Political donation deductions: I T department launches TAXASSIST to aid queries under Section 80GGC

The Income Tax Department has launched a new initiative called TAXASSIST, aimed at assisting taxpayers who have received notices regarding their claims for deductions on political donations. This move comes as a response to increasing instances of fake claims under Section 80GGC of the Income Tax Act, 1961, which permits deductions for contributions to political parties or electoral trusts. TAXASSIST is designed to help individuals navigate the complexities of responding to income tax notices effectively.

Section 80GGC allows taxpayers to claim deductions on political donations, provided they comply with specific eligibility criteria and documentation requirements. However, given the rise in fraudulent claims, the Income Tax Department is keen on ensuring that taxpayers review their Income Tax Returns (ITRs) carefully. “Review your ITR carefully, incorrect claims can lead to scrutiny or penalties.” Taxpayers receiving notices under Section 158BC are advised to submit Form ITR-B via the e-Proceeding tab on the Income Tax portal, as per the department’s guidance.

On the social media platform X, the Income Tax Department highlighted a frequent error made by taxpayers: claiming deductions under Section 80GGC, which applies strictly to individuals and not to businesses. To correct such mistakes, taxpayers are advised to file either a revised return or an updated return (ITR-U) and settle any additional tax dues that may arise.

Responding to public queries, the department clarified that its new TAXASSIST service is available to help taxpayers fix these errors and guide them through the required procedures.

If discrepancies arise or if deductions are claimed without adequate proof, these returns are automatically flagged for deeper examination. Taxpayers in such situations must provide supporting evidence; failure to do so can result in tax assessments, penalties, or further legal action.

CA Ashish Niraj from A S N & Company advised that if the donation is genuine and made to a registered political party, taxpayers should not panic. “If your claim is genuine and you have donated to a registered political party, there is no need to panic. Simply reply to the notice with valid donation receipts and be ready to provide bank statements or transaction details if requested later.” For those wishing to withdraw their claims, an updated return under Section 139(8A) can be filed, along with the necessary tax payments, within seven days of receiving the notice.

For individuals who have claimed deductions incorrectly or lack supporting documentation, CA Niraj suggests filing ITR U under Section 139(8A) promptly, with added tax payments. However, he points out a current limitation: “Presently, ITR U Filing is available for AY 2023-24 and AY 2024-25 Only. As per Budget 2025 provisions ITR U for AY 2021-22 and AY 2022-23 should have enable but presently it is not available on portal to file. On the Home Page of Income Tax Portal in the Announcement section it mentions that \”Facility for filing updated returns for the AYs 2021-22 and 2022-23 as per Finance Act, 2025 will be provided shortly\”.”

The TAXASSIST initiative represents the Department’s commitment to promoting transparency and compliance in political donations while providing necessary support to taxpayers. By utilising this service, taxpayers can better manage their tax obligations and avoid penalties associated with improper claims.

Additionally, this initiative highlights the importance of maintaining accurate records and understanding the intricacies of tax regulations. With the right guidance and adherence to the rules, taxpayers can ensure their compliance and contribute to a more transparent political funding environment. 

Meanwhile, the department has intensified its efforts this year to detect inconsistencies in income tax filings by deploying artificial intelligence and advanced data analytics. Authorities are cross-checking deduction claims against information sourced from banks, mutual funds, employers, and various financial institutions using tools such as the Annual Information Statement (AIS) and the Statement of Financial Transactions (SFT).