Electoral Bonds Scheme

Electoral Bond

Introduced in the 2017 Union Budget, Electoral Bonds are the interest-free bearers to donate money to a political party anonymously.

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On 26th March 2021, the SC dismissed petitions asking to stay the sale of new electoral bonds ahead of the assembly elections in West Bengal, Tamil Nadu, Kerala, Assam, and Puducherry. The court said there was no justification to stay the sale even though the bigger constitutional challenge to the Electoral Bonds Scheme filed in 2017 is still pending.

It was filed by the Association of Democratic Reforms which is a Non-Profit Organization and works for electoral transparency and accountability. The association is more than 20 years old. The court had admitted the plea and sought responses from the Government and election Commission.

In 2019, the Association of Democratic Reforms found electoral bonds wrong because the donations to a political party had become opaque. According to the association, many political parties like CPI(M) and Election Commission of India, Electoral Bonds are bad for the election.

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The History

Introduced in the 2017 Union Budget, the guidelines related to Electoral Bonds were announced in January 2018 by the then Finance Minister Arun Jaitley in the Lok Sabha.

It was introduced by amendments made through the Finance Act 2017, Reserve Bank of India Act 1934, Representation of Peoples Act 1951, Income Tax Act 1961, and Companies Act.

Before 2017, if a political party gets a donation of less than Rs. 20,000 from a donor, then it was not mandatory to reveal the source of the fund. It could be paid in cash. This rule was clearly being misused and black money was being donated. 90% of the political fund was in the denominations of less than Rs. 20,000. Political parties became dependent on black money for election campaigns.

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The Scheme

According to the Electoral Bonds Scheme, if the donation is more than Rs.2000, then the source has to be revealed and electoral bonds have to be used for donation.

Electoral bonds are available in the State Bank of India. When asked for an Electoral Bond, the donor’s details will only be available with the bank to maintain privacy. Electoral Bonds are available only in the denominations of Rs. 1000; Rs. 10,000;Rs. 1 lac; Rs. 10 lacs and Rs. 1 crore.


Rules For Receiving Party

The political party receiving the donation should be registered under Section 29A of the representation of the Peoples Act 1951 and must have secured at least 1% of the votes polled in the most recent Lok Sabha or state election. The political party qualifying the given parameters will be eligible to get the donation through an Electoral Bond.

Name of the purchaser has to be kept confidential by the bank. The Electoral Bond is valid only for 15 days from the date of purchase and it is available for purchase for a period of days each at the beginning of every quarter.

There is no limit on the number of bonds an individual or company can purchase. If the party has not encashed the Electoral Bond in the said 15 days then the State Bank of India deposits it into the Prime Minister’s Relief Fund.

A total of 12,924 Electoral Bonds worth Rs. 6534.78 crores have been sold in 15 phases between March 2018 and January 2021.

Rules For Donating Company

The company should have been in existence for the last three years at least. It should not be a Government company as per the provisions of the Companies Act. In any particular financial year, the aggregated amount contributed by the company should not exceed 7.5% of its average net profits in the immediately preceding three financial years.

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Who Can Purchase And Donate Electoral Bonds? 

The Electoral Bonds under this scheme can be purchased by a citizen of India or incorporated or established in India. It includes:

● An individual.
● A Hindu Undivided Family.
● A firm.
● A company.
● An association of Persons or a Body of Individuals, whether incorporated or not.
● Every Artificial Judicial Person.
● Any agency, office, or branch owned or controlled by a person.

Because of the anonymity it offers, Electoral Bonds have become a popular way of donation. More than half of the donations received by political parties come from Electoral Bonds donations.

The Electoral Bonds Scheme is overall in favor of the ruling party as the donor’s details are available with the bank which makes it accessible for the Reserve Bank of India and the RBI to come under the Government. The current ruling party, BJP, is the biggest beneficiary because they have received Rs. 1660.89 crore, i.e, 60.17% of the total Rs. 2760.20 crore received by parties via Electoral Bonds.

Why Is The Scheme Challenged?

The Electoral Bonds Scheme is challenged because of the anonymity it provides to the donors of the Electoral Bonds. According to the Finance Act 2017, the center had exempted parties from disclosing the details of the donations received through Electoral Bonds. They need not disclose these details in their mandatory contribution reports to the EC every year.

In 2019, the EC stated that it will only support the Electoral Bonds Scheme if the donor’s name is revealed to them due to which the apex court had declared previously as an interim order that political parties have to disclose the details of every donation to the EC for transparency

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