🗳️ Non-Corporate Political Funding? Section 80GGC is Your Tax Benefit! ✨

While Indian companies can claim a deduction for contributions to political entities under Section 80GGB, other taxpayers also have a similar provision. Section 80GGC of the Income Tax Act, 1961, allows a deduction from the Gross Total Income for monetary contributions made to political parties or electoral trusts by any assessee other than an Indian company or a local authority. Understanding Section 80GGC is important for individuals, HUFs, firms, LLPs, and other non-corporate entities that contribute to political funding, enabling them to claim a tax benefit for such contributions.

What is Section 80GGC? (The Concept)

Section 80GGC provides a deduction from the Gross Total Income (GTI) for specific monetary contributions made to political entities by eligible assessees.

• Gross Total Income (GTI): The total income computed under all five heads of income (Salaries, House Property, PGBP, Capital Gains, Other Sources), after accounting for eligible loss set-offs.
• Deduction: An amount subtracted from your GTI to arrive at your Total Taxable Income, on which tax is calculated.
• Chapter VI-A: The chapter in the Income Tax Act (Sections 80C to 80U) listing various deductions from Gross Total Income.

The primary purpose is to facilitate and provide a tax incentive for transparent political funding by individuals and other non-corporate taxpayers, similar to the provision for Indian companies under Section 80GGB.

Who Can Claim Section 80GGC Deduction? (Crucial)

The deduction under Section 80GGC is available to Any Assessee, with two specific exclusions:

• Any Assessee: This broadly includes Individuals, Hindu Undivided Families (HUFs), Firms, Limited Liability Partnerships (LLPs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), Artificial Juridical Persons (AJPs), Cooperative Societies, Trusts, and even Foreign Companies (if they are not considered ‘Indian Companies’).
• CRITICAL EXCLUSIONS: The deduction is NOT available to assessees who are:
  • An Indian Company. (They claim deduction under Section 80GGB).
  • A Local Authority. A Local Authority is generally defined as a municipal committee, district board, body of port commissioners, or other authority legally entitled to, or entrusted by the government with, the control or management of a municipal or local fund.

Explanation: Essentially, if you are a taxpayer but are not an Indian company or a local authority, you are eligible to claim deduction under Section 80GGC for eligible political contributions.

What Contributions are Eligible Under Section 80GGC?

To be eligible for deduction under Section 80GGC:

• The contribution must be made in money. Contributions made in kind (like providing goods, services, sponsoring events etc.) are NOT eligible for deduction under Section 80GGC.
• The monetary contribution must be made during the previous year (PY 2024-25 for AY 2025-26).

To Whom Can Contributions Be Made? (Eligible Donees – Crucial)

The eligible monetary contribution must be made to one of the following entities:

• Any Political Party.
  • Political Party: Means a political party registered under Section 29A of the Representation of the People Act, 1951.
• An Electoral Trust.
  • Electoral Trust: Refers to a company formed for the purposes of Section 13B of the Income Tax Act and approved by the Central Board of Direct Taxes (CBDT) under the Electoral Trusts Scheme, 2013.

These are the same eligible donees to whom Indian companies can contribute and claim deduction under Section 80GGB.

The Deduction Amount Under Section 80GGC (100%)

• The amount of deduction allowed under Section 80GGC is 100% of the eligible amount contributed during the previous year (PY 2024-25 for AY 2025-26).
• There is no upper monetary limit on the amount of deduction that can be claimed under Section 80GGC, other than the condition that the total deduction under Chapter VI-A cannot exceed the Gross Total Income of the assessee. The full eligible contribution is deductible.

Payment Method (Crucial – Non-Cash ONLY)

Section 80GGC, like Section 80GGB, has a strict rule regarding the payment method:

• Any contribution made by an eligible assessee to a political party or an electoral trust must be made by any mode other than cash.
• This means payments must be made via cheque, demand draft, online transfer, electoral bonds, or any other digital mode.
• Cash contributions, regardless of the amount, are strictly NOT eligible for deduction under Section 80GGC.

