- By Aditya Pratap Singh
- Thu, 21 Mar 2024 05:43 PM (IST)
- Source:JND
Tax deduction on political funding: Ever since the Election Commission released the data on Electoral Bonds after the Supreme Court asked the State Bank Of India (SBI) to hand over electoral bond data to the poll body, it has been in the news. Companies have donated hundreds and thousands of crore to political parties via electoral bonds. Amid all going around the political funding, many are wondering, if political funding attracts tax exemption.
If you are among the people who have the same question then, the answer is 'Yes'. According to the Income Tax Act 1961, Electoral funding attracts tax deductions. The Tax deductions over the political funding come under Section 80GGC. Section 80GGC was introduced to eliminate corruption in electoral funding.
In addition, the Tax Deduction Act encourages companies and people to donate to the political system to reduce their tax liabilities by claiming tax deductions.
Limit on Political Funding in cash
The maximum amount for funding to a political party depends on the mode of payment. For example, if the amount is paid in cash, a maximum deduction of Rs 2,000 can be claimed. If the fund is paid using a cheque online, there is no cap.
You should be aware that exemption can be claimed only by individuals, Corporations, Hindu Undivided Family (HUF, Association of Persons (AOP), and Body of Individuals (BOIs).
How much can a corporation donate to a political party?
Although there is no upper limit on contributions, the Companies Act 2013 allows companies to contribute a maximum of 7.5 percent of their annual net income. One more thing, which needs to be sure that the political party, to which the donation is being made, must be registered under Section 29A of the Representation of the People Act, 1951.
