Section 80GGB

What Is Section 80GGB Of The Income Tax Act?

Under Section 80GGB of Income Tax Act, 1961 if an Indian company donates money to a political party or an electoral trust registered in India the company can claim a deduction for that donation. Political party receiving the donation must be officially registered under Section 29A of the Representation of the People Act 1951. An electoral trust on the other hand is a non profit organization established under Section 8 of the Companies Act 2013. Electoral trusts can accept voluntary donations from companies and then distribute these funds to registered political parties as per legal guidelines.

Who Is Eligible To Claim Deductions Under Section 80GGB?

Most Indian businesses registered under the Companies Act of 2013 can deduct donations they make to recognized political parties or electoral trusts under Section 80GGB for tax purposes. However there are some exceptions:

1. Government agencies cannot claim this deduction.
2. Newly established companies defined as those in operation for less than three years are also ineligible.

3. To qualify for the tax deduction donations must be made through demand drafts, cheques or electronic payments. Cash donations are not eligible.

According to Section 29A of the Representation of the People Act 1951 donations must be made to a recognized political party. Donations to electoral trusts are also eligible for tax deductions under Section 80GGC.

What Expenses Are Covered Under Section 80GGB?

Section 80GGB of the Indian Income Tax Act allows companies to claim deductions for contributions made to political parties or electoral trusts. Here are the key points about expenses covered under Section 80GGB.

• Donations made by a company to any political party registered under Section 29A of the Representation of the People Act 1951 are eligible for deduction.
• Political party must be registered and must comply with the regulations set forth by the Election Commission of India.
• Donations made to electoral trusts which are established to receive contributions and distribute them to political parties are also covered.
• Electoral trusts must be registered and recognized by Central Board of Direct Taxes.
• Contributions must be made through legitimate banking channels such as cheques, demand drafts, electronic transfers.
• Cash contributions are not eligible for deduction under this section.
• Entire amount of the contribution made to a political party or electoral trust can be claimed as a deduction.
• There is no upper limit on the amount that can be claimed as a deduction under Section 80GGB.
• Companies must maintain proper receipts and records of the contributions made to political parties or electoral trusts. These records must be produced if required by tax authorities for verification purposes.
   

What Documents Are Required To Claim Deductions Under Section 80GGB?

To claim a deduction under Section 80GGB for donations made to political parties or electoral trusts you need a donation receipt. This receipt should have the following details:

1. Your name
2. Your address
3. Your Permanent Account Number
4. Tax Deduction and Collection Account Number of the recipient
5. Registration number of the political party or trust
6. How you made the donation like bank transfer, cheque
7. Amount you donated

Make sure the receipt includes all these details to claim your deduction.

Amount Of Deduction Under Section 80GGB

1. There is no maximum limit on the amount that can be deducted from taxes. Any amount given by a qualifying firm to a registered political party under Section 29A of the Representation of the People Act, 1951, can be deducted from its taxes.

2. Donations made by corporations to political parties are fully tax deductible under Section 80GGB of the Income Tax Act.

3. Companies can donate to charities and deduct up to 100% of the donation from their taxable income. However according to the Companies Act 2013 their donations cannot exceed 7.5% of their average net profit over the last three years.

Conditions To Claim Section 80GGB Deductions

Section 80GGB of Income Tax Act in India covers the rules for companies donating to political parties. Here are the key points simplified:

1. Donations to political parties must be made by Cheque, Demand Draft or Electronic Transfer. Cash donations are not allowed.

2. There is no maximum limit on how much a company can donate to political parties.

3. Companies must disclose the donation amount and the name of the political party in their Profit and Loss account for the financial year.

4. If donations are made through electoral bonds the company only needs to mention the donation amount in the Profit and Loss account without naming the political party.

5. Any advertisement a company places on a platform owned by a political party such as social media, magazines or newspapers is considered a donation and qualifies for an income tax deduction.

6. Donations must be made through approved payment methods and the company must keep records of the transactions.

7. Public Sector Enterprises and companies less than three years old are not allowed to make these donations.

Conclusion

Under Section 80GGB of the Income Tax Act Indian companies and taxpayers can get tax deductions when they donate to electoral trusts or registered political parties. To qualify for these deductions donors need to follow specific rules in the Income Tax Act and provide the necessary documents to the Income Tax Department. Indian government aims to promote transparency in political funding and encourage more people to participate in the democratic process by offering these tax incentives.