Govt gave tax concessions of almost Rs 4,000 crore on donations to political parties in 2022-23

In 2021-22, tax concessions for political donations was Rs 3,516.47 crore, jumping over 300% from the previous fiscal. In 2014-15, it was Rs 170.86 crore.

Overall, the total revenue impact of tax concessions availed on political donations in nine years since 2014-15 is an estimated Rs 12,270.19 crore. The data for FY 2023-24 is yet to be made public.

Under the Income Tax Act, 1961, taxpayers, including Indian companies, firms, Association of Persons (AOPs), Body of Individuals (BOIs), individuals or Hindu Undivided Families (HUFs), are allowed to claim deductions in respect to donations made by them to political parties. These include donations made through cheques, account transfers or electoral bonds.

In 2022-23, of the projected revenue impact of Rs 3,967.54 crore, the most — Rs 2,003.43 crore — was due to donations by corporate taxpayers under Section 80GGB.

Section 80GGB of the Income Tax Act states that “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.” However, it does not allow deductions “in respect of any sum contributed by way of cash”.

Under Section 80GGC, the tax concessions claimed by individuals for political donations was Rs 1,862.38 crore and Rs 101.73 crore by non-corporate taxpayers (firms/AOPs/BOIs).

“In computing the total income of an assessee, being any person, except local authority and every artificial juridical person wholly or partly funded by the Government, there shall be deducted any amount of contribution made by him, in the previous year, to a political party or an electoral trust… ,” Section 80GGC of the Income Tax Act states.

Like companies, individuals are also not allowed to claim deduction under Section 80GGC in respect of any sum contributed to political parties by way of cash.

For the purpose of the Section 80GGB and 80GGC, the Act defines the term “political party” as “a political party registered under section 29A of the Representation of the People Act, 1951”.