Distinction from Section 80GGB

The primary difference between Section 80GGB and Section 80GGC lies in the type of assessee eligible to claim the deduction:

• Section 80GGB: Exclusively for Indian Companies.
• Section 80GGC: For all other assessees, EXCEPT Indian Companies and Local Authorities.

Both sections cover contributions to the same types of donees (Political Parties and Electoral Trusts) and have the same rules regarding mandatory monetary contribution, 100% deduction, and strict non-cash payment requirement.

Proof of Contribution is Mandatory

To claim deduction under Section 80GGC, the assessee must obtain and keep valid proof of the contribution. This would typically be:

• A receipt issued by the political party or electoral trust receiving the contribution.
• The receipt should contain details such as the name and PAN of the political entity/trust, the amount of contribution, the mode of payment, and the date of contribution.

How to Claim Section 80GGC Deduction

1. Verify Assessee Type: Ensure you are an eligible assessee (not an Indian company or local authority).
2. Check Contribution Eligibility: Verify that your contribution is monetary, made to an eligible political party or electoral trust, and made by a non-cash mode during PY 2024-25.
3. Calculate Deduction: Calculate the eligible deduction (100% of the eligible contribution).
4. Declare in ITR: Declare the deduction under Section 80GGC in your annual Income Tax Return (ITR).
5. Maintain Proofs: Keep the proofs of contribution safely for records and potential scrutiny by the tax authorities.

Examples

Example 1: Individual Donates to Political Party

Mr. Sanjay (Individual) contributes ₹25,000 via online transfer to a registered Political Party in PY 2024-25.

• Assessee Type: Individual (Not Indian Company or Local Authority). (Yes)
• Contribution: Monetary, ₹25,000. (Yes)
• Donee: Registered Political Party. (Yes)
• Payment Method: Online Transfer (non-cash). (Yes)
• Deduction: 100% of eligible contribution.
• Mr. Sanjay’s Deduction under Section 80GGC = 100% of ₹25,000 = ₹25,000.

Example 2: Firm Donates to Electoral Trust

M/s. Associates (a Partnership Firm) contributes ₹1,00,000 via cheque to an approved Electoral Trust in PY 2024-25.

• Assessee Type: Partnership Firm (Not Indian Company or Local Authority). (Yes)
• Contribution: Monetary, ₹1,00,000. (Yes)
• Donee: Approved Electoral Trust. (Yes)
• Payment Method: Cheque (non-cash). (Yes)
• Deduction: 100% of eligible contribution.
• M/s. Associates’ Deduction under Section 80GGC = 100% of ₹1,00,000 = ₹1,00,000.

Example 3: Cash Contribution by Individual (Not Eligible)

Ms. Preeti (Individual) contributes ₹5,000 in cash to a registered Political Party in PY 2024-25.

• Assessee Type: Individual. (Yes)
• Contribution Type: Monetary. (Yes)
• Donee: Registered Political Party. (Yes)
• Payment Method: Cash. (No)
• Ms. Preeti’s Deduction under Section 80GGC = ₹0. (The cash payment makes the entire contribution ineligible for deduction).

Example 4: Donation by Indian Company (Not Eligible under 80GGC)

XYZ Ltd. (an Indian Company) contributes ₹2,00,000 via online transfer to a registered Political Party in PY 2024-25.

• Assessee Type: Indian Company. (No)
• XYZ Ltd.’s Deduction under Section 80GGC = ₹0. (Indian companies are not eligible for 80GGC; they claim under Section 80GGB).

Important Points to Remember about Section 80GGC

Conclusion

Section 80GGC provides a wide range of non-corporate assessees with the ability to claim a 100% tax deduction for monetary contributions to registered political parties or electoral trusts, provided the contribution is made through non-cash channels. This section, along with Section 80GGB for companies, aims to bring transparency to political funding. Understanding the strict eligibility criteria (excluding companies/local authorities), the specific eligible donees, and the mandatory non-cash payment rule is crucial. Importantly, this deduction is available under both the Old and New Tax Regimes from AY 2025-26 onwards. For accurate tax planning and compliance regarding political funding, ensuring adherence to the requirements of Section 80GGC and consulting a qualified tax professional is strongly recommended.