1. Identify the taxpayer, recipient and year
This guide covers claims under the Income-tax Act, 1961 through FY 2025–26 (AY 2026–27), including the earlier years in the examples. For contributions from 1 April 2026, consult sections 136 and 137 of the Income-tax Act, 2025, together with the applicable regime, rules and forms. The two periods have different year labels.
For the 1961 Act, an Indian company should examine section 80GGB. Other eligible persons, such as an individual, HUF, partnership firm or LLP, should examine section 80GGC. The latter section expressly excludes local authorities and artificial juridical persons wholly or partly funded by government. Company law and other laws may separately prohibit a contribution even if the tax provision would otherwise allow a deduction.
| Check | Section 80GGB | Section 80GGC |
|---|---|---|
| Recipient | A political party registered under section 29A of the Representation of the People Act, 1951, or an approved electoral trust. | The same recipient test. |
| Eligible payment | A genuine contribution made during the year by a mode other than cash. | The same non-cash rule. A ₹500 cash contribution produces a nil deduction for that amount. |
| Amount | The qualifying amount, subject to the Chapter VI-A limits, including the gross total income ceiling in section 80A(2). | The same overall ceiling. There is no separate rupee cap in section 80GGC itself. |
| Tax regime | Sections 115BAA and 115BAB exclude this deduction. | Section 115BAC excludes it where that regime applies. A regular partnership firm is not choosing between the individual old and new regimes. |
| Company governance | Separately test section 182 of the Companies Act, 2013 and the recipient’s ability to accept the payment. | Check other restrictions that apply to the contributor, including service conduct rules or foreign contribution law. |
| Party souvenir advertisement | Test the deemed-contribution provisions and eligible recipient, payment and regime conditions. | Section 37(2B) bars a business deduction for covered party-publication advertisements. Do not assume an advertisement qualifies under section 80GGC. |
2. Apply the Electoral Bonds judgment and company law
In Association for Democratic Reforms v. Union of India, 2024 INSC 113 (15 February 2024), the Supreme Court invalidated the Electoral Bond Scheme and struck down amendments that allowed anonymous donations and removed the corporate contribution cap. For direct company contributions, apply the 7.5% ceiling on average net profits for the three immediately preceding financial years under the pre-amendment section 182 framework. Government companies and companies in existence for fewer than three financial years are barred. A resolution passed at a meeting of the board must authorise the contribution. For direct contributions, the profit and loss account disclosure identifies the amount and the recipient political party. For payments through an electoral trust, MCA General Circular 19/2013 distinguishes disclosure of the amount released to the trust from the party-specific disclosure for a direct contribution.
The tax deduction does not itself establish that a payment is lawful. Check the recipient’s registration or approval for the relevant date and reconcile the actual payment to its acknowledgement. A registered unrecognised political party may meet the registration test. Recognition, registration and the party’s own section 13A tax treatment are separate matters.
3. Electoral trusts under the 1961 Act
Check that the recipient is approved under the Electoral Trusts Scheme, 2013, rather than assuming any nonprofit or body calling itself a trust qualifies. The scheme was framed for nonprofit companies under section 25 of the Companies Act, 1956, the predecessor to section 8 of the 2013 Act. Rule 17CA regulates permitted donors, banking channels, records and distributions. It restricts cash, contributions from non-citizens and foreign entities, and other specified contributions.
Section 13B makes the exclusion of voluntary contributions from the trust’s taxable income conditional on the required distribution to section 29A parties and compliance with the rules. Apply the 95% minimum under section 13B and Rule 17CA(8) to the year’s aggregate contributions together with any carried-forward surplus as specified there. Rule 17CA(8) also limits administrative spending and requires distribution of the distributable amount to eligible parties before 31 March of the financial year. Under Rule 17CA(12), the trust has a separate audit and Form 10BC obligation. Those rules govern the trust and do not replace the donor’s own eligibility checks.
4. Eight worked illustrations
The examples are fictional. Amounts are in rupees, and the stated tax computations assume no surcharge or other adjustment unless specified.
Case 1: Salaried executive pays ₹3,00,000 by RTGS
For FY 2024–25, assume a resident under 60 using the old regime has salary of ₹28,00,000, qualifies for the ₹50,000 salary standard deduction and can set off ₹2,00,000 of eligible self-occupied housing interest loss. Gross total income is ₹25,50,000. Assume eligible EPF contributions of ₹1,50,000 under section 80C, ₹50,000 of eligible non-cash premiums for resident senior-citizen parents under section 80D, and a genuine March 2025 contribution of ₹3,00,000 to a registered national party. Total deductions are ₹5,00,000 and taxable income is ₹20,50,000, compared with ₹23,50,000 without the political contribution. Tax including 4% cess falls from ₹5,38,200 to ₹4,44,600, a difference of ₹93,600.
Case 2: Cash returned to the donor
In FY 2022–23 a taxpayer claims ₹4,00,000 after the recipient returns ₹3,40,000 in cash (85% of the transfer, leaving ₹60,000 with the recipient). Assume the deduction is disallowed after a properly initiated reassessment. If ordinary taxable income moves from ₹20,00,000 to ₹24,00,000 under the old regime, the incremental tax including cess is ₹1,24,800. If section 270A applies and misreporting is established, the 200% penalty on this assumed tax base is ₹2,49,600, for ₹3,74,400 before interest and payment credits. Ordinary under-reporting generally has a 50% penalty rate, subject to the statutory exclusions. A section 148A show-cause notice is not the reassessment notice under section 148. Interest under sections 234B and 234C must be tested separately against their respective bases, dates and payment history; no interest figure follows from these facts. Wilful evasion may also raise section 276C issues.
Case 3: ₹50,00,000 paid by a company under section 115BAA
A company with ₹80 crore turnover elects section 115BAA and pays an approved electoral trust by RTGS. Its rate on ordinary income is 22%, with 10% surcharge and 4% cess, for an effective rate of 25.168%. Section 80GGB is unavailable, so the deduction is nil. A board resolution and turnover alone do not determine whether the contribution complies with company law.
Case 4: ₹10,000 in cash to a candidate’s campaign office
The deductible amount is nil. Cash does not qualify under section 80GGC, and a candidate or campaign office is not itself a section 29A party or approved electoral trust. A stamped receipt cannot cure either issue. The separate cash rule under section 80G does not apply.
Case 5: ₹25,00,000 paid to an electoral trust
An individual promoter using the old regime pays ₹25,00,000 by RTGS to a trust whose approval is valid for the relevant period. The full ₹25,00,000 can be deducted if the other conditions are met and sufficient eligible gross total income remains after other deductions. Match the trust receipt, approval and bank record. A trust contribution does not guarantee donor anonymity.
Case 6: ₹8,00,000 for a political party’s souvenir advertisement
An Indian private company pays ₹8,00,000 by bank transfer for an advertisement in a registered party’s souvenir published by the party. Section 37(2B) bars a business advertising deduction. The explanation to section 80GGB refers to the meaning of contribution under section 293A of the Companies Act, 1956; section 182(2)(b) is its successor for this type of deemed contribution. For a company under the regular tax regime, the ₹8,00,000 may qualify under section 80GGB if the recipient, company-law and other tax conditions are met and sufficient gross total income is available. There is no double deduction.
Case 7: Partnership firm contributes ₹10,00,000
A firm earns ₹45,00,000 of ordinary business profit before a genuine bank payment of ₹10,00,000 made by the firm to a registered party. If the donation was debited to profit and loss, add it back in computing business income. Review the applicable tax-audit reporting when an audit is required. Assume the firm has no other income or deductions and qualifies to claim ₹10,00,000 in its ITR-5. Tax at 30% plus 4% cess falls from ₹14,04,000 on ₹45,00,000 to ₹10,92,000 on ₹35,00,000, a saving of ₹3,12,000. A donation made by a partner personally would require a separate analysis.
Case 8: Proposed adjustment to a genuine ₹1,50,000 claim
An IT manager earning ₹30,00,000 pays a registered state party ₹1,50,000 by NEFT. If CPC proposes a section 143(1)(a) adjustment, first read the proposed reason and deadline. Reconcile (1) the bank statement and transfer reference, (2) the recipient’s receipt and identifying particulars, (3) dated evidence of section 29A registration, and (4) the tax regime and return schedule. Respond through the stated portal process and retain the acknowledgement. A declaration is not invariably required, and the evidence does not guarantee acceptance.
5. Frequently asked questions
Is there an upper limit?
No separate rupee limit applies under section 80GGC. Aggregate Chapter VI-A deductions cannot exceed gross total income under section 80A(2). Check any further restrictions for particular income or regimes.
May a government servant donate?
Check the applicable conduct rules first. Rule 5 of the Central Civil Services (Conduct) Rules restricts political association and subscribing in aid of political activity. State and service-specific rules require separate review.
Can a non-resident Indian contribute?
Residence for tax purposes does not establish citizenship or the source of funds. MHA guidance treats payments from an Indian citizen living abroad, made from personal savings through normal banking channels, as outside the definition of foreign contribution. Contributions from a foreign citizen, including an OCI holder, are subject to the foreign-source prohibition for political parties. Check the Foreign Contribution (Regulation) Act and section 29B of the Representation of the People Act before payment. If the contribution is lawful, separately check the tax regime and eligible income. Do not assume a particular account type is compulsory.
What records support the claim?
Keep the bank reference and statement, a matching receipt identifying the recipient, and proof of registration or trust approval. Complete the applicable return schedule using the recipient and transaction fields requested for that year.
Is section 80GGC available under section 115BAC?
No. A taxpayer subject to that regime must validly choose the old regime to claim the deduction, if otherwise eligible. Check the election procedure and deadlines for the taxpayer and year.
Does a corporate donor need shareholder approval under section 182?
Section 182 calls for a board resolution at a meeting. Check the cap, eligibility, and recipient disclosure separately and review whether other requirements apply to the company or transaction.
Sources
- Income-tax Act, 1961, as amended by Finance Act 2025
- Income-tax Act, 2025, sections 1, 136, 137 and 536
- Representation of the People Act, 1951, sections 29A–29C
- Supreme Court, Association for Democratic Reforms v. Union of India, 2024 INSC 113
- Companies Act, 2013, section 182
- MCA General Circular 19/2013 on contributions through an electoral trust
- Ministry of Finance, Electoral Trusts Scheme and Rule 17CA
- Income-tax Act, 1961, section 13B
- Central Civil Services (Conduct) Rules, 1964, Rule 5
- Government FAQs on the Foreign Contribution (Regulation) Act
- MHA FCRA FAQs on citizenship and personal savings
- CBDT, AY 2026–27 ITR-3 validation rules
- Income Tax Department, domestic companies for AY 2026–27
- Income Tax Department, partnership firms and LLPs for AY 2026–27