Any Sum contributed by an eligible assessee to any political party (registered u/s 29A of Representation of People Act) or Electoral Trust is eligible for deduction under Income Tax Act, 1961.
No deduction is allowable if contribution/Political Donation is made in cash (applicable from A.Y.2014-15).
Eligible assessee means Indian co. and any other person (except local authority and every artificial juridical person wholly or partly funded by government) Deduction u/s 80GGB:- if contribution made by Indian Co. Deduction u/s 80GGC:- if contribution made by any person (except local authority and every artificial juridical person wholly or partly funded by government).
Thus, if a foreign company gives donation, it can claim deduction u/s 80GGC. But if an Indian company gives donation, the deduction shall be allowed u/s 80GGB.
There is no requirement of quoting PAN at time of making contribution.
Restrictions under Companies Act, 1956 regarding political donation/ contribution:
Section 293-A of the Companies Act 1956 deals with prohibitions and restrictions regarding political donation/ contribution. A Government company and a company which has been in existence for less than three years can not contribute to any political party or to any person for political purpose. Companies other than those mentioned above may contribute any amount or amounts directly or indirectly to any political party or for any political purpose to any person provided that the aggregate of the amounts which may be so contributed by a company in any financial year shall not exceed 5% of its average net profits determined in accordance with the provisions of Section 349 and 350 during the three immediately preceding financial years. For making the contribution, a resolution must be passed at board meeting.
Section 293 A(4) of the Companies Act requires the companies making the donations to political parties to disclose the same with the details explicitly in their respective profit & loss account statements
Expenditure incurred by an assessee (whether Indian co or any person except local authority and every artificial juridical person wholly or partly funded by government) on advertisement in any souvenir, brochure, tract, pamphlet published by political parties is not allowed but deduction u/s 80GGB (only Indian Co.) is allowed.
Restrictions under Representation of People Act, 1951:
According to Sec.29B of Representation of People Act, 1951 , donor should be an Indian citizen either living in India or abroad (NRIs with Valid Indian passport can donate to political parties).Provided that no political party shall be eligible to accept any contribution from any government co. or any foreign source defined under clause (e) of section 2 of the Foreign Contribution (Regulation) Act, 1976 (49 of 1976). (Under Sections 3 & 4 of Foreign Contributions (Regulation) Act (FCRA), 1976, political parties are not permitted to accept contributions from foreign companies or companies controlled in India by foreign companies.)
According to Sec.29C of Representation of People Act, 1951, the treasurer of a political party or any other person authorized by the political party in this behalf shall report the details of the contributors except Government companies who have contributed over Rs 20,000 during the financial year to Election Commission before the due date for furnishing a return of its income of that financial year u/s139 of Income Tax Act, 1961.
Provision under Income Tax Act, 1961: As per section 13A of the I.T Act, any income of a political party
which is chargeable under the head “Income from house property” or “Income from other sources” or “Capital Gains” or any income by way of voluntary contributions received by a political party from any person shall not be included in the total income of the previous year of such political party. Provided that— (a) such political party keeps and maintains such books of account and other documents as would enables the Assessing Officer to properly deduce its income there from; (b) in respect of each such voluntary contribution in excess of twenty thousand rupees, such political party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution.