An Overview of Tax Exemptions Under Section 80GGB

Section 80GGB of the Income Tax Act in India allows deductions on contributions made by Indian companies to political parties. With a provision like this, Indian taxpayers contribute towards political activities as well as save on taxes. So, if you are someone who supports political parties and are a taxpayer, this article is for you. Read on to learn more about tax exemptions under section 80GGB.

Overview of Section 80GGB

According to the Income Tax Act of 1961, Section 80GGB states that an Indian company or a trust can get tax benefits if they are making any kind of contribution to a political party. Firms can thus claim a deduction equivalent to the amount donated, subject to specified limits. This provision aims to encourage corporate participation in the political process while providing tax incentives. To avail of these benefits, companies must however adhere to certain requirements. Moreover, it is also essential to stay updated on any amendments to this section for accurate and compliant tax planning.

Eligibility Requirements to Get Tax Savings Under Section 80GGB

All the Indian companies that have been registered under the Companies Act of 2013 are eligible for tax exemptions. However, there are exceptions to this which have been listed below:

• A government agency
• A business enterprise that has been operating for only three years
• Any donation made through cash. Payments made through demand drafts, cheques, etc, provide an opportunity for tax savings

Maximum Limit to Claim Under Section 80GGB

Wondering if there is any specific limit that can be claimed under section 80GG? If so, then your concern is right. But the good news is that there is no upper limit when it comes to claiming tax deductions under section 80GGB of the Income Tax Act. However, the only condition is that the political party should be a registered one. There is no capping on the maximum amount that can be donated.

Things to Consider While Claiming Under Section 80GGB

To get the maximum tax saving benefits under section 80GGB, it is very important to keep a few things in mind. To help you out, we have enlisted some of the points you need to consider when you claim under this section:

• Political Party: There is no specific political party towards which you have to make contributions to be eligible for tax deductions. You can make donations to any political party of your choice to enjoy tax benefits under section 80GG. Also, the donation can be made to multiple political parties at a time.
• Donation Amount: There is a maximum amount when it comes to making contributions to a political party. The business company can thus donate any amount of money. The donation amount can be received by any individual except for the person belonging to any local authority or artificial juridical person
• Donation Mode: If you are making any donations through cash, then it will not qualify under section 80GG. Donations made through demand draft, cheque, and digital modes will only qualify for tax deduction under section 80GG.
• Eligibility: You must ensure that the political party to whom the donation is made is registered as per section 29A of the Representation of People Act, 1951. Alternatively, it must be registered at any electoral trust. In case you have made the donation to an electoral bond, then in that case, there is no need to mention the name of the party, you just need to mention the donation amount.
• Other Factors: According to the most recent guidelines, if a company advertises on a platform owned by a Political Party, then also it will be regarded as a contribution under Section 80 GGB

Comparing Section 80GGB with Section 80GGC

While the primary purpose of both section 80GGB and section 80GGC is almost the same, yet there is a significant difference between the two sections that you should know about. Section 80GGB provides tax benefits if any business enterprise is making donations to a political party, on the other hand, section 80GGC offers the opportunity to save taxes to a single taxpayer only. However, in both cases, there should be a supporting receipt of the donation that will help you in saving taxes.

Take Away

In conclusion, Section 80GGB plays an essential role in regulating tax deductions for political contributions. There are certain limitations when it comes to eligibility of Section 80GGB, however, there is no denying that this section serves as a useful way to make political donations as well as save on taxes.

FAQs

1. What are the documents required to claim under section 80GGB?

Some of the documents required to claim under section 80GGB include PAN, donation receipt, mode of payment details, and registration number of the donor.

2. Is there any limit on the donation amount permissible under section 80GGB?

No, there is no specific limit on the donation amount permissible under section 80GGB.

3. Can a business enterprise make donations to multiple parties at the same time?

Yes, donations can be made to multiple political parties at the same time.

4. How is section 80GGB different from section 80GGC?

Section 80GGB is applicable to business entities, while section 80GGC provides tax benefits to an individual taxpayer.

5. Can the donation be made to a specific political party only to claim tax savings under section 80GGB?

No, donations can be made to any political party to enjoy tax benefits under section 80GGB.