Political Party Contribution Deduction under the Income Tax Act 2025 (Sections 136 and 137)

The Income Tax Act 2025 allows a deduction from total income for money given to a political party registered under section 29A of the Representation of the People Act, 1951, or to an electoral trust. Section 136 covers Indian companies and section 137 covers any assessee other than a local authority and a government-funded artificial juridical person (so individuals, HUFs and firms use it, and the text does not exclude companies). Both sections have one firm condition: the contribution must be other than by way of cash.

The text is short and the sections state no rupee cap. This guide explains the conditions, how the deduction interacts with the slab regime in section 202 and the overall limit in section 122, and works through examples for tax year 2026-27. The law quoted is as amended by the Finance Act, 2026. It is information, not tax advice.

Who can claim a deduction for political party donations?

Section	Who it covers	Who is left out
136	An assessee that is an Indian company	Non-company assessees (they use section 137)
137	Any assessee, such as an individual, HUF, firm, association or company	A local authority, and an artificial juridical person wholly or partly funded by the Government

The two sections use the same words for the payment. The company version adds a meaning for "contribute" in section 136(2): it has the meaning given in section 182 of the Companies Act, 2013. Read that section if your company is unsure whether a particular payment counts as a contribution.

Which payments qualify under sections 136 and 137?

Three things must all be true.

1. The recipient is eligible. It is a political party registered under section 29A of the Representation of the People Act, 1951, or an electoral trust. Section 2(43) defines an electoral trust as a trust approved by the Board as per the scheme made by the Central Government.
2. The payment is not in cash. A cheque, bank draft or electronic transfer is outside the cash exclusion. Keep the bank statement or cheque copy as proof.
3. It is made during the tax year. The deduction is for the amount contributed in that tax year.

Is there a limit on the deduction?

Neither section 136 nor section 137 names a maximum amount. Two other provisions still shape what you can actually claim.

• Gross total income cap (section 122(2)). The aggregate of all deductions under Chapter VIII cannot exceed your gross total income.
• AOP and BOI (section 122(3)). If section 137 gives the deduction to an association of persons or body of individuals, a member cannot claim the same deduction again on the share of income.

Can I claim it under the section 202 slab regime?

Section 202(1) sets slab rates for individuals, HUFs, AOPs, BOIs and certain others, unless the person exercises the option in section 202(4). When those rates apply, section 202(2)(a)(xii) says total income is computed without Chapter VIII deductions, other than those in sections 124(1), 124(2), 125(2) and 146. Sections 136 and 137 are not in that exception.

In plain terms, a person who stays in the section 202 slab regime gets no deduction for political donations. A person who exercises the option under section 202(4) is computed under the normal provisions and can claim it, subject to its conditions. Work out which route is cheaper before opting out, because the option has its own timing and withdrawal rules.

Worked example 1: individual, tax year 2026-27

Assumptions: Ravi is a resident individual who has opted out under section 202(4). His gross total income is Rs 10,00,000. He has no other Chapter VIII deductions. During the year he gives Rs 40,000 by cheque to a party registered under section 29A and Rs 10,000 in cash to the same party.

Step	Amount (Rs)
Cheque donation, qualifies under section 137	40,000
Cash donation, excluded	0
Deduction allowed	40,000
Gross total income	10,00,000
Total income (10,00,000 less 40,000)	9,60,000

Worked example 2: company, tax year 2026-27

Assumptions: Brightline Foods Pvt Ltd is an Indian company with gross total income of Rs 80,00,000 and no other Chapter VIII deductions. It transfers Rs 5,00,000 by bank to an approved electoral trust, and pays Rs 1,00,000 in cash to a registered party.

1. Qualifying contribution under section 136: Rs 5,00,000 (non-cash, to an electoral trust).
2. Cash payment: Rs 1,00,000, not deductible under section 136(1).
3. Check section 122(2): Rs 5,00,000 is below Rs 80,00,000, so the full amount is allowed.
4. Total income: 80,00,000 less 5,00,000 = Rs 75,00,000.

Worked example 3: when the gross total income cap bites

Assumptions: Meena is a resident individual, opted out under section 202(4), with gross total income of Rs 30,000 for tax year 2026-27 and no other deductions. She pays Rs 50,000 by electronic transfer to a registered party.

1. Qualifying contribution: Rs 50,000.
2. Section 122(2) caps total Chapter VIII deductions at gross total income, Rs 30,000.
3. Deduction allowed: Rs 30,000. Total income: Rs 0.

Real-life scenarios

The practising doctor. Dr Anil gives Rs 25,000 to a registered party by UPI. He is an individual, so section 137 applies and the UPI transfer is not cash. He keeps the bank entry and the party's receipt and claims the deduction in his return, having opted out under section 202(4).

The municipal body. A local authority wants to donate to a party. Section 137 specifically excludes a local authority, so no deduction is available, whatever the payment mode.

The salaried employee in the default regime. Sunita donates Rs 20,000 by cheque but stays in the section 202 slab regime. Under section 202(2)(a)(xii) the deduction is not part of her computation, so she gets no tax benefit from the donation.

How does this link to what the party itself pays tax on?

Schedule VIII (read with section 12) keeps a registered party's voluntary contributions out of its total income, subject to conditions. These include account payee cheque, draft or electronic modes for donations above Rs 2,000, and a record of each contribution above Rs 20,000. Electoral trusts must distribute 95% of the donations and surplus to eligible parties in the tax year. Rule 289 sets how an electoral trust functions, including that it accepts no cash contribution and requires the PAN of a resident contributor. These conditions bind the recipient, not you, but they explain why donors are told to use banking channels and get a receipt.

Is advertising in a party's souvenir deductible instead?

No. Section 34(2)(c) says expenditure on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party is not treated as business expenditure laid out wholly and exclusively for the business. A business cannot move a political payment into advertising costs.

Common mistakes

• Paying in cash and claiming anyway. Both sections exclude cash in so many words.
• Donating to an unregistered party. Only a party registered under section 29A of the Representation of the People Act, 1951, or an electoral trust, qualifies.
• Assuming the deduction works in the section 202 slab regime. Chapter VIII deductions, apart from the few listed in section 202(2)(a)(xii), are not available there.
• Forgetting the gross total income cap. Section 122(2) limits the total of all Chapter VIII deductions.
• Booking the payment as advertising. Section 34(2)(c) blocks that for party souvenirs and similar publications.
• Losing the proof. Keep the bank record and the receipt in the file for the year.

Quick reference

Point	Rule	Where
Indian company	Deduction for non-cash contribution	Section 136(1)
Any assessee	Same, except local authority and government-funded AJP	Section 137
Recipient	Section 29A registered party or electoral trust	Sections 136(1), 137
Cash	Not allowed	Sections 136(1), 137
Overall cap	Gross total income	Section 122(2)
Slab regime	Not available unless opted out	Section 202(2)(a)(xii), 202(4)

How a CA firm can keep this clean

For a practice, the work is in the paperwork: confirming each client's regime choice, collecting the bank proof and receipt, and noting which clients made donations before the return is prepared. Finexo's practice management software lets you track these document requests and deadlines across your client list. It does not compute the deduction or file returns for you. For the wider picture of Chapter VIII, see our overview of deductions from total income.

Where this is in the Act

• Section 136: contributions by companies to political parties
• Section 137: contributions by any person to political parties
• Section 122(2) and (3): overall cap and AOP/BOI rule
• Section 202(2)(a)(xii) and 202(4): slab regime and the option to opt out
• Section 2(43): electoral trust
• Section 34(2)(c): party souvenir advertising
• Schedule VIII and section 12: tax treatment of parties and electoral trusts
• Rule 289: functioning of an electoral trust