Prashant Kishor’s ₹ 99 crore donation to Jan Suraaj Party - Does it qualify for tax relief? Experts explain

With Bihar elections having come to a close after results were announced on Friday giving a clear mandate to NDA, one fledgling leader who made waves, at least prior to the results, was none other than political consultant-turned-politician Prashant Kishor.

His party Jan Suraaj reportedly spent more money on digital ads than Congress, JD(U) and RJD put together while BJP spent the highest, said a report by AltNews.

At several forums, Kishor publicly stated that he personally donated around ₹98.76 crore of his personal earnings in the past three years to Jan Suraaj, a party he founded. All political parties across the spectrum tend to receive donations based on their popularity and ideology.

BJP, for instance, reportedly received highest amount of donation amounting to ₹2,243 crore from 8,353 donors across India in 2023-24, shows the Association for Democratic Reforms (ADR) data, a report stated.

Although Kishor paid ₹20 crore income tax on his income ( ₹241 crore between 2021-2024), but was he entitled to claim deduction on his donation of ₹98.76 crore that he made to Jan Suraaj? Let us find out

Are donations to political parties taxable?

Typically political donations are exempt from income tax and deduction is allowed under the income of individuals. Under the new tax regime, however, no such deduction is allowed for donating money to political parties.

“Donation to political parties is totally exempt from tax but not under the new tax regime,” says Chirag Chauhan, a Mumbai-based Chartered accountant.

"Genuine Donations to political parties are allowed as deduction under Income tax Act. However, if you are using the same as mechanism of tax evasion, same is not allowed," says chartered accountant Pratibha Goyal, partner of PD Gupta & Company, a Delhi-based CA firm.

However, the income from which donations are made ought to be from explained sources. Otherwise, these could be treated as unexplained expenditure under Section 69C and taxed accordingly.

“Political donations made from properly accounted income, whether tax-paid or exempt, do not attract tax liability. But if such contributions come from unexplained sources, they may be treated as unexplained expenditure under Section 69C and taxed at 60% plus surcharge and cess," says O.P. Yadav, Tax Evangelist, Prosperr.io and Former Principal Commissioner of Income Tax.

Old Tax regime Vs New Tax Regime

Under the old tax regime, donors can claim 100% deduction for donations made to political parties. These deductions are allowed for individuals as well as companies under section 80GGC and section 80GGB of Income Tax (I-T) Act, respectively.

These deductions (old tax regime) are permitted for any sum contributed to a registered political party so long as the contribution is made through a non-cash method.

However, these deductions are not allowed under the new tax regime and can not be claimed against income taxed at special rates, explains Mr Yadav.

“Under the Old Tax Regime, non-cash contributions to political parties or electoral trusts qualify for deduction under Sections 80GGB and 80GGC subject to the overall Chapter VI-A limit of not exceeding the gross total income. This deduction is unavailable under the New Tax Regime and also for companies taxed under Sections 115BA, 115BAA, and 115BAB. Additionally, these deductions cannot be claimed against income taxed at special rates, such as STCG under Section 111A or LTCG under Sections 112 and 112A,” adds Yadav of Prosperr.io.

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