Claim audit · FY 2026-27

“Donations to registered political parties under Section 80GGC are deductible at 100%, and cash donations are permitted; a donation-plus-cashback arrangement is a legitimate way to route funds and save tax.”

Section 80GGC allows an individual taxpayer to claim a deduction for the entire amount donated to a registered political party or an electoral trust. There is no monetary ceiling on the deductible amount, and the deduction is available under the old regime. However, the donation must be made by any mode other than cash, such as cheque, bank draft, electronic transfer, or UPI. Cash donations of any amount do not qualify for the deduction. The political party must be registered under Section 29A of the Representation of the People Act, 1951, and the taxpayer must obtain a receipt containing the party's name and the amount donated. The deduction is available to individuals and HUFs, while companies claim donations to political parties under Section 80GGB. The part of the claim that is true is that 80GGC provides a 100% deduction. The part that is false is the cashback arrangement, where a donor gives money to a party and receives a portion back in cash. Such a scheme is not a legitimate tax-planning tool. It amounts to claiming a deduction for a donation that is partially or fully returned, and it constitutes tax evasion. The Income-tax Act treats the arrangement as a sham, and the department can deny the deduction and impose penalty under Section 270A for under-reporting or misreporting of income. The person who receives the cashback also has undisclosed income, potentially attracting prosecution. The donation must be a genuine, outright transfer of funds to the party's account, with no benefit or consideration flowing back to the donor. The viral claim combines a true statutory provision with a fraudulent scheme, making it partly true. The deduction itself is legitimate when the donation is genuine, made by cheque or digital mode, and supported by a proper receipt. The cashback ring is illegal, regardless of how it is structured. Taxpayers should avoid any arrangement where the political party returns a portion of the donation in cash, as both donor and recipient face significant legal consequences.