Electoral Bonds

Political parties require funds to help them function through the elections. Earlier, the government established no proper scheme for funding political parties. In 2017, the Finance Bill introduced a new concept of electoral bonds. Later the electoral bond scheme was notified by the NDA government led by Prime Minister Narendra Modi on January 29, 2018. The significance of electoral bonds is to keep funding to various political parties clean and transparent. It helps keep a check on black money, which is often used to fund political parties during elections. Now let us see what an electoral bond is in detail.

What is an Electoral Bond?

An Electoral bond is an instrument similar to a promissory note that one can purchase to make donations to eligible political parties. To be eligible to receive funds through electoral bonds, a political party must be registered under the Representation of the People act 1951 and must have secured 1% or more votes in the last General Elections or the Legislative Assembly. The bond is a bearer instrument, and the amount donated is payable to the bearer free of interest. Electoral bonds can be purchased only by the citizens of India. Any person or body established or incorporated in India can purchase electoral bonds and donate to their choice of a political party. Earlier, under the Companies Act, no foreign company was allowed to make donations to Indian political parties. But after the introduction of the electoral bond scheme, even foreign companies can make donations if they wish to do so. Now that we know what is an electoral bond? Let us look at its features.

Features of Electoral Bonds

Anonymous Donation

All donations made via electoral bonds are anonymous. The bond does not contain any information related to the donor. Therefore, political parties are unaware of the person who has donated.

Validity

After being issued, the electoral bonds have a validity period of 15 calendar days. The political party must deposit the bond within this time frame to benefit from the donation. Otherwise, the bond expires after the validity period, and they can no longer claim it.

Confidentiality

The State Bank of India is liable to keep all the information confidential related to the purchaser. In no circumstance the bank is allowed to share these details with any person. The only exception to this clause is when the details are asked by a law enforcement agency or the court of law.

Availability for purchase

The Government of India has set a time frame for the purchase of electoral bonds. Any person who wishes to purchase a bond can do so in the first 10 days of each quarter. The bonds are not available for sale after this period.

Denominations of Electoral Bond

Electoral bonds can be purchased in the following denominations. People who wish to donate more can do so by purchasing multiple bonds in the following denominations – 

• Rs. 1,000 

• Rs. 10,000 

• Rs. 1,00,000 

• Rs. 10,00,000 

• Rs. 1,00,00,000

Non-refundable 

Electoral bonds, once sold, are non-refundable. Even if the purchaser wants to return the bonds in exchange for the money, it is not possible. So, purchasers must keep this thing in mind before making donations through electoral bonds.

Non-tradable 

Stocks and bonds can be traded in the stock market. However, one cannot trade electoral bonds in any stock market.

Loan

One cannot use electoral bonds as a security to get a loan against them. These are only meant for making donations to political parties, and one cannot use them in any other way.

Taxability

The donations made through electoral bonds are tax-deductible. This means that the political party receiving the donation will get a tax exemption, and the donor gets a deduction when filing taxes.

Controversy Over the Use of Electoral Bonds

The significance of electoral bonds is to provide genuine and transparent donations to political parties to help them in elections. However, many people oppose the idea as all the donations are made anonymous. Therefore, voters are unaware of where the funding has come from. Even shareholders of a company remain unaware of their contribution if a company has chosen to donate to a political party. In addition, it is also said that it helps to circulate black money in the system and is similar to money laundering. Some people, therefore, consider it a threat to the principles of democracy.

Conclusion

The electoral bond scheme was introduced in good faith to maintain transparency and clarity about funding to political parties. However, the scheme has not been accepted completely by all authorities. In April 2019, the Supreme Court of India demanded political parties submit the details of their funding through electoral bonds to the Election Commission of India. The finance ministry was also asked to change the timeline to purchase electoral bonds from 10 days to only 5 days. With proper execution and guidelines, electoral bonds can prove to be a beneficial tool to curb illegal funding for elections in the country.