Deduction in respect of contributions given by any person to political parties
In computing the total income of an assessee, being any person, except local authority and every artificial juridical person wholly or partly funded by the Government, there shall be deducted any amount of contribution made by him, in the previous year, to a political party or an electoral trust :
Provided that no deduction shall be allowed under this section in respect of any sum contributed by way of cash.
Explanation.—For the purposes of sections 80GGB and 80GGC, “political party” means a political party registered under section 29A of the Representation of the People Act, 1951 (43 of 1951).
Analysys of section 80GGC
When calculating the total income of a person, excluding local authorities and government-funded artificial juridical persons, any amount they contributed to a political party or an electoral trust during the previous year can be deducted.
However, it’s important to note that no deduction is allowed for cash contributions. In this context, a “political party” refers to a party registered under Section 29A of the Representation of the People Act, 1951.
Let’s consider an example to further illustrate the concept
Ms. Sharma is a self-employed professional in India. During the previous financial year, she earned a total income of ₹10,00,000. She decided to make a contribution of ₹50,000 to a registered political party in support of their activities.
Since Ms. Sharma’s contribution was made through a non-cash mode, she is eligible to deduct the entire amount of ₹50,000 from her total income while calculating her taxable income. As a result, her taxable income would be reduced to ₹9,50,000.
However, if Ms. Sharma had made a cash contribution instead of a non-cash contribution, she would not be allowed to claim any deduction for that amount. Cash contributions are not eligible for deduction under the applicable tax provisions.
It’s important to note that the specific deduction rules and tax rates may vary based on the prevailing tax laws and regulations in India.