It is the height of election season, and campaign spending is setting new records. Many political parties are going all out to avail donations to fill their pockets. But breaking the traditions, parties are also focusing on individuals to mop up finance. Some parties are promoting their online donation platforms in the run-up to the polls, highlighting the tax deduction for contributing to political parties.
Election funding can reap some smart tax saving with 100% tax deduction for donation to political parties. The entire amount donated by an individual to a recognized political party is allowed as deduction under Section 80GGC of the Income Tax Act, 1961 while computing his/her gross total income.
Following parameters should be kept in mind for availing deduction under the said section:
- Donations made in cash are not eligible for tax deduction. In short, make the payments through banking channels - cheques, demand drafts, credit or debit cards and internet banking.
- Another condition is that donation should be made to a political party registered under Section 29A of the Representation of the People Act, 1951.
While there is no cap on the claim amount as a deduction for such donations, there is an overall limit on total deductions. This exemption is part of Chapter VI-A deductions. And under the law, the total deductions under the said Chapter cannot exceed the gross income. The employees will have to claim a refund at the time of filing their Income Tax Returns.
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