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CS Executive · Tax Laws and Practice · Classification and Tax Incidence on Companies

Under the Income-tax Act, 2025 (applicable from the June 2027 session), a company's contribution to a political party is allowed as a deduction to an assessee that is an Indian company. Which condition must be met for the deduction?

The deduction under section 136 of the Income-tax Act, 2025 requires an Indian company to contribute other than in cash, to a registered political party or an electoral trust. Cash contributions do not qualify, and the provision does not apply to foreign companies.

  1. AThe contribution must be made other than by way of cash, to a registered political party or an electoral trustCorrect
  2. BThe contribution may be made in cash up to Rs. 2,000 only
  3. CThe contribution is allowed only if the company is a foreign company
  4. DThe contribution is allowed only to an electoral trust and not to any political party

Explanation

Section 136 allows an Indian company a deduction for an amount contributed other than by way of cash during the tax year to a political party registered under section 29A of the Representation of the People Act, 1951 or to an electoral trust. Cash contributions get no deduction, so the Rs. 2,000 cash option is wrong. The section covers Indian companies, not foreign ones, and it covers both registered parties and electoral trusts.

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