Section 80GGB: For Companies
Any contributions by an Indian company to any political parties or an electoral trust shall be eligible for deduction while computing total income (Profit and Loss a/c). The company should maintain proof of such expenditure.
Contribution in CASH is NOT allowed.
By using Electoral bonds Scheme, Companies can donate to political parties without disclosing their identity.
Political Contribution also includes expenses in relation to advertising, television commercials, radio jingles and social media campaign conducted by the political parties.
Income tax act does not specify any limit for political contribution, however as per Companies Act, 2013, the maximum donation is 7.5% of average net profits during the three immediately preceding financial years.
Companies are required to disclose the total contribution made under section 182 in their Profit and Loss (P/L) account and also the name of the political party. In case of contribution through electoral bond, name of the political party is not required.
However, following companies are PROHIBITED from making political contributions [section 182 of Companies Act]-
- A company with a life of less than 3 years; and
- A Government company
Section 80GGC: For Other than Companies
It provides deduction in respect of contributions by an assessee, being any person, to any political parties or an electoral trust in any mode other than cash while computing total income.
Local authority and every artificial juridical person wholly or partly funded by the Government is not allowed to make a political contribution.
100% of contribution is allowed as a deduction from total income. However, deduction of contribution in excess of taxable income is not possible.
Contribution in cash is NOT allowed.
However, by using electoral bonds a citizen of India can donate without disclosing their identity.
So, deduction under section 80GGC is available to-
- An Individual
- Hindu Undivided Family (HUF)
- A Firm
- An AOP or BOI (not funded by Govt.)
- Artificial Juridical Person (not funded by Govt.)
1. For Section 80GGB, Contribution shall include-
(a) A donation or subscription or payment caused to be given by a company on its behalf or on its account to a person who, to its knowledge, is carrying on any activity which, at the time at which such donation or subscription or payment was given or made, can reasonably be regarded as likely to affect public support for a political party shall also be deemed to be contribution of the amount of such donation, subscription or payment to such person for a political purpose;
(b) The amount of expenditure incurred, directly or indirectly, by a company on an advertisement in any publication, being a publication in the nature of a souvenir, brochure, tract, pamphlet or the like, shall also be deemed,— (i) where such publication is by or on behalf of a political party, to be a contribution of such amount to such political party, and (ii) where such publication is not by or on behalf of, but for the advantage of a political party, to be a contribution for a political purpose.
2. Electoral Trust is a Section 25 Company or a non-profit company created in India for orderly receipt of the voluntary contributions from any person and for distributing the same to the respective political parties, registered under Section 29A of the Representation of People Act, 1951. Example- Satya Electoral Trust, Bajaj Electoral trust, General Bajaj Electoral trust etc.
3. Political party means a political party registered under section 29A of the Representation of the People Act, 1951 (43 of 1951).
4. Political parties or office bearers thereof are prohibited from accepting foreign contributions, from any foreign source including foreign companies.
- Companies Act, 2013