Donation to a political party can be done by an Indian citizen or Indian company. A non resident can also contribute if he or she has a valid passport. These individuals and Indian companies can claim tax deduction on their donations if conditions related there to have been satisfied.
We have two sections related to tax deduction on donation to political parties. Section 80GGB deals with donation in respect of contributions given by companies to political parties or electoral trust and section 80GGC which deals with donation to political parties by persons other than companies, local authority and artificial judicial person wholly or partly funded by the government.
To claim tax deduction under section 80GGC, an individual has to satisfy certain conditions. If these conditions are not satisfied then tax deductions will not be available.
Here are the conditions;
- Donation has to be paid in any mode other than cash. This means money has to be donated by cheque or through net banking or by any banking channel.
- Political party must be registered under section 29A of the representation of the people act, 1951.
This means an individual can donate cash to a political party. But to claim tax deduction they have to pay it in cheque or through a banking channel. This provision has been introduced with effect from 1st April 2014. If donation is done by handing over cash to a political party then you will not be eligible to get tax deduction.
Similar deduction is available under section 80GGB to Indian companies who have donated money to a political party. As discussed above, donation by Indian companies are to be in any mode other than cash and the political party must be registered under section 29A of the representation of the people act, 1951.
Even expenditure by way of advertisement to a magazine owned by a political party is also considered as contribution under section 80GGB of income tax act. This means if an Indian company has advertised in a magazine owned by a political party then that amount will be considered for tax deduction under section 80GGB of income tax act, 1961.
However, similar provision is not available for section 80GGC of income tax act. Due to this, if an individual has advertised in a magazine owned by a political party then he or she can not claim tax deduction under section 80GGC.
Please remember that there is no minimum and maximum level for these sections. An individual or an Indian company can donate any amount as they feel right. Under section 80GGB and 80GGC, entire donation to a political party can be claimed as tax deduction.
To claim tax deduction, you are required to have the receipt issued by political party. The receipt must contain the name of donor, amount donated, name and address of political party, PAN and TAN of the political party.