Frequently Asked Questions
What law governs Electoral Trusts and where is the registration requirement?
Electoral Trusts are governed by the Electoral Trust Scheme 2013 notified by the Central Government under Section 2(22AAA) of the Income Tax Act 1961. The trust must be incorporated as a company under Section 8 of the Companies Act 2013 and must obtain approval from the Election Commission of India before accepting any contribution.
What tax exemption does an Electoral Trust get, and under which section?
Under Section 13B of the Income Tax Act 1961, an Electoral Trust is exempt from income tax on amounts distributed to registered political parties, provided at least 95% of aggregate contributions received in the financial year are so distributed. The remaining 5% may be carried forward for distribution in the next year. The trust must file its annual return under Section 139(4C) of ITA 1961 (Section 263 of ITA 2025 for TY 2026-27 onwards).
Can a corporate donor claim a deduction for contributing to an Electoral Trust?
Yes. A company making contributions to an approved Electoral Trust may claim a deduction under Section 80GGB of the Income Tax Act 1961. Individuals and other persons (excluding companies and local authorities) may claim under Section 80GGC. Cash contributions are not deductible — payment must be by account-payee cheque, demand draft, or electronic transfer.
Are foreign contributions permitted, and what does FCRA say?
No. An Electoral Trust cannot accept contributions from foreign sources. Section 3 of the Foreign Contribution (Regulation) Act 2010 prohibits political parties and entities involved in political activities from receiving foreign contributions. The Electoral Trust Scheme 2013 further restricts contributions to Indian citizens and companies incorporated in India. Accepting a foreign contribution exposes the trust to cancellation of approval and prosecution under FCRA.
What annual compliance obligations does an Electoral Trust carry?
The trust must: (1) file an income tax return under Section 139(4C) of ITA 1961 / Section 263 of ITA 2025; (2) submit an annual statement of contributions received and distributions made to the Election Commission of India and the prescribed income-tax authority as required under Clause 10 of the Electoral Trust Scheme 2013; and (3) file ROC annual returns (Form MGT-7 and AOC-4) under the Companies Act 2013 as a Section 8 company.
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