What is Section 80-GGB
Updated on : Aug. 27, 2022 - 3 p.m. 17 min read.
Section 80GGB of the Income Tax Act provides for a deduction in respect of contributions made by companies to political parties or electoral trusts. This deduction is available to all companies, including Indian companies, whether public or private, and even foreign companies that have a branch office or business in India.
As per Section 80GGB of the Income Tax Act, 1961, any Indian company or enterprise that donates to a political party or an electoral trust registered in India can claim a deduction for the amount contributed. The political party receiving the donation must be registered under Section 29A of the Representation of the People Act, 1951. An electoral trust is a non-profit company created under Section 8 of the Companies Act, 2013. An electoral trust can receive voluntary contributions from other companies and then reallocate them to the duly registered political parties.
- Indian companies that are registered under the Companies Act, 2013.
- Donations should not be made in cash, to claim tax benefits.
- Donations must be made to a political party registered under section 29A of the Representation of People Act (RPA), 1951.
- Donations made to electoral trust are also eligible for claiming tax deduction under section 80GGC.
It is important to note that as per Section 80GGB of the Income Tax Act, 1961, the maximum amount of deduction that can be claimed under section 80GGB is limited to 7.5% of the company's total income before the deduction is taken into account. Additionally, the political party or electoral trust to which the contribution is made must furnish a certificate to the company specifying the amount of contribution received and other details such as the PAN number of the political party or electoral trust.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.