Individual Taxpayers Claimed Higher Tax Benefits on Political Donations Than Corporates

by gauravsinghigc

Tags : political donations tax benefits, individual vs corporate tax claims, tax deductions India, political funding tax relief, income tax exemptions, financial news 2025, tax policy updates | Published at : 17 Feb 2025 05:50 AM | Author : Gaurav Singh (gauravsinghigc)

Individual taxpayers in India have claimed higher tax deductions on political donations compared to corporate entities, highlighting a shift in tax-saving strategies. Learn how these contributions impact taxation and political funding.

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📊 Individual Taxpayers Claim Higher Tax Benefits on Political Donations Than Corporates

The revenue impact of tax deductions availed by individual taxpayers for donations to political parties has surged post-Covid-19. In the last two financial years leading up to the Lok Sabha elections, individual taxpayers have claimed higher tax benefits than corporate entities under Section 80GGC of the Income Tax Act.

📈 Key Findings from Budget 2025-26

💰 Individuals & HUFs claimed Rs 2,275.85 crore in tax benefits in FY23, projected to grow by 12.36% to Rs 2,557.15 crore in FY24.
🏢 Corporate taxpayers claimed deductions of Rs 514.40 crore in FY23 and Rs 577.98 crore (projected) in FY24.
📊 Total tax deductions for political donations (including individuals, corporates & firms) stood at Rs 2,905.96 crore in FY23 and are projected to reach Rs 3,265.14 crore in FY24.
📆 Over the past 10 years (FY15-FY24), total tax concessions for political donations have amounted to Rs 14,473.75 crore.

📜 Tax Laws Governing Political Donations

✅ Section 80GGC: Allows individuals, HUFs, firms, AOPs, and BOIs to claim 100% deduction on contributions to political parties via bank transfers, cheques, or electoral bonds (cash donations are not eligible).
✅ Section 80GGB: Allows corporate taxpayers to claim deductions for political donations, provided they are not made in cash.
📌 Definition of "Political Party": Must be registered under Section 29A of the Representation of the People Act, 1951.

📊 Post-Pandemic Surge in Political Donations

🆙 Political donation tax deductions rose sharply from Rs 544.53 crore in FY20 to Rs 740.03 crore in FY21 and Rs 1,650.86 crore in FY22.
📉 Despite this growth, total deductions in FY24 are expected to be lower than FY22’s peak of Rs 3,516.47 crore.

🤔 What Does This Mean?

The rising tax deductions claimed by individual taxpayers indicate an increasing trend of direct political contributions. With Lok Sabha elections approaching, donations through electoral bonds and bank transfers are becoming a preferred route for political funding.

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