Electoral bonds, which were first introduced in 2017, let private citizens and corporate entities make anonymous contributions to any political party indefinitely. Under the electoral bond scheme, donors could purchase electoral bonds from SBI in fixed denominations, which they could then give to any political party that could cash them in. The donor’s name was not required to be disclosed by the recipient political parties to the Election Commission of India (ECI) or anyone else thanks to the bonds.
What is the Electoral Bond Scheme?
In India, electoral bonds represent a relatively novel idea in the field of political financing. Since the introduction of electoral bonds in 2017, any number of private individuals or corporate entities have been able to anonymously donate funds to any political party. The bonds were bought by donors in fixed denominations from the State Bank of India (SBI) and given to any political party, that could cash them using a bank account, until a historic decision by the Supreme Court in mid-February to abolish the seven-year-old election funding system, just weeks before the Lok Sabha elections scheduled for April-May of this year.
How Does The Electoral Bond Scheme Work?
Any corporate entity, registered agency, or unbroken Hindu family in India can issue electoral bond Scheme through the donation of funds to any political party that is eligible for the campaign. The State Bank of India (SBI) and other banks were informed by the RBI to begin issuing corporate bonds, which come in the following denominations:
₹10,000, ₹1,000,00,000, ₹10,000,000, and ₹1,00,00,000. Electoral bonds, regardless of denomination, are good for 15 days from the date of issuance. The electoral bonds that the general public or businesses issue are given to the political parties. The political parties intend to submit returns on the total amount of electoral bonds they have been given to the electoral commission.
For example:
Bonds may be issued by an individual for ten days in January, April, July, and October of the following year. One will have thirty days to issue electoral bonds if it is an election year. The issuance of electoral bonds has various tax advantages. Donors of electoral bonds receive an additional tax benefit for their contributions. Donations of electoral bonds are exempt from taxes under Sections 80 GG and 80 GGB of the Income Tax Act. However, according to Section 13A of the Income Tax Act, the political party that receives the donations may also get a donation.
How to Use Electoral Bonds?
The process of using electoral bonds is simple. In multiples of RS 1,000, RS 10,000, RS 100,000, and RS 1 crore, the bonds will be issued. That being said, the range is RS 1,000 to RS 1 crore. There are electoral bonds available at certain SBI branches. The bonds can be bought by a donor with a KYC-compliant account, and they can donate to any political party or individual of their choosing. Electoral bonds can be cashed by the recipient via the party’s validated account. Nevertheless, electoral bonds have a fifteen-day validity period.
Electoral Bonds Advantages
- All electoral bond transactions are done online or with checks.
- The Election Commission of India has disclosed a bank account that must be used to redeem all electoral bond Scheme that have been issued, which strengthens the malpractice.
- Electoral bonds contribute to the government’s objective of fully digitizing and safeguarding election funding. As a result, it is not legally necessary for donations exceeding RS 2000 to take the form of electoral bonds and checks.
- Election bond Scheme are widely used, and this can serve as a check on political parties that operate with the sole intention of raising money from the general public. This is because electoral funding is only available to registered parties who receive at least 1% of the total votes in the general election.
When are Election Bonds Available for Purchase?
Every quarter, at the start of the first ten days, the electoral bonds go on sale. The first ten days of January, April, July, and October are designated for the purchase of government-specified electoral bonds. The government will designate an extra thirty days during the Lok Sabha election year.
What Requirements Apply to Electoral Bonds?
Electoral bonds may be obtained by any party registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951), provided that the party has received at least one percent of the votes cast in the most recent Assembly or General elections. The party will receive a verified account from the Election Commission of India (ECI), and this account will be used for all electoral bond transactions. On the electoral bonds, the donor’s name will not appear. As a result, the identity of the donor may not be known to the political party.
Things to Know About Electoral Bond Scheme
- Denominations: There were several denominations of electoral bond Scheme available, starting at Rs 1,000 and going up to Rs 1 crore.
- Validity: The expiration period of electoral bonds is a crucial point to remember. The bonds were valid for fifteen days.
- Legal framework: In India, the Finance Act of 2017 brought in electoral bonds. The government asserted that by using banking channels to channel donations, these bonds would increase transparency in political funding. Critics, however, voiced their concerns over the lack of transparency surrounding the funding source.
- Anonymity: The anonymity offered to donors by electoral bonds was one of their main characteristics. The fact that an individual or organization’s identity was kept private when they bought these bonds guaranteed that there were no potential biases or outside influences in the political funding process.
- How did bond funds get to eligible political parties?: The interested parties had to use a bank account with the approved bank to encash the electoral bonds within a specific amount of time. If the funds were not received within 15 days, the donation was placed into the Prime Minister’s Relief Fund.
- Which political parties were permitted to obtain electoral bond funding?: As per the official statement dated November 4, 2023, “Only political parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951), and who have secured at least one percent of the votes cast in the most recent general election for the State’s Legislative Assembly or House of the People, are eligible to receive Electoral Bonds.”
- Transparency concerns: Election bonds were hailed by the government as a way to improve political funding transparency, but detractors claimed that the democratic process was in danger because donors’ identities were not disclosed. They contended that corruption and improper influence could occur if the source of these funds was unknown.
FAQ of Electoral Bond Scheme
Q1. When are Election Bond Scheme Available for Purchase?
Ans. Every quarter, at the start of the first ten days, the electoral bonds go on sale. During the first ten days of January, April, July, and October, voters can purchase the government-specified electoral bonds.
Q2. With whom are Electoral Bond Scheme issued?
Ans. Any corporate entity, registered agency, or unbroken Hindu family in India can issue electoral bonds through the donation of funds to any political party that is eligible for the campaign.
Q3. Is there no tax on electoral bond Scheme?
Ans. The Income Tax Act of 1961’s Sections 80GG and 80GGB provided tax exemptions for electoral bonds issued by individuals or entities. Section 13A of the Income Tax Act allowed political parties to accept the donations.