News Highlights
The Union government recently told the Supreme Court that the procedure for funding political parties under the Electoral Bond Scheme 2018 is “absolutely transparent”.
Electoral Bond
- An electoral bond is like a promissory note that can be bought by any Indian citizen or company incorporated in India from select branches of the State Bank of India.
- The bonds are similar to bank notes that are payable to the bearer on demand and are free of interest.
- The bonds are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore, and the State Bank of India (SBI) is the only bank authorised to sell them.
- The citizen or corporate can donate the same to any eligible political party.
- Now, the receiver can encash the bonds through the party’s verified account. The electoral bond will be valid only for fifteen days.
- SBI deposits bonds that a political party hasn’t enchased within 15 days into the Prime Minister’s Relief Fund.
When was the electoral bond introduced?
- The electoral bonds were introduced with the Finance Bill (2017). On January 29, 2018, the Prime Minister notified the Electoral Bond Scheme 2018.
Which parties receive the electoral bonds?
- The only party registered under section 29A of the Representation of the Peoples Act, 1951 and has secured at least one per cent of the votes polled in the most recent General elections or Assembly elections entitled to receive electoral bonds.
- The Election Commission of India (ECI) will allot a verified account to the party, and all the transactions of an electoral bond will be made through this account.
- The electoral bonds will not bear the name of the donor. Thus, the political party might not know the donor’s identity.
When Can You Purchase Electoral Bonds?
- The electoral bonds are purchased for ten days at the beginning of every quarter.
- The first ten days of January, April, July, and October is the purchase of electoral bonds specified by the government.
- The government shall specify an additional period of 30 days in the year of the Lok Sabha elections.
Are electoral bonds taxable?
- In February 2017, the finance minister said the donations would be tax deductible.
- Hence, a donor will get a deduction, and the recipient, or the political party, will get a tax exemption, provided the political party files returns.
Restrictions removed after the introduction of Electoral Bond Scheme
- Earlier provisions
- Earlier, no foreign company could donate to any political party under the Companies Act.
- A firm could donate a maximum of 7.5 per cent of its average three-year net profit as political donations according to Section 182 of the Companies Act.
- As per the same section of the Act, companies had to disclose details of their political donations in their annual statement of accounts.
- By the Electoral Bond scheme, the government moved an amendment in the Finance Bill to ensure that this provision would not apply to companies in the case of electoral bonds.
- Thus, Indian, foreign, and even shell companies can now donate to political parties without having to inform anyone of the contribution.
Advantages of Electoral Bonds
- All electoral bonds issued are to be redeemed by a bank account that the Election Commission of India has disclosed; hence the malpractice can be reduced.
- The widespread use of electoral bonds can help to hold back political parties who operate with the goal of simply collecting funds from the public.
- It is because only registered parties attaining at least 1% of the votes in the general election can receive electoral funding.
- Electoral bonds work with the government’s goal to make election funding entirely safe and digitised. Therefore, all transactions of electoral bonds are carried out via cheques or digitally.
- Electoral bonds would keep a tab on the use of black money for funding elections
Challenges for Electoral Bonds
- Right to Know:
- Voters will not know which individual, company, or organisation has funded which party and to what extent. This infringes the citizens ‘Right to Know and makes the political class even more unaccountable.
- Crony Capitalism:
- This may become a convenient channel for repatriating money parked in tax havens to political parties for some favour or benefit to business people.
- Anonymous funding can lead to deposits of black money.
- Non-disclosure to Election Commission:
- While RoPA, 1951 mandates that the funds received by political parties in sums greater than Rs 20,000 be disclosed to the tax authorities, the Finance Act 2017 explicitly provides an exemption to this clause for electoral bonds.
- Amendments to Companies Act 2013:
- The amendment removed an eligibility clause(A company can make a political contribution only if its average net profit of three preceding financial years is 7.5%).
- As per ECI, this gives rise to the creation of shell companies just to fund political parties.
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Content Source: The Hindu