What is corporate funding of elections?

Last Updated at: February 13, 2020
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Corporate Funding of Elections

Why are we discussing this topic?

As per the Association for Democratic Reforms, the total declared income of all the national parties for the financial year 2017 – 2018 amounted to INR 1,198.75 crores in total.

As per the Section 29A of RPA (Representation of the People Act), 1951, every body or association of individual citizens is required to register them with the EC (Election Commission) to act as a political party. The political party should confirm all conditions pertaining to corporate funding and here we have discussed the points regarding the same.

To give some context, the national parties include the Bharatiya Janata Party (BJP), Indian National Congress (INC), Bahujan Samaj Party (BSP), Nationalist Congress Party (NCP) Communist Party of India (CPI), Communist Party of India (Marxist) (CPM) and All India Trinamool Congress (AITC).

On June 3, 2013, the Central Information Commission (CIC) decided on the issue of, whether such national political parties should be considered as “public authorities” as per Section 2(h) of the Right to Information Act, 2005 (RTI Act) or not. As per this provision of the RTI Act, a public authority means anybody which is established or constituted by any other law made by the Parliament. Such public authorities are required to disclose information and share the response to the queries raised by the common people. This ambit of information might also include seeking information from these national political parties about their source of funding.

In this case, the CIC decided that such national political parties are to be considered as public authorities in the larger interest of democratic principles because of their main function, i.e., forming the government and being accountable to citizens.

Are the political parties mandated to disclose the details of the amount of corporate funding?

Section 29A of the Representation of the People Act, 1951 (RPA) states that every association or body of individual citizens of India is required to register themselves with the Election Commission (EC) to be able to function as a political party. Such associations or body of individuals have to declare that, they shall always strive to keep the spirit of the Constitution of India, 1949 (Constitution) by imbibing the principles of socialism, secularism and democracy.

Further, Section 29B of the RPA states that every political party may accept any amount of contribution which is voluntarily offered to it by any person or an eligible company as per the provisions of law, which is discussed in the next part of this article.

From the perspective of disclosure, all registered political parties are required to file the contribution report with the EC.  Such report to contain the details of the donors who have made a contribution above INR 20,000 to such political party for a specific financial year.

Such contribution report lists the name of the contributing person/company, address, PAN number and mode of contribution. If any of the donors is a corporate entity or an eligible company, then the political party has to confirm if all the conditions related to corporate funding have been complied with or not. The next part of the article shall discuss the basic conditions to be fulfilled by a corporate entity, prior to making contributions to any political party.

See this contribution report filed by the All India Trinamool Congress for the financial year 2017-2018.

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What are the recent changes in law related to corporate funding of elections?

Section 182 of the Companies Act, 2013 (Companies Act) deals with the prohibitions and restrictions regarding political contribution by a corporate. It is pertinent to note that, approval of the Board of Directors (Board) of the body corporate is a must before making any kind of political contribution.

This provision was amended vide the Finance Act, 2017.

Let us compare and contrast this provision pre and post the aforesaid amendment.

Firstly, any company which is not a Government company as per the provisions of the Companies Act, and has been in existence for at least three years may contribute any amount directly or indirectly to any political party, i.e. eligible company.

However, prior to this amendment, this provision also provided for an upper limit on the amount that may be contributed by such eligible company. It stated that, in a particular financial year, the aggregate amount contributed by such company to any political party shall not exceed 7.5% of its average net profits in immediately preceding three financial years.

This 7.5% threshold was omitted by virtue of this amendment.

In essence, now there is no bar on the amount that can be contributed by a corporate towards the funding of any political party.

Secondly, the current provision states that every eligible company shall disclose the total amount contributed by it to any political party in its profit and loss account. Such amount shall be contributed by an account payee cheque drawn on a bank or an account payee bank draft or by using electronic clearing system through a bank account. Further, the current provision provides immense flexibility to an eligible company to make a contribution to political parties. This means that such eligible companies can contribute through any instrument which might be issued pursuant to any scheme notified under any law for the time being in force, which is a wide ambit.

It is to be noted that, the old provision explicitly provided for the name of the party to whom such contribution is being made be disclosed. However, this aspect was completely substituted by the aforesaid amended provision.

Can GST be refunded? When can GST refund be claimed?

Visit the GST portal to claim the refund of the GST tax paid. Your eligible to receive the GST refund along with the rate of interest of 6%.Understand the procedure for GST registration and GST returns here.

What is the support available for collateral free borrowing?

The Government of India, the Ministry of MSME and SIDBI have set up a Credit Guarantee Fund Trust for the MSMEs to facilitate the credit flow to the MSME businesses.More on Income Tax Return Filing.

My employer deducts and deposits TDS on my behalf. Do I still need to file my Income Tax Return?

Individuals whose annual income exceeds 2,50,000 must file the income tax returns without fail. This must be done even when your employer deducts the TDS annually on your behalf.Learn more about ISO Certification.

ISO 9001 certification is valid for how many years

After completion of ISO implementation audit and ISO documentation audit, ISO certification body offers certificate that will be effective for 3 years.More info on NGO Registration in india.

Can a Trustee take salary from trust fund?

A trustee can draw compensation only if it is for Trust related work.However, the amount should be reasonable and within market standards.Otherwise it is illegal.More about Udyog Aadhar Registration.

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What is corporate funding of elections?

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Why are we discussing this topic?

As per the Association for Democratic Reforms, the total declared income of all the national parties for the financial year 2017 – 2018 amounted to INR 1,198.75 crores in total.

As per the Section 29A of RPA (Representation of the People Act), 1951, every body or association of individual citizens is required to register them with the EC (Election Commission) to act as a political party. The political party should confirm all conditions pertaining to corporate funding and here we have discussed the points regarding the same.

To give some context, the national parties include the Bharatiya Janata Party (BJP), Indian National Congress (INC), Bahujan Samaj Party (BSP), Nationalist Congress Party (NCP) Communist Party of India (CPI), Communist Party of India (Marxist) (CPM) and All India Trinamool Congress (AITC).

On June 3, 2013, the Central Information Commission (CIC) decided on the issue of, whether such national political parties should be considered as “public authorities” as per Section 2(h) of the Right to Information Act, 2005 (RTI Act) or not. As per this provision of the RTI Act, a public authority means anybody which is established or constituted by any other law made by the Parliament. Such public authorities are required to disclose information and share the response to the queries raised by the common people. This ambit of information might also include seeking information from these national political parties about their source of funding.

In this case, the CIC decided that such national political parties are to be considered as public authorities in the larger interest of democratic principles because of their main function, i.e., forming the government and being accountable to citizens.

Are the political parties mandated to disclose the details of the amount of corporate funding?

Section 29A of the Representation of the People Act, 1951 (RPA) states that every association or body of individual citizens of India is required to register themselves with the Election Commission (EC) to be able to function as a political party. Such associations or body of individuals have to declare that, they shall always strive to keep the spirit of the Constitution of India, 1949 (Constitution) by imbibing the principles of socialism, secularism and democracy.

Further, Section 29B of the RPA states that every political party may accept any amount of contribution which is voluntarily offered to it by any person or an eligible company as per the provisions of law, which is discussed in the next part of this article.

From the perspective of disclosure, all registered political parties are required to file the contribution report with the EC.  Such report to contain the details of the donors who have made a contribution above INR 20,000 to such political party for a specific financial year.

Such contribution report lists the name of the contributing person/company, address, PAN number and mode of contribution. If any of the donors is a corporate entity or an eligible company, then the political party has to confirm if all the conditions related to corporate funding have been complied with or not. The next part of the article shall discuss the basic conditions to be fulfilled by a corporate entity, prior to making contributions to any political party.

See this contribution report filed by the All India Trinamool Congress for the financial year 2017-2018.

Register Your Startup

What are the recent changes in law related to corporate funding of elections?

Section 182 of the Companies Act, 2013 (Companies Act) deals with the prohibitions and restrictions regarding political contribution by a corporate. It is pertinent to note that, approval of the Board of Directors (Board) of the body corporate is a must before making any kind of political contribution.

This provision was amended vide the Finance Act, 2017.

Let us compare and contrast this provision pre and post the aforesaid amendment.

Firstly, any company which is not a Government company as per the provisions of the Companies Act, and has been in existence for at least three years may contribute any amount directly or indirectly to any political party, i.e. eligible company.

However, prior to this amendment, this provision also provided for an upper limit on the amount that may be contributed by such eligible company. It stated that, in a particular financial year, the aggregate amount contributed by such company to any political party shall not exceed 7.5% of its average net profits in immediately preceding three financial years.

This 7.5% threshold was omitted by virtue of this amendment.

In essence, now there is no bar on the amount that can be contributed by a corporate towards the funding of any political party.

Secondly, the current provision states that every eligible company shall disclose the total amount contributed by it to any political party in its profit and loss account. Such amount shall be contributed by an account payee cheque drawn on a bank or an account payee bank draft or by using electronic clearing system through a bank account. Further, the current provision provides immense flexibility to an eligible company to make a contribution to political parties. This means that such eligible companies can contribute through any instrument which might be issued pursuant to any scheme notified under any law for the time being in force, which is a wide ambit.

It is to be noted that, the old provision explicitly provided for the name of the party to whom such contribution is being made be disclosed. However, this aspect was completely substituted by the aforesaid amended provision.

Can GST be refunded? When can GST refund be claimed?

Visit the GST portal to claim the refund of the GST tax paid. Your eligible to receive the GST refund along with the rate of interest of 6%.Understand the procedure for GST registration and GST returns here.

What is the support available for collateral free borrowing?

The Government of India, the Ministry of MSME and SIDBI have set up a Credit Guarantee Fund Trust for the MSMEs to facilitate the credit flow to the MSME businesses.More on Income Tax Return Filing.

My employer deducts and deposits TDS on my behalf. Do I still need to file my Income Tax Return?

Individuals whose annual income exceeds 2,50,000 must file the income tax returns without fail. This must be done even when your employer deducts the TDS annually on your behalf.Learn more about ISO Certification.

ISO 9001 certification is valid for how many years

After completion of ISO implementation audit and ISO documentation audit, ISO certification body offers certificate that will be effective for 3 years.More info on NGO Registration in india.

Can a Trustee take salary from trust fund?

A trustee can draw compensation only if it is for Trust related work.However, the amount should be reasonable and within market standards.Otherwise it is illegal.More about Udyog Aadhar Registration.

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