be claimed as tax deduction under section 80GGB.
  2. 100% tax deduction is permissible for the companies making donations to registered political parties under section 80GGB.

Can a company claim deduction on donations made to multiple political parties?

Yes, a company can claim 100% deduction on donations made to multiple political parties under section 80GGB of the income tax act, 1961.

Can companies donate or contribute any amount as political donations?

Yes, companies can donate any amount as contribution to political parties but it should not be more than 7.5% of the average net profits earned by the company in previous 3 financial years. However, it is mandatory for the companies to disclose these donations or contributions in their statement of Profit & Loss account along with the name of the political party. If you are making a contribution through electoral bonds, it is not necessary for you to mention the name of the political party in the statement of P&L account.

Can individuals make donations to political parties & claim tax deduction benefit u/s 80GGB?

Only companies are eligible to make donations to political parties and can claim tax deduction u/s 80GGB. An individual is only eligible for making donations to political parties and claiming deduction under section 80GGC.

Qualifying modes of payment

A company can use the following modes of payment to make donations to political parties –

  1. Cheque
  2. Online net banking
  3. Debit card or credit card
  4. Demand draft

Note – If you want to claim the tax benefit, do not use cash as mode of payment.

Exceptions under Section 80GGB

Any eligible Indian company making donation/contribution to political party or electoral trust is not eligible to claim tax deduction under section 80GGB because of the following exceptions –

  1. Any donation/contribution made by a company through cash is not eligible for deduction under section 80GGB.
  2. Any donation made in kind or affection also not qualifies for deduction under section 80GGB.

Looking for any help in income tax return filing, kindly call us at 8800221252 or you can also e-mail us at info@finacbooks.com

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