Similar to a financial tool used to make contributions to political parties, electoral bonds have similar functions. Read this blog to know more about the same
An electoral bond functions similarly to a financial instrument used to donate money to political parties. These bonds may also be issued by the general public to support approved political parties. How Does It Help In Saving Tax?
A political party that wishes to participate in elections must register in accordance with Section 29A of the Representation of the People Act, 1951. The bonds function similarly to banknotes that are interest- and demand-free payments to the bearer.
These bonds can be purchased by an individual party digitally, with a DD, or with a check. On January 29, 2018, the Narendra Modi-led NDA government announced the introduction of it’s and the 2018 Electoral Bond Scheme.
Election Bond Program
The Indian government has authorized the issuing of the 23rd tranche of election bonds, which will go on sale on November 9. Prior to the assembly elections in Gujarat and Himachal Pradesh, the choice was made. Whereas Himachal Pradesh will hold elections on November 12, Gujarat will hold elections in two stages on December 1 and 5.
How Does the Electoral Bond Program Work?
- Any Indian corporation, recognised organisation, or unbroken Hindu family may issue electoral bonds by making contributions to the political groups of their choice that are listed as eligible for the campaign.
- Corporate bonds are offered in the following denominations: ₹1,000, ₹10,000, ₹1,000,000, and ₹1,000,000 and are issued by institutions that have been notified by the RBI, such as the State Bank of India (SBI). The validity period for it, regardless of denomination, is 15 days.
- Election bonds issued by individuals or companies are given to the political parties. Political parties that anticipate approaching the electoral commission must file a return on the total amount of electoral bonds that have been acquired.
Who may Receive an Electoral Bond?
To be eligible to receive electoral bonds, a political party must be registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951), and it must have won at least 1% of the votes cast in the most recent general election for the State’s Legislative Assembly or House of Representatives.
Typically, a designated month’s first to tenth are when electoral bond tranches are available for purchase. In the case of bond sales, the 21st tranche was held from July 1–10, 2022, while the 22nd tranche was held from October 1–10, 2022. 2018 March 1–10 saw the sale of the initial batch of electoral bonds.
How Should I Use Election Bonds?
- Creating electoral bonds is indeed a simple procedure. Multiples of ₹1,000, ₹10,000, ₹100,000, and ₹1 crore would be used to issue the bonds. But the range is from ₹1,000 to ₹1 crore.
- At select SBI locations, you may buy electoral bonds. A donor who has a KYC-compliant account is able to buy the bonds and make a donation to the political party or person of their choosing.
- And through the party’s verified account, the receiver of electoral bonds may cash them in. Election-related bonds, however, only have a fifteen-day validity period.
When May You Buy Election Bonds?
Toward the beginning of each quarter, the electoral bonds were offered for sale for 10 days. The government-specified window for buying electoral bonds is the first 10 days of January, April, July, and October.
In the year of Lok Sabha elections, the government must designate an extra 30 days.
What Requirements Apply To Electoral Bonds?
Any party that has obtained at least 1% of the votes cast in the most recent general election or assembly election and is registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951), is eligible to receive electoral bonds. All transactions involving an electoral bond will take place through the verified account that the Election Commission of India (ECI) will assign to the party.
The donor’s name will not appear on the electoral bonds. Therefore, it’s possible that the political party is unaware of the participant’s identity.
Election Bond Program Advantages and Disadvantages
Advantages
- The malpractice is enhanced since the Election Commission of India has published the bank account where all electoral bonds issued must be redeemed.
- The widespread usage of electoral bonds could aid in slowing down political parties that exist solely to raise money from the general populace. Since only registered parties that received at least 1% of the vote in the general election are eligible to receive money for elections, this is the case.
- Electoral bonds help the government achieve its objective of making election financing completely secure and digital. Therefore, it is not legally necessary for any gift that exceeds ₹2000 to be made in the form of electoral bonds or checks.
- All electoral bond transactions are completed electronically or with checks.
Disadvantages
- According to some detractors, the main motivation for the implementation of electoral bonds was to stifle funding for opposition parties.
- Financially sound enterprises are not in any way threatened by electoral bonds. These businesses want to favour each political party over others by funding it. The elimination of the restriction on giving 7.5% of the company’s yearly income to a political party further supports this.
Only the State Bank of India may Sell Electoral Bonds
In order to issue electoral bonds, only SBI is authorised. Among the SBI locations that have been granted authorisation are those in Lucknow, Shimla, Dehradun, Kolkata, Guwahati, Chennai, Patna, New Delhi, Chandigarh, Srinagar, Gandhinagar, Bhopal, Raipur, and Mumbai. Within 15 days of its issue, an electoral bond will become inoperative. The announcement added that if the bond was submitted after the validity time had passed, no payment would be paid to any political party.
Why Is It Required?
- Association for Democratic Reforms (ADR) claims that the majority of political parties accept monetary donations from unidentified sources due to low regulations on donations. Over an 11-year period, a total of ₹11,300 crore in party finance came from unidentified sources, or little under 70%.
- They would compel contributors to make financial contributions, with the issuing authorities capturing their identities.
- promoting openness in the funds and donations political parties get establishing a transparent bond purchasing process with verified KYC and an audit trail.
Electoral Bond Problems
- Anonymity: However neither donor nor even the political party are required to disclose the identity of the donor.
- Black Money: The selling of electoral bonds had turned into a place for shell companies and other organisations to stash illegal funds, including the profits of bribes paid to political parties.
- Donations made using Electoral Bonds are completely tax-exempt. They also do not have to be notified here to Income Tax authorities.
- Removing the Net Profit Donation Limit: The government has eliminated the contribution limit for financing political parties. A business could only donate to politics in the past if it had 7.5% of the net average earnings over the previous three fiscal years.
Election Commission Observations
- The Election Commission of India criticised these actions as being backwards-looking, and the ECI lacks the tools to determine if the political party got money from overseas or illegally-obtained government agencies.
- The Election Commission also conveyed worries that these amendments would allow unrestricted foreign funding of Indian political parties, which could result in foreign corporations influencing Indian politics. These amendments also allow for the injection of black money for political funding via shell companies.
- The following remarks have been made either by Election Commission of India in an affidavit submitted to the Supreme Court:
- Contrary to official statements, It’s obstruct political financial transparency.
- Foreign corporate powers are invited to influence Indian politics thanks to electoral bonds and the lifting of the foreign funding cap.
- Election-related bonds would have a “serious impact” on the openness of political party funding.
Conclusion
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