Everything about Section 80GGC of the Income Tax Act Explained
Section 80GGC of the Income Tax Act allows an individual to claim a tax deduction against contributing or donating to a political party of his or her preference. If you are curious to know more about this Section, keep reading!
What Are the Eligibility Criteria to Avail Tax Deduction Under Section 80GGC?
Taxpayers need to meet the following eligibility parameters to claim tax deduction under Section 80GGC of the Income Tax Act:
- An individual taxpayer can claim tax deduction under Section 80GGC. Thus, an employee who receives income through salary and earns no additional income from other businesses can enjoy a deduction on tax when filing tax returns.
- A local authority cannot claim tax deduction under this Section.
- Corporations cannot avail of tax deductions under this Section of the Income Tax Act.
- An artificial juridical person who receives partial or complete funding from the Government cannot claim tax deduction under this Section.
Which Entities Are Eligible to Receive Contribution Under Section 80GGC?
Individuals can contribute or donate to the following entities to claim tax deduction under Section 80GGC of the Income Tax Act:
- Electoral trusts
- A political party having a registration under Section 29A of the Representation of the People Act, 1951
What Is the Maximum Deduction Limit Under Section 80GGC?
The maximum tax deduction against donations to a political party or electoral trust under Section 80GGC is 100%. However, as this Section is under Chapter VIA deductions, the total deduction amount cannot exceed an individual's total taxable income. Moreover, tax deductions are not valid on TDS on a taxpayer's salary.
How to Claim Tax Deduction Under 80GGC of the Income Tax Act?
Individuals can claim tax deduction under Section 80GGC of the Income Tax Act when filing income tax returns. Taxpayers need to mention the donation amount under Chapter VI-A deductions of the ITR form. Submit details of the donation amount to the employer so that he or she can include this information in Form 16.
The political party to which contribution has been made shall issue a receipt in the name of the employer, summarising the following information:
- Address and name of the political party
- Donation amount
- PAN and TAN details of the political party
The donation amount that an employee makes towards a political party shall be deducted from his or her salary. Additionally, he or she also needs to collect the certificate from the employer. This is an essential document for claiming tax deduction under Section 80GGC of the Income Tax Act. It proves that the employee has drawn the fund from his or her salary account to donate to a political party.
When Can an Individual Not Claim Tax Deduction Under Section 80GGC?
Take a look at the following situations when an individual cannot avail of tax deduction under Section 80GGC:
- Individuals contributing to a political party through cash cannot claim a tax deduction under this Section. Donations made through demand draft, cheque or online payments are the only acceptable payment modes for donations and qualify to avail tax deduction under this Section.
- Individuals providing gifts or making donations in other kinds cannot claim tax deduction under this Section.
Section 80GGC of the Income Tax Act was introduced to make electoral funding transparent and free from corruption. Besides, it also encourages individuals to support the political system financially, where they can claim tax deductions against such donations and lower their tax liability.