Income Tax Deduction u/s 80GGC

Income Tax Deduction u/s 80GGC

-Dr. Lalit Kumar Setia

The income tax act provides a deduction u/s 80GGC for the amount of contribution made during the previous year, to a political party or an electoral trust. This deduction is not available for the amount contributed by way of Cash. For claiming deduction u/s 80GGC, the political party to whom the amount is contributed by way other than cash should be registered under section 29A of the Representation of the People Act, 1951.

How much % of gross earnings can be donated to the political organizations under section 80GGC

As per the income tax act, an individual can donate as much as 10% of his  or her gross earning to any political organization of his or her choice (reference - https://www.bankbazaar.com/tax/section-80ggc.html) 

100% Tax Deduction is possible on the amount contributed under section 80GGC

Yes, it is possible that an assessee claims 100% tax deduction under section 80GGC but it is a must donate through demand draft or cheque or any digital mode to get the deduction. Need not to say, the total amount claimed under section 80GGC cannot be higher than the total taxable income of an individual.

Can a person donate to multiple political parties?

The condition is only one, the political parties should be registered under section 29A of the Representation of the People Act, 1951. There is no limit on the number of political parties to whom an assessee decides to contribute an amount of donation.

Documents required for getting deduction u/s 80GGC

It is worth noting that if the donation is made to any entity which is not notified by the income tax act to get the donations for making the donors claim deduction u/s 80G, the deduction is not admissible. Similarly, in the case of 80GGC, if the donation is made to parties not registered under section 29A of the Representation of the People Act, 1951, then the deduction is not admissible.

The details of the donations are to be submitted in writing to the employer, for incorporating it in form 16. In case, it is not submitted, the assessee may mention the details in the specified column while submitting the income tax return.

The donation may be deducted directly from the salary and the donation receipt is submitted in the name of the employer with proper details i.e. name and address of the party, amount donated, PAN, and TAN of the party.

The employee can claim a deduction if he has this certificate from the employer which confirms that the contribution was made from the employee’s salary account.

In case, the employee himself made any contribution, he may submit the same in writing with the above details of receipt received from the political party.

Most of the taxpayers can misuse section 80GGC for getting tax deductions, may submit fake donation receipts and in such case, how to ensure the admissibility of deduction 80GGC, is a challenge for the Drawing and Disbursing Officers (DDOs).

Filing of Bogus Refund Claims or giving the wrong deduction by a DDO to the employee

In case, any bogus refund is claimed by a taxpayer, the responsibility lies with the taxpayer. But in case a wrong deduction is given by a DDO to an employee, the DDO will be responsible for it. The Income Tax Law makes the assessing officers responsible if the assessment of income is not done accurately.

DDOs are expected to consider the following points in 80G

In the case of 80G, an employer or DDO is allowed only to consider only the following donations to allow while giving deduction under section 80G:

The Jawaharlal Nehru Memorial Fund; The Prime Minister’s Drought Relief Fund; The National Children’s Fund; The Indira Gandhi Memorial Trust; The Rajiv Gandhi Foundation and to the following bodies to the extent of 100 percent of the contribution: The National   Defence  Fund  or  the Prime Minister’s National Relief Fund; The Prime Minister’s Armenia Earthquake Relief Fund; The Africa (Public Contribution-India) Fund; The National Foundation for Communal Harmony; The Chief Minister’s Earthquake Relief Fund, Maharashtra; The National Blood Transfusion Council; The State Blood Transfusion Council; The Army Central Welfare Fund; The Indian Naval Benevolent Fund; The Air Force Central Welfare Fund; The Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996; The National Illness Assistance Fund; The Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund, in respect of any State or Union Territory, as the case may be, subject to certain conditions; The University or educational institution of national eminence approved by the prescribed authority; The National Sports Fund to be set up by the Central Government; The National Cultural Fund set up by the Central Government; The Fund for Technology Development and Application set up by the Central Government; The national trust for welfare of persons with autism, cerebral palsy mental retardation and multiple disabilities.

The employer or DDO cannot be in a position to ascertain the genuineness of donations if the donations have been made to private charitable trusts, therefore, only the income tax department can allow such deduction of donation under section 80G.

What can happen if the income tax department detects bogus or fake deduction claims of an individual?

There are three persons, on which action can be taken by the income tax department i.e. Employees, Employers, and the consultant whoever is found guilty of making the bogus or fake deduction allowed. The following points should be considered while getting or allowing deduction in case of donations:

1. Only those deductions which are made in cash (up to Rs. 2000) or cheque or electronic fund transfer (EFT) are eligible for the tax deduction. The donations in form of clothes, milk, medicines, food, etc. are not eligible for getting a tax deduction.

2. The donations to foreign charitable trusts are not eligible for tax deduction under India’s Income Tax Act.

3. In the case of 80GGC, donations to political parties by making miscellaneous expenses such as brochures, souvenirs, or pamphlets cannot be claimed.

4. The following documents are required to claim deduction under section 80G:

Stamped Receipt with proper details:

It is must obtain a stamped receipt from the trust or institution which is notified by the income tax act to receive donations for 80G purposes. The receipt should contain the name, address, and PAN of the trust or institution along with the registration number under section 80G, and validity of registration (registration period) must also be mentioned.

*Copyright © 2021 Dr. Lalit Kumar. A few rights reserved. Use this information in the public interest.

This content is written by Dr. Lalit Kumar Setia; a renowned author and trainer. He completed his Doctorate in Commerce from Kurukshetra University Kurukshetra and MBA in Information Technology from GJU, Hisar. He also wrote two books, 15 research papers, and organized more than 200 Training Courses during his working period since 2006 in Haryana Institute of Public Administration, Gurugram. The article was published on 23rd December 2021 and last updated on 23rd December 2021. The writer can be contacted on lalitkumarsetia@gmail.com 

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