Section 80GGB: Deduction in respect of contribution given by Indian companies to political parties

By | February 13, 2016

S. 80GGB allows deduction to corporate organizations for any amount contributed to political parties. They can claim deduction ranging from 50% to 100% of the amount. There is also restriction on the deduction as per S. 293A of the Companies Act, 1956.

S. 293A of the Companies Act, 1956 deals with the prohibition and restriction regarding political contribution. A non-Government company which has been in existence for not less than three years may contribute any amount or amounts directly or indirectly to any political purpose to any person provided that the aggregate of the amounts which may be so contributed by a company in any financial year shall not exceed 5% of its average net profits determined in accordance with the provisions of S. 349 and 350 during the three immediately preceding financial years.

Under the existing provisions of S. 80GGB, any sum contributed by an Indian company to any political party or an electoral trust in the previous year, is allowed as deduction in computing the total income of such Indian company. A similar deduction is available to an assessee, being any person other than local authority and artificial juridical person u/s 80GGC. There is no specific mode provided for making such contribution.

With a view to discourage cash payments by the contributors, it is proposed to amend the provisions of aforesaid sections, so as to provide that no deduction shall be allowed u/s 80GGB and 80GGC in respect of any sum contributed by way of cash.

This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years.


As Per Section 80GGB, of the Income Tax Act, 1961-

Deduction in respect of contributions given by companies to political parties.

In computing the total income of an assessee, being an Indian company, there shall be deducted any sum contributed by it, in the previous year to any political party [or an electoral trust].

The following proviso shall be inserted before the Explanation to section 80GGB by the Finance Act, 2013, w.e.f. 1-4-2014:

Provided that no deduction shall be allowed under this section in respect of any sum contributed by way of cash.

Explanation.—For the removal of doubts, it is hereby declared that for the purposes of this section, the word “contribute”, with its grammatical variation, has the meaning assigned to it under section 293A of the Companies Act, 1956 (1 of 1956).

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