Tax Deductions on Contribution by Companies to Political Parties: Section 80GGB

Published On - March 15, 2016

admin Income Tax Deductions, Income-tax Act, 1961

To get an idea about the tax deductions on contribution to political parties, by companies or enterprises the primal thing, is to understand the basic rules of the same. As per Indian Income Tax Act, 1961,there are certain things that one needs to keep in mind when making donation to political parties as a company or an enterprise:

  1. Any Indian company is permitted to donate money to any political party they are willing to support.
  2. These donors can also donate to multiple parties.
  3. Any individual can take the donation with the exception of a person belonging to the local authority or an artificial juridical person who is otherwise funded by the government, partially or wholly.
  4. No cash payments are allowed and only payments made through cheques, demand draft, direct transfer or pay order in account of the respective political parties are allowed. This is done to keep the record of the amount being donated for the political party.
  5. The political party who is taking the donation has to be registered as per the Section 29A of Representation of the People Act, 1951 or register at an electoral trust.
  6. The companies do not have any restriction when it comes to the amount they are donating to any political party.
  7. Under the Section 80GGB the company receives 100% deduction is permitted from the income of the assessee based on the donation amount given to the political parties.

Tax Deduction under 80GGB:

An enterprise or a company may make a donation to a political party or parties and also claimed the amount for Tax Deduction under the Section 80GGB, of the Indian Income Tax Act, 1961. This section is basically details and rules of the donations provided by Indian companies to any political party or parties or even an electoral trust. These donations can be done through any recorded mode other than cash as long as the political party is registered under the section 29A of the People Act, 1951.

Also any expenses such as advertising, television commercials, radio jingles and now the latest being social media conducted by the political party is considered as contribution under this section. According to this section if any Indian company publicises in a magazine that is owned the political party, the amount will be tax exempted as per section 80GGB. There are no restrictions on the amount that can be donated or spent as long as the company has proof of the expenditure of the same.