Deductions Under Section 80GGB

Deductions Under Section 80GGB - An Overview

A provision of exemption from taxation under Section 80GGB exists to promote increased contributions to political parties. It focuses on financial support or donations given to political parties by Indian corporations. The political party has to be registered as per Section 29a under the Representation of People Act of 1951. Subsequently, an electoral trust can also receive such contributions and can further reallocate to registered political parties.

Tax Deductions Under Section 80GGB

As per the law, any Indian company can provide donations directly to a political party or an electoral trust registered in India. It will give a tax deduction on the donation amount as per the Income Tax Act of 1961. The political party is to be legally registered as per Section 29a of the Representation of the People's Act of 1951. Other businesses may voluntarily donate money to an electoral trust and then distribute it to legally recognised political parties.

Rules and Regulations to Claim Deductions Under Section 80GGB

The guidelines and conditions governing contributions to political parties in India are outlined in Section 80GGB. The following are the crucial details you have to take into account:

• Cash contributions are prohibited, under Section 80GGB
• All the contributions have to be made directly to the political parties registered in India
• The payment should be made via a demand draft, electronic transfer, or by a cheque
• There are no limitations on the total amount of contributions made to the political party
• Under Section 80GGB of the Income Tax Act, 1971 no higher limit should be applied to contributions made to political parties. However, businesses are provided to contribute up to 7.5% of their annual net profit under the Companies Act of 2013
• Amount contributed to the political party has to be registered in the profit and loss statement
• If the donation is made through electoral bonds, it is not necessary to list the party name in the yearly statement. Only the contributed amount has to be stated
• According to the most recent guidelines, any commercial placed by a business on a website run by a political party would qualify as a contribution under Section 80 GGB. This will directly provide a tax deduction. Social media, periodicals, newspapers, etc. are all included
• There is no upper limit to the amount that can be donated to a political party, but it is required that a business use an approved method and maintain a written record of the donation
• Any public sector company or business with a three-year or less than 3-year lifespan should not be allowed to make any form of contributions under Section 80GGB.

Eligibility Requirements for Section 80GGB Tax Benefits

The following are the eligibility requirements for Section 80GGB tax benefits:

• The taxpayer must be an Indian company or enterprise.
• The donation must be made to a political party or an electoral trust registered in India.
• The donation must be made in cash or by cheque, demand draft, or online transfer.
• The donation must be made during the financial year.

Contributions Under Section 80GGB

The following are the contributions that are eligible for deduction under Section 80GGB:

• Any sum of money contributed to a political party or an electoral trust registered in India.
• Any expenses incurred in connection with the donation, such as advertising, travel, and printing costs.

Difference Between Section 80GGB and Section 80GGC

The main difference between Section 80GGB and Section 80GGC is the type of organization that the donation is made to. Section 80GGB allows a deduction for donations made to political parties or electoral trusts, while Section 80GGC allows a deduction for donations made to charitable organizations.

Here is a table summarizing the key differences between Section 80GGB and Section 80GGC:

Things to Note While Contributing to Political Parties in India

You must comprehend a few things if your business is thinking about giving to an Indian political party. According to the Income Tax Act of 1961, the following are the main points you need to keep in mind. If you don't adhere to the suggested procedure, the authorised authorities may reject your request for a deduction.

• Registered Indian organisation has the right to donate funds to the political party of their choice
• A business is free to donate to as many political parties of its choice
• All the contributions made are eligible for income tax deduction under Section 80GGB
• Under Section 29A of the Representation of the People Act of 1951, the political party receiving the donation must be legally registered
• The donation amount must be received by an electoral trust that has been properly registered and acknowledged by the relevant authorities
• Contributions have to be strictly made through bank accounts, electronic transfers, demand drafts, and cheques
• Cash payments are never permitted. This is done to keep track of the money received and spent while also ensuring transparency in political funding
• Under Section 80GGB, the company may deduct all donations made to political parties in full. Therefore, you are free to donate to political parties to choose from and deduct those donations from your income taxes
• You must keep accurate records of all payments made and adhere to all rules outlined in the Income Tax Act of 1961.

Exceptions Under Section 80GGB

By Section 80GGB

• To support a political party, a company or corporation must be registered under the Companies Act of 2013
• Businesses and organisations less than three-year-old are ineligible to claim deductions under Section 80GGB
• No political party may accept funds from foreign sources, including contributions from foreign businesses or people.

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