ELECTORAL BONDS (Syllabus: GS Paper 2 – Polity)

News-CRUX-10     16th February 2024        
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Context: The Supreme Court recently directed the State Bank of India to stop issuing electoral bonds immediately.


Electoral Bonds

  • About: Electoral bonds are bearer instruments, akin to promissory notes, available for purchase by any Indian citizen or an Indian-incorporated company.
  • Introduced: In 2018 by the Union government.
  • Objectives: to cleanse the system of political funding in the country by eradicating the menace of unaccounted money coming into the country’s economy through political funding.
  • Donation Option: Citizens or corporations can buy these bonds and subsequently donate them to any eligible political party of their choice.
  • Resemblance to Bank Notes: Electoral bonds are akin to banknotes and are payable to the bearer on demand, devoid of any interest.
  • Digital or Cheque Purchase: Individuals and parties can acquire these bonds either digitally or through a cheque.
  • Eligibility: Only political parties registered under Section 29A of the Representation of the People Act, 1951, and those securing at least 1% of votes in the last general election to the House of the People or the Legislative Assembly of the State can receive electoral bonds.
  • Encashment Procedure: Political parties can encash these bonds solely through a designated bank account with the authorized bank.
  • Mandatory Disclosure: Political parties must disclose the amount received via electoral bonds to the Election Commission.
  • Donor Anonymity: Importantly, electoral bonds do not bear the name of the donor, ensuring the anonymity of the contributor.

Amendments Related To Political Funding

  • Amendment to the Representation of the People Act 1951: The government amended Section 29C effectively exempting political parties from informing the ECI about the details of contributions made to them through electoral bonds. 
  • Amendment to the Companies Act 2013: No companies are required to give details of political contributions in their annual profit and loss accounts.
  • The government has also removed the cap of 7.5% (seven point five percent) on corporate contributions to the political parties.
  • Amendment to the FCRA Act 2010: allowed foreign companies with subsidiaries in India to fund Indian political parties.
  • Amendment to the Income Tax Act 1961: allowed anonymous donations only less than Rs. 20,000. 
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