What is Section 80GGB?
Section 80GGB of the Income Tax Act, 1961 provides tax deduction facility to Indian companies on donations made to registered political parties or an electoral trust. Since there is no limit specified u/s 80GGB, any amount contributed to a political party can be claimed as a tax deduction.
Eligibility Criteria for Claiming Tax Benefits Under Section 80GGB
- All Indian companies registered under the Companies Act, 2013 can make donations to a registered political party or electoral trust to claim tax deduction under section 80GGB except the following:
- A Government Company
- A company which is established only in the last 3 years.
- To claim tax benefits, donations should not be made in cash. All other modes of donations except cash such as demand draft, cheque, e-payment are all eligible for claiming a tax deduction u/s 80GGB.
- Donations must be made to a registered political party under section 29A of Representation of People Act (RPA), 1951. Donations made to electoral trust also will be eligible for claiming tax deduction under section 80GGC.
Deduction Limit Under Section 80GGB
- There is no upper limit for claiming the tax deduction. Any amount donated to a registered political party (u/s 29A of RPA, 1951) by a qualified company can be claimed as a tax deduction.
- Donations made under section 80GGB by companies are 100% tax-deductible.
Can companies contribute any amount as political donations?
There is no provision under the Income Tax Act, 1961 which limits the political contributions made by companies. However, under the Companies Act, 2013, companies can only contribute upto 7.5% of their average net profits of the past three financial years.
It should also be noted that u/s 182, it is mandatory for companies to disclose such contributions in their profit/loss statement along with the name of the political party.
Can individuals make donations to a political party and claim tax deduction benefits?
While only companies can claim tax benefits under section 80GGB, individuals making donations to a registered political party or an electoral trust can claim tax deductions under section 80GGC of the IT Act, 1961.
Also Read: Know More About Section 80GGC
Can I claim tax deduction on donations made to scientific research institutions?
Section 80GGA of the IT Act 1961 contains provisions for claiming a tax deduction on donations made to institutions involved in scientific research.
Also Read: Know More About Income Tax Deductions