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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How a Person Caught for Tax Evasion

 How a Person Caught for Tax Evasion

-Dr. Lalit Kumar Setia

Modes of Tax Evasion:

Taxpayers most of the time, try to delay the payment of taxes or even be failed to pay the taxes. The Government takes it very strictly and there are provisions of penalties, late fees, interest on delayed payment etc. Secondly, there are instances where the smuggling is used to hide the transactions and such things are curbed with the help of taxation inspectors. Third, one of the major modes of tax evasion is the submission of false tax returns. In Government as well as Corporate organizations, the employees and suppliers to organizations, submit false tax returns hiding their income; known as concealment of income. Submission of false tax returns is taken very strictly and the person is required to pay 300% of the amount including a 200% penalty and even there are provisions for imprisonment if it is done intentionally by a person.

The fourth way is to show inaccurate financial statements, most organizations maintain two types of books, one in the fairway and the second is a rough way. Whenever any taxation inspector or audit team comes into the shop/office, the fair accounts are shown which are incomplete. Even it is tried to give bribes and hide the facts from Government.

The fifth way is the submission of false documents (affidavits, certificates, undertakings, etc.) particularly to claim exemptions, deductions, and other benefits available in the Income Tax Act. This is mostly done by the persons who know the provisions in a smarter way.

The sixth way is ‘Non Reporting of Income’, for example, hiding the income from specified sources such as the sale of assets, business transactions without taking money in a bank account, etc.

The seventh way is ‘to store the money and wealth outside the country so that the Government cannot look into the money and wealth retained by the persons.

How Government collects Tax?

The Income Tax Department directs Drawing and Disbursing Officers (DDOs) to deduct a certain percentage of tax from certain specific nature of payments and thereafter remit the same. In the United States of America (USA) is known as ‘Pay As You Earn’ means the citizens while receiving an income, get the tax deducted first. It is basically a great method to reduce tax evasion. Isn’t it?

Status of Income-tax return forms

In India, the extended last date of Income-tax return was 31st December 2021. As of 19th December 2021, the total income tax return forms received were 3.83 crores out of which, more than 50% that is 2.17 crores were submitted by salaried employees. The figures state that out of people contributing to the collection of income tax, the majority of taxpayers belonged to the 'Salaries category', and this majority matters in the economic development of India. 

In Government organizations, DDOs are responsible to withdraw government money from the treasury and disburse the same as per the rules of the Finance Department. How do DDOs support tax administration? What is expected from the DDOs as far as Income Tax is concerned?

A. Obtaining Tax Deductor Account Number (TAN):

Before deducting tax at source (TDS), it is a must for the DDOs to obtain a Tax Deductor Account Number (TAN). It is required to mention the TAN number while depositing the TDS, submit the return of TDS, and issue the certificate of TDS to the deductee.

B. Receiving the correct PAN number from the Deductees and Mentioning it:

It is true that the DDO has to deduct TDS if payments are of certain specific nature as per the Income Tax Act. But it is also necessary that the amount deducted at the source is reflected in the correct PAN of deductees. In case, the PAN number is written wrong or the deductee submits it wrong; the tax credit cannot be provided.

C. Tax Deduction at Correct Rate as per Act and its Deposit

A DDO should be aware of the provisions of Income Tax, how much tax or at which rate, the tax be deducted from which nature of the payment. After deduction of tax, it cannot be retained in the pocket of DDO or in any other account of office/government. It is required to transfer the deducted amount to the designated banks either through book transfer or challan. In case, the TDS is collected by Government Department then it is transferred immediately with the book transfer entry at the time of making payment, and in case of others, it is required to deposit the TDS amount before the 7^th of the following month. There is one exception, that is the last month of the financial year i.e. March. In case, the TDS amount is collected by others (i.e. other than Government Department), it is required to deposit the amount before 30^th April.

For a deposit of TDS, the deductor is required to use Challan no. 281 and pay the amount either on the web portal of Income Tax or in designated banks that facilitate Income Tax Department in effective administration. It is also necessary to quote the correct section of the Income Tax Act with the correct rate of TDS in each deductee record.

D. TDS / TCS Return filing by Deductors:

All Government Departments, Companies, Persons whose accounts are required to be audited, and the persons with more than 50 deductees are required to compulsorily submit the TDS / TCS return in a specific format i.e. Form 24Q for Salaries Payments, Form 26Q for Non-Salaries Payments, and Form 27EQ for Tax Collection at Source, etc.

It is also necessary to file the correction statements whenever there is any discrepancy noticed in the earlier-filed TDS / TCS returns.

E. Issue of Certificates to the Deductees:

It is required to issue the certificate to the deductee with mentioning the details of the amount deducted. In the case of salaried deductees, Form 16 is issued up to 31^st May and in the case of non-salaried deductees, Form 16A is issued within 15 days from the due date of furnishing the TDS return.  

*Copyright © 2021 Dr. Lalit Kumar. All rights reserved.

This article is written by Dr. Lalit Kumar Setia; a renowned author and trainer. The article was published on 27th July, 2021 and last updated on 4^th September, 2021. The writer can be contacted on lalitkumarsetia@gmail.com 

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