Political contributions U/S 80GGC:

Introduction:
1. Section 80GGC of the Income Tax Act provides an opportunity for the taxpayers to claim deductions on contributions made to political parties.

2. Any amount contributed to a political party registered under Section 29A of the Representation of the People Act, 1951, is eligible for deduction under Section 80GGC of the Income Tax Act.

3. This includes National and Regional parties which are recognized by the Election Commission of India.

Conditions for claiming deduction :
1. The deduction can be claimed only if donations are made by any mode other than cash.

2. There is no maximum limit for availing deduction under Section 80GGC of the Income Tax Act.

3. Deductions cannot be claimed for donations made directly to politicians or political parties which the Election Commission of India does not recognize.

4. A valid receipt is essential for claiming deduction under Section 80GGC of the Income Tax Act.

5. NRIs are also eligible for claiming deduction under Section 80GGC of the Income Tax Act provided all the conditions mentioned in the section are complied with.

Some typical queries:
1. Can a deduction under Section 80GGC of the Income Tax Act be claimed if contribution is made in kind?
No. Deductions are permitted only if made in monetary form and not otherwise.

2. What should be the mode of payment?
The donation should be made in any mode other than cash. Cheque, draft, or any other form of digital payment methods can be used.

3. Income Tax Department has conducted searches on several Registered Unrecognised Political Parties (RUPPs), finding fraudulent donation schemes. In one such operation involving 23 RUPPs, authorities found bogus intermediaries issuing fake donation receipts, indicating systematic abuse of the tax provisions. What is the best course of action in those cases?
Taxpayers must carefully evaluate reassessment notices and consider options such as surrendering deductions, filing appeals, or opting for amnesty schemes to manage potential liabilities.

4. Is deduction available under the new tax regime?
No. Deduction is not available under the new tax regime.

5. Is any format prescribed for the receipts?
The political party shall issue a receipt containing the name and address of the party, the amount donated, along with PAN and TAN of the party.

Relevant Case Laws:
LIC of India v. CIT (1997) 219 ITR 410 (SC) Summary:
Hon Supreme Court established the ‘Doctrine of Impossibility,’ stating that donors cannot be held responsible for how political parties utilize donated funds.

McDowell & Co. Ltd. v. CTO (1985) 154 ITR 148 (SC)
Hon Supreme Court laid down the principle that while tax planning is legal, tax avoidance through colorable devices is not permissible. The Court ruled that transactions intended solely for the purpose of tax evasion, without any commercial substance, can be disregarded by tax authorities. Thus testing.