Electoral Bond

An electoral bond is like a promissory note that can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India. The citizen or corporate can then donate the same to any eligible political party of his/her choice. The bonds are similar to bank notes that are payable to the bearer on demand and are free of interest. An individual or party will be allowed to purchase these bonds digitally or through

When was electoral bond introduced?

The electoral bonds were introduced with the Finance Bill (2017). On January 29, 2018 the government notified the Electoral Bond Scheme 2018.

How to use electoral bonds?

• Using electoral bonds is quite simple. The bonds will be issued in multiples of Rs 1,000, Rs 10,000, Rs 100,000 and Rs 1 crore (the range of a bond is between Rs 1,000 to Rs 1 crore). These will be available at some branches of SBI.
• A donor with a KYC-compliant account can purchase the bonds and can then donate them to the party or individual of their choice. Now, the receiver can encash the bonds through the party’s verified account. The electoral bond will be valid only for fifteen days.
• The 29 specified SBI branches are in cities such as New Delhi, Gandhinagar, Chandigarh, Bengaluru, Bhopal, Mumbai, Jaipur, Lucknow, Chennai, Kolkata and Guwahati.

When are the bonds available for purchase?

• The electoral bonds are available for purchase for 10 days in the beginning of every quarter. The first 10 days of January, April, July and October has been specified by the government for purchase of electoral bonds.
• An additional period of 30 days shall be specified by the government in the year of Lok Sabha elections.

Electoral bonds: Conditions

1. Any party that is registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951) and has secured at least one per cent of the votes polled in the most recent General elections or Assembly elections is eligible to receive electoral bonds. The party will be allotted a verified account by the Election Commission of India (ECI) and the electoral bond transactions can be made only through this account.
2. The electoral bonds will not bear the name of the donor. Thus, the political party might not be aware of the donor’s identity.

Are electoral bonds taxable?

In February 2017, the then finance minister Arun Jaitley said that the donations would be tax deductible. Hence, a donor will get a deduction and the recipient, or the political party, will get tax exemption, provided returns are filed by the political party.

Why were electoral bonds introduced in India?

Electoral bonds were being introduced to ensure that all the donations made to a party would be accounted for in the balance sheets without exