Managing a political party and running a political campaign is an expensive affair. Promotion, publicity and bringing the Party workers/supporters together require a lot of money. There was always anonymity maintained by parties and lack of transparency with regards to their sources of funding. With an intention to curb the movement of black money and corruptions in politics, the government had introduced electoral bonds in the 2017-18 budget.
Electoral bonds are bearer banking Instruments used for funding eligible political parties. An eligible political party is a one which is registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and secured not less than 1% of the votes polled in the last general election to the legislative assembly.
Earlier to 2017, as per the Section 29 C of “Representation of the People Act, 1951 for donations beyond Rs.20000/-, the parties had to declare the names of the donors.
Later in 2017, the Government brought in a new rule that only up to Rs.2000 cash payment can be accepted as cash donation and beyond this amount, the donors can donate online or through cheques only. This was introduced to make the entire process digital.
As per earlier amendment, the companies could donate only up to 7.5 % of their profits as donations to any political party. This rule has been removed when Electoral bonds were introduced in 2017. Companies can donate the entire profits to political parties in the form on Electoral bonds.
An Indian citizen, Hindu Undivided family, a firm, corporate body or a registered association /Agency can buy these electoral bonds to donate funds to eligible Political parties of their choice.
Available in denominations of Rs1000, Rs 10,000, Rs 1,00,000, Rs 10,00,000 and Rs 1,00,00,000 – RBI notified banks like State Bank of India issues these bonds. These bonds are valid for a time of 15 days from the day of issuance.
The political parties are expected to file returns with the election commission on the total electoral bonds received by them.
The bonds can be issued in the month of January, April, July and October for a period of 10 days. During the election year, the period will have a 30 days window.
The donor has an advantage of tax exemption under section 80GGC/80GGB of Income tax act. The receiving political party can also get an exemption under section 13A of Income Tax Act.
Benefits of Electoral Bonds
- Bonds would not have name of the donor on the bond copy. Identity of the donor is protected though all transactions are done digitally or through cheques.
- It is the government‘s good intention to make the election funding completely digitized is served to a large extent as any donation above Rs.2000/- should be in the form on electoral bonds or Cheques only.
- Transparency can be maintained to large extent as the donor identity, intentions are known through the seller bank.
- Visibility to Election commission of India as all the bonds are to be redeemed only in the ECI disclosed bank account only.
- This will help to curb activities of fake political parties who form parties with intention to collect funds only. Only genuine parties who have at least 1% of votes in the last elections will thus be able to participate.
Loopholes of Electoral Bonds
- Critics argue that the intention of having complete transparency will not be served as the donor’s identity is not known while purchasing bonds. The government believes that by doing so they are extending the individual’s right to vote in secret Ballot. There are chances that unchecked foreign funding through electoral bonds might be getting promoted due to this. These funding agencies might have their own interest in doing so and might affect the country’s interests.
- Some also say that the Electoral bonds are introduced to choke the funding of the opposition party and would be more favourable to the ruling party.
- Earlier RBI and government only were authorized to issue bearer bonds.But for electoral bonds other banks are also authorized to issue bearer bonds like State Bank of India.
- Shell companies might be formed just to fund the political parties as the limit of 7.5 % profits has been abolished. The companies can purchase electoral bonds with 100% net profits and shut down once the purpose is served.
The electoral bonds are definitely a good start towards transparency. However, complete transparency is still a concern as the donor details are not in the open. Though the government thinks otherwise, the donors have to fulfil the KYC norms while purchasing these bonds. Thus, the details of the donors are available with the banks issuing these bonds.
The success of this novel idea remains to be seen.