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  4. Income Tax 2024: How to file for tax deductions on donations to political parties? Know all details

Income Tax 2024: How to file for tax deductions on donations to political parties? Know all details

Donations to political parties are tax-exempt, provided they are directed towards political parties recognised by the Election Commission.

Edited By: Akshit Tyagi New Delhi Published on: February 16, 2024 10:33 IST
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Image Source : PTI (FILE) Tax

The Income Tax Department has reportedly issued notices to individual taxpayers, highlighting discrepancies in their filings for deductions on donations made during FY21-22. These notices specifically flagged donations made to unrecognised political parties, prompting the department to investigate whether such donations were made for tax evasion or money laundering purposes.

Donations to political parties or electoral trusts are indeed tax-exempt, provided they are directed towards political parties recognised by the Election Commission. Taxpayers can claim up to 100 percent deduction on donations, subject to their total annual income.

The I-T department has sent notices to nearly 5,000 taxpayers, citing discrepancies in payments. There is a concern that some of these donations may have been roundtripped, with a portion of the amount being returned to the taxpayer in cash. Additionally, some notices pertain to donations that appear disproportionate to the taxpayer’s total annual income.

Regarding donations made through electoral bonds, the recent Supreme Court ruling invalidating electoral bonds has created uncertainty for taxpayers who made contributions using this instrument. Donors are required to provide the recipient’s PAN for claims under Section 80GGB/GGC of the Income Tax Act, 1961. However, the anonymity provided to the recipient by electoral bonds has been a point of contention.

Taxpayers who have made donations to political parties can claim deductions of up to 100 percent of their total annual salary under Section 80GGC of the Income Tax Act, subject to certain conditions.

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