Under the existing provisions of section 80GGB of the Income Tax, contribution by an Indian company to any political party or an electoral trust in the previous year, is allowed as deduction in computing the total income of the firm.
Currently, a similar deduction is also available to individuals under section 80GGC. There is no specific mode provided for making such contributions in the Act.
"With a view to discourage cash payments by the contributors, it is proposed to amend the provisions... So as to provide that no deduction shall be allowed under section 80GGB and 80GGC in respect of any sum contributed by way of cash," the Budget document presented in Parliament said.