Section 80GGB allows an Indian Company to donate to political Party or Electoral Trust in India to save income tax. This is allowed to encourage more donations to be done to political parties in India for Development purpose. It is available for Indian Companies who’s contributions or donations to political political party or electoral trust can help them save income tax. There is no maximum limit under 80GGB and 100% of the donated amount can be claimed in this section,
Let us understand Section 80GGB in detail
- What is Section 80GGB of Income Tax Act?
- Section 80GGB Conditions and Eligibity
- Deduction Limit under Section 80GGB
- Types of Contributions in 80GGB
- Rules to claim Section 80GGB Deduction
- Frequently Askes Questions
What is Section 80GGB of Income Tax Act?
- Section 80GGB of income tax act allows Indian Company to donate or contribute to political party or electoral trust in India for development purpose
- This donation can help the Indian companies to save income tax
- For Individuals, the donations and contributions to political parties or electoral trust can be claimed under Section 80GGC to save income tax
- Note that there is no maximum limit to be claimed under 80GGB and 100% of the amount donated can be claimed as deduction from gross income
- The political party receiving the donation must be a registered political party under the Section 29A of the Representation of the People Act
- An electoral trust is a non-profit company
- Electoral trust can receive contributions from companies and then reallocate it to the registered political parties
- Individuals can make donations to other organizations under Section 80G to claim deductions with old tax regime
Section 80GGB Conditions and Eligibity
There are certain conditions to be followed to claim Section 80GGB:
- All Indian businesses that are registered under the Companies Act of 2013 are allowed to deduct donations, except Government agency, company that has been in operation for three years or less.
- Cash transactions are not allowed to be deducted under 80GGB
- Only cheque, demand draft or online transfers are eligible to claim 80GGB deductions to save income tax
- Contributions must be made to political parties that are recognized according to Section 29A of the Representation of the People Act (RPA), 1951
- Contributions can also be made to electoral trust which can than allocate the funds to political parties
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Deduction Limit under Section 80GGB
There is no maximum limit to be claimed under Section 80GGB. The entire amount donated to political parties or electoral trust can be claimed under this section.
Note that the contributions or donations made in cash will not be considered as deduction. Only demand draft, cheque of online transactions are to be considered to deduction under 80GGB.
Types of Contributions in 80GGB
There are certain list of contributions allowed in 80GGB:
- A business donation or payment or subscription paid to a person who is engaging in any activity which has the potential to influence or alter public support for a political party. Such contribution is eligible for deduction
- The amount spent by company on advertisements, produced on behalf of political parties directly or indirectly is also eligible for deduction
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Rules to claim Section 80GGB Deduction
- Donations or contributions made in cash are not allowed as deduction under 80GGB
- Cheque, Demand draft or online transaction must be used to claim 80GGB deduction made for donations to political parties by Indian companies
- There is no maximum limit to be claimed. 100% or the amount contributed can be claimed in this section to save income tax
- But there is a cap for contributions to be made. Companies can donate up to 7.5% of the annual net profits made within last 3 years to political parties. The company need to disclose the name of the party and the amount donated in the Profit and Loss account for financial year
- Any advertisement from a company on platform owned by political party can be allowed as deduction, which includes, social media, newspapers or magazines.
- A public sector enterprise cannot claim this deduction. Also, a company who is operating since last 3 years or less is not allowed to use 80GGB deduction.
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So Section 80GGB of income tax act allows the Indian company to claim deductions for contributions or donations made to political parties or electoral trust.
There is no maximum limit under this deduction that can be claimed, so entire 100% of the amount can be deducted under 80GGB deduction.
Some more Reading:
- Section 80U Tax Deduction for Physically Disabled
- Income Tax Deduction on House Rent under Section 80GG
- Section 24 Home Loan Interest Deduction
Frequently Askes Questions
Who is eligible for 80GGB?
Indian companies that has been operating for more than 3 years are eligible to claim 80GGB deduction if they contribute or donate to political parties or electoral trust. There is no maximum limit under this section, but maximum contribution that a company can make is up to 7.5% of the annual net profit of company for last 3 years.
Can Individuals claim Section 80GGB? 80GGB vs 80GGC:
No, 80GGB is allowed to be claimed by Indian companies. For Individuals, Section 80GGC is applicable for donations made to political parties or electoral trust.
So the difference is, 80GGB is for companies and 80GGC is for Individuals to contribute or donate to political parties in order to save income tax.
What is exemption under 80GGB?
Section 80GGB exemption allows Indian companies to contribute or donate to political parties or electoral trust in order to claim deduction to save income tax from their gross total income in a financial year. Similarly 80GGC is applicable for Individuals.
Can you donate to multiple political parties under 80GGB?
Yes, donations to multiple political parties are allowed, all donations amount and names of political parties must be mentioned in profit and loss account statement for that financial year by the company.
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