Section 80GGC

What is Section 80GGC?

Section 80GGC of the Income Tax Act, 1961 allows individuals to claim 100% tax deduction on donations made to registered political parties or electoral trusts. The primary purpose of this section is to promote transparency in electoral funding while encouraging citizens to contribute to political institutions without additional tax burdens.

This deduction is available only if the donation is made through legitimate banking channels, such as:

• Internet banking
• Debit or credit cards
• Cheques or demand drafts
• UPI or digital payment methods

Contributions made in cash or kind are not eligible for deductions under this section.
 

Eligibility Criteria for Claiming Section 80GGC Deductions

Who Can Claim Deductions?

The following entities are eligible to claim deductions under Section 80GGC:

• Individuals
• Hindu Undivided Families (HUFs)
• Firms
• Association of Persons (AOPs)
• Body of Individuals (BOIs)
   

Who Cannot Claim Deductions?

The following entities are not eligible to claim deductions under Section 80GGC:

• Companies – Indian companies making donations can claim deductions under Section 80GGB, not 80GGC.
• Local Authorities – Any donation made by local governing bodies is not covered under this section.
• Artificial Juridical Persons (wholly or partially funded by the government) – Entities receiving government funding cannot claim deductions under this section.
• Taxpayers under the New Tax Regime – Individuals opting for the new tax regime cannot claim deductions under Section 80GGC.

Where Can Donations Be Made Under Section 80GGC?

For a donation to qualify under Section 80GGC, it must be made to one of the following entities:

• A Political Party – The party must be registered under Section 29A of the Representation of the People Act, 1951.
• An Electoral Trust – Contributions to an electoral trust recognised by the government are also eligible for deductions.

Any contributions made to unregistered political entities or independent candidates do not qualify for deductions under this section.
 

Deduction Limits Under Section 80GGC

What is the Maximum Deduction Allowed?

• Section 80GGC allows a 100% deduction on the amount donated to eligible political parties or electoral trusts.
• However, the total deduction cannot exceed the total taxable income of the individual for that financial year.
• If the taxable income becomes zero after claiming the deduction, the individual cannot claim any refund or carry forward the deduction.
   

What Types of Donations Are Not Eligible?

The following types of contributions do not qualify for deduction under Section 80GGC:

• Cash Donations – From FY 2013-14, cash donations are not eligible for deductions. The government mandated electronic payment methods to increase transparency.
• Donations in Kind – Contributions in the form of gifts, property, assets, or any other non-monetary items do not qualify for tax deductions.
   

Key Features of Section 80GGC

• Full Deduction – Unlike other donation-based tax benefits, Section 80GGC allows a 100% deduction on contributions made to eligible entities.
• Non-Corporate Taxpayers Only – Companies cannot claim deductions under this section; they must use Section 80GGB.
• Promotes Transparency – Section 80GGC was introduced to reduce black money in elections and encourage funding through banking channels.
• Cannot be Claimed Under the New Tax Regime – Individuals opting for the new tax regime under Section 115BAC are not eligible for this deduction.
   

Documentation Required for Claiming Deduction

To claim a deduction under Section 80GGC, taxpayers must submit the following documents while filing their Income Tax Return (ITR):

Donation Receipt – A receipt issued by the political party or electoral trust must be submitted as proof. The receipt must include:

• Name of the donor
• PAN and TAN details of the political party
• Date and mode of payment
• Registration number of the political party

Payment Proof – Bank statements, cheque details, or online transaction references should be kept as proof of payment.

Income Tax Return (ITR) Form – The donation details must be included under Chapter VI-A deductions in the relevant ITR form.

How to Claim Deduction Under Section 80GGC?

Step-by-Step Process

• Make a Contribution – Donate to an eligible political party or electoral trust using approved banking methods.
• Collect the Receipt – Ensure you receive a valid donation receipt from the recipient party.
• File ITR with Deduction Details – While filing your income tax return, mention the contribution amount under Chapter VI-A deductions.
• Submit Supporting Documents – Attach the donation receipt and payment proof for verification.
• Verify and File ITR – Cross-check all details before submitting the tax return.
   

Differences Between Section 80GGB and Section 80GGC

Scenarios Where Section 80GGC Deduction is Not Allowed

• Opting for the New Tax Regime – Individuals choosing the new tax regime under Section 115BAC cannot claim deductions under Section 80GGC.
• Donations in Cash or Kind – Any contribution made in cash or as a gift is not eligible.
• Lack of Proper Documentation – If a taxpayer fails to provide supporting documents, the deduction claim can be rejected by the Income Tax Department.
   

Conclusion

Section 80GGC is a crucial provision under the Income Tax Act, 1961, designed to promote transparency in political funding while allowing individuals to benefit from tax deductions. By contributing to registered political parties or electoral trusts through legitimate banking channels, taxpayers can reduce their taxable income while supporting the democratic process.

However, it is essential to adhere to eligibility conditions, avoid cash contributions, and maintain proper documentation to claim deductions successfully. By understanding and utilising Section 80GGC, individuals can make informed decisions about their political donations while optimising their tax liabilities.