The Income Tax Act of 1961 permits for tax deductions for contributions given to political events. Tax deductions can be found underneath Section 80GGC for contributions made by taxpayers to political events or electoral trusts.The Income Tax Act’s Section 80GGC was established to remove corruption and improve transparency in election financing.
Additionally, it encourages folks to contribute cash to the political system to cut back their tax liabilities by claiming tax deductions for such contributions. The quantity that may be deducted is dependent upon the type of cost. A most deduction of Rs. 2,000 will be claimed if the quantity is paid in money. There isn’t any cap on the deduction, although, if the quantity is paid for with a cheque or an digital cost methodology.
But there’s a skinny line between exemption from taxes and evasion of taxes, and since Section 80GGC has no higher restrict, it’s continuously monitored so long as you stay aware of the dos and don’ts. To keep away from undue inquiry, bear the next in thoughts earlier than contributing to a political get together or an electoral process:
It is vital to notice that the deduction could solely be claimed by people, Hindu Undivided Family (HUF), firms, Association of Persons (AOP), and Body of Individuals (BOIs).
In a number of instances, it has been seen that political events reimburse taxpayers for his or her donations after taking a portion of the entire quantity supplied. This transaction is often described as a Bogus Donation. Since the variety of these transactions has risen, the Income Tax Department can be notifying authentic taxpayers that they should present supporting documentation with a view to declare donations as a deduction from their gross whole revenue. In that scenario, you ought to have the ability to confirm that the transaction is authentic.
While there isn’t any higher restrict on donations, corporations are allowed to contribute a most of seven.5 p.c of their yearly internet earnings underneath the Companies Act of 2013. The sole necessities are that donations can’t be given in form or money, and the political get together should be registered underneath part 29A of the Representation of the People Act, 1951.
The taxpayer can even verify that the get together to which he’s offering funds isn’t included on the record of Registered Unrecognised Political Parties (RUPP) by visitingeci.gov.in to confirm the registration.
The taxpayer should get a duplicate of the cancelled test and the political get together’s PAN (Permanent Account Number) card. The financial institution info given within the cancelled cheque could also be moreover verified in opposition to these listed on a political get together’s registered web site.
You want a political get together receipt with the donor’s identify, the donation quantity and the political get together’s identify on it with a view to be eligible for a tax deduction. Keep this receipt fastidiously since you will want it when submitting your taxes.
Even should you get a receipt from the get together that you just donated to, you have to embrace the donation in your tax return to say a deduction. To forestall any issues with the Income Tax Department, ensure your tax return has all the data required concerning the contribution.
