Section 80GGC Deduction Under Scrutiny ÔÇô ITDÔÇÖs Compliance Notice Explained

Overview

Recently, taxpayers who have claimed deductions under Section 80GGC of the Income Tax Act, 1961, have been receiving SMS warnings from the Income Tax Department (ITD). Donations to political parties and electoral trusts may be deducted under this clause. The notifications ask taxpayers to confirm the veracity of their claims and especially pertain to Assessment Years 2022–23, 2023–24, and 2024–25.

Taxpayers must verify their information on the Compliance Portal if the claim is legitimate. To avoid fines and interest under Sections 270A and 234F, they must file an Updated Return (ITR-U) under Section 139(8A) if the deduction was incorrectly claimed.

Recognizing the Income Tax Act's Section 80GGC

Section 80GGC: What is it?

An individual taxpayer may claim a 100% tax deduction under Section 80GGC for contributions given to:

• Central Government-approved electoral trusts
• Political parties registered under Section 29A of the Representation of the People Act, 1951

Who Is Eligible for This Deduction?

Individual taxpayers, including both salaried and self-employed persons.

This deduction is not available to businesses, companies, or artificial juridical bodies.

Requirements for 80GGC Deduction Claims

• Cash donations are not permitted. Contributions must be made via banking channels (cheque, draft, or electronic transfer).
• Taxpayers must maintain donation receipts and evidence of the transaction.
• The beneficiary (electoral trust or political party) must be legally registered under the relevant laws.

Why is the Income Tax Department Sending SMS Alerts?

The ITD is scrutinizing Section 80GGC claims to detect inaccurate or fraudulent deductions. The alerts serve two purposes:

• Check for accuracy: Taxpayers must use the Compliance Portal to verify their claims.
• Identify false claims: If a claim is inaccurate, the taxpayer must file an Updated Return (ITR-U) under Section 139(8A) before 31st March 2025.

How Should You Respond to an SMS Alert?

1. Check your details on the Income Tax Department's Compliance Portal to ensure your claim is valid.
2. Maintain proper donation records as required by Rule 18AB of the Income Tax Rules, 1962.
3. If your claim is incorrect, you must file an Updated Return (ITR-U) before March 31, 2025.

Consequences of Fraudulent Claims

• Penalty under Section 270A: If the ITD detects false claims, the penalty can be up to 200% of the tax amount.
• Interest under Section 234F: Failure to comply may result in late fees up to Ôé╣5,000.

Procedure for Submitting an Updated Return (ITR-U)

1. Log in to the Income Tax e-filing portal.
2. Under Section 139(8A), select "File Updated Return (ITR-U)".
3. Enter the required information, including updated income and deductions.
4. Pay additional taxes, penalties, and interest (if applicable).
5. Submit the return before March 31, 2025.

Conclusion

The Income Tax Department is enforcing stricter compliance for Section 80GGC deductions. Taxpayers must verify their claims and file corrections if necessary. Non-compliance can result in severe penalties, so take action now to ensure tax compliance.