What are Electoral Bonds?
Electoral bonds are financial instruments that act as promissory notes or bearer bonds. They can be purchased by individuals or companies in India specifically for contributing funds to political parties. These bonds are issued by the State Bank of India (SBI) and are sold in multiples of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh, and ₹1 crore. Donations made under this scheme by corporate and even foreign entities enjoy 100% tax exemption, while the identities of the donors are kept confidential, both by the bank and the recipient political parties.
How are Donations Made?
The bonds can be purchased through a KYC-compliant account to make donations to a political party. Once the money is transferred, the political parties must encash the donations within a given amount of time. Notably, there is no limit on the number of electoral bonds that a person or company can purchase.
Who can Receive Funds via Electoral Bonds?According to the provisions of the scheme, only political parties registered under Section 29A of the Representation of the People Act, 1951, and which secured not less than 1 per cent of the votes polled in the last elections to the Lok Sabha or a state legislative assembly are eligible to receive electoral bonds.Electoral Bonds Scheme and the Case
The electoral bonds scheme was first announced by former finance minister Arun Jaitley during the 2017 Budget Session. It was later notified in January 2018 as a source of political funding through amendments to the Finance Act and the Representation of the People Act. In order to implement the scheme, the Centre made amendments to the Companies Act, Income Tax Act, Foreign Contribution Regulation Act (FCRA), and the Reserve Bank of India Act.
Several petitions were filed in the Supreme Court, including those by CPI(M), Congress, and some NGOs, against the constitutional validity of the scheme. The hearing began on October 31 last year, with arguments made on its legality and the potential threat it may pose to the country.
According to the petitioners, the scheme violates the right to information, opens doors to shell companies, and promotes corruption. Rajya Sabha MP and senior advocate Kapil Sibal raised concerns that a political party could use the donations for purposes other than elections.
However, the Centre has maintained that the scheme ensures transparency and is a powerful check on the use of illicit money in elections.
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