Section 80GGB of ITA, 1961 : Section 80Ggb: Deduction In Respect Of Contributions Given By Companies To Political Parties

Explanation using Example

Imagine a company named 'GreenTech Innovations Pvt. Ltd.', which is registered in India. In the financial year 2022-2023, GreenTech decides to support a political party, 'The Progressive Alliance', by contributing to their campaign. They choose to donate an amount of ₹500,000 to the party through a cheque. This donation is permissible under Section 80GGB of The Income-tax Act, 1961.

When GreenTech prepares its income tax return for the year, it can claim a deduction of the contributed amount from its total income. This means that the ₹500,000 donated to 'The Progressive Alliance' will not be counted as part of GreenTech’s taxable income, potentially reducing the company's tax liability.

However, if GreenTech had made this contribution in cash, they would not be eligible for the deduction as per the provided clause that prohibits cash contributions from being deducted for tax purposes.