In a significant ruling on February 15, 2024, the Supreme Court has imposed a ban on electoral bonds, which were a means of political parties receiving contributions. Despite being introduced in India to bring transparency to political funding, the use of electoral bonds has been halted.
What are Electoral Bonds?
Introduced by the Modi government in 2018 to curb cash transactions in political donations and enhance transparency, electoral bonds are financial instruments. Individuals, corporations, and entities purchase these bonds, termed as electoral bonds, to contribute funds to political parties. The political parties then redeem these bonds at banks, converting them into funds.
Why Were Electoral Bonds Introduced?
The Electoral Bond Scheme was initiated by the Modi government on January 2, 2018, with the aim of reforming the electoral funding system in the country. The bonds are issued four times a year in January, April, July, and October. Buyers, who contribute funds to political parties, can purchase these bonds either by visiting designated branches or through online transactions on the bank’s website. The government asserted that electoral bonds would bring “clean money” and enhance transparency in political funding.
Where to Obtain Electoral Bonds
Electoral bonds, distributed through 29 branches of the State Bank of India (SBI), are available in cities such as New Delhi, Mumbai, Kolkata, Chennai, Gandhinagar, Chandigarh, Patna, Ranchi, Guwahati, Bhopal, Jaipur, and Bengaluru. As of 2019, the highest percentage of electoral bonds, 30.67%, was sold in Mumbai, with Delhi accounting for 80.50% of the total.
Tax Benefits for Electoral Bond Buyers
Donors who contribute funds to political parties through electoral bonds can enjoy anonymity by purchasing bonds of up to one crore rupees from designated SBI branches. This system helps donors maintain confidentiality and also provides tax benefits. Only political parties securing a minimum of 1% of the votes in general elections are eligible to receive funds through these bonds.
Contribution Limits and Validity
Within ten days of issuance, individuals, groups, or corporate entities can purchase electoral bonds ranging from 1,000 to 1 crore rupees. The bonds, available in denominations of 1,000, 10,000, 1 lakh, 10 lakhs, and 1 crore rupees, must be deposited into the designated account of the preferred political party within 15 days of purchase.
Receiving Contributions from Abroad
Notably, the introduction of electoral bonds aimed to bring clean funds and transparency to political funding, as highlighted by then Finance Minister Arun Jaitley in January 2018. The Electoral Bond Scheme was brought into effect through amendments in the Finance Act of 2017, with potential risks and challenges to transparency.
