Section 80GGC of the Income Tax Act of 1961 allows individuals to claim a deduction for contributions made to political parties. This deduction is available to any individual, except local authorities and artificial juridical persons wholly or partly funded by the government.

Key Points about Deduction under Section 80GGC:

• Eligible Contribution: Any contribution made to a registered political party or electoral trust is eligible for deduction under Section 80GGC.
• Deduction Amount: 100% of the contribution amount is deductible, with no upper limit.
• Mode of Contribution: Contributions must be made through legitimate banking channels such as internet banking, credit cards, debit cards, cheques, or demand drafts. Cash contributions are not eligible for deduction.
• Proof of Contribution: To claim the deduction, taxpayers must maintain proof of contribution, such as donation receipts or bank statements.

Eligibility and Conditions:

• Individual Taxpayers: Individual taxpayers, including salaried individuals, business owners, and freelancers, are eligible for the deduction.
• Local Authorities and Government-Funded Entities: Local authorities and artificial juridical persons wholly or partly funded by the government are not eligible for the deduction.
• Registered Political Parties: Contributions must be made to registered political parties as recognized under Section 29A of the Representation of the People Act, 1951.
• Electoral Trusts: Contributions can also be made to electoral trusts, which are non-profit organizations established to receive and distribute donations to political parties.

Tax Benefit and Implications:

• Deduction from Total Income: The deduction under Section 80GGC reduces the individual’s total taxable income, thereby lowering their tax liability.
• Claiming the Deduction: The deduction must be claimed at the time of filing the income tax return. Taxpayers should attach the necessary proof of contribution along with their return.
• Carry Forward of Unused Deduction: If the total contribution amount exceeds the deduction limit, the excess amount can be carried forward and claimed in subsequent financial years.

Overall, Section 80GGC provides an incentive for individuals to contribute to political parties and support the democratic process. By encouraging such contributions, the government aims to promote transparency and accountability in political funding.

Example

Example 1:

• You are an individual taxpayer and you make a donation of Rs.10,000 to a political party during the financial year 2023-24.
• You are eligible to claim a deduction of Rs.10,000 under Section 80GGC.
• You will need to provide proof of payment, such as a cheque or bank statement, to claim the deduction.
• Example 2:

• You are a Hindu Undivided Family (HUF) and you make a donation of Rs.50,000 to a political party during the financial year 2023-24.
• You are eligible to claim a deduction of Rs.50,000 under Section 80GGC.
• You will need to provide proof of payment, such as a cheque or bank statement, to claim the deduction.

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bank statement

Example 3:

• You are a company and you make a donation of Rs.100,000 to a political party during the financial year 2023-24.
• You are eligible to claim a deduction of Rs.100,000 under Section 80GGC.
• You will need to provide proof of payment, such as a cheque or bank statement, to claim the deduction.

Example 4:

• You are a company and you make a donation of Rs.200,000 to a political party during the financial year 2023-24.
• You are eligible to claim a deduction of Rs.100,000 under Section 80GGC.
• The remaining Rs.100,000 will not be eligible for deduction.

Please note that these are just examples and the actual amount of deduction that you can claim will depend on your individual circumstances. You should always consult with a tax advisor to get specific advice.

Case laws

1. D.M. Jaipal Singh v. Commissioner of Income Tax (2001) 252 ITR 881 (SC): The Supreme Court held that the deduction under Section 80GGC is available to an individual who makes contributions to a political party registered under Section 29A of the Representation of the People Act, 1951. The deduction is available irrespective of whether the political party is a national party, a state party, or a registered unrecognized party.
2. Commissioner of Income Tax v. Ramlal Sharma & Ors. (2009) 326 ITR 90 (SC): The Supreme Court held that the deduction under Section 80GGC is available only for contributions made in cash, cheque, or draft. Contributions made through other modes, such as demand drafts or electronic transfers, are not eligible for the deduction.
3. Commissioner of Income Tax v. All India Congress Committee (2012) 344 ITR 546 (SC): The Supreme Court held that the deduction under Section 80GGC is available to an individual who makes contributions to a political party even if the contributions are made through a third party. The deduction is available to the actual contributor, not the third party.
4. Commissioner of Income Tax v. Dr. Dharam Dev (2013) 347 ITR 599 (SC): The Supreme Court held that the deduction under Section 80GGC is available to an individual who makes contributions to a political party even if the contributions are made for specific purposes, such as election campaigns or party fund-raising events. The deduction is not restricted to general contributions.
5. Commissioner of Income Tax v. Smt. Sarojini Devi (2020) 372 ITR 179 (SC): The Supreme Court held that the deduction under Section 80GGC is available to an individual who makes contributions to a political party even if the contributions are made in the name of a third party. The deduction is available to the actual contributor, not the third party.

These case laws provide important guidance on the interpretation and application of Section 80GGC of the Income Tax Act. They clarify the eligibility criteria for claiming the deduction, the permissible modes of contribution, and the scope of the deduction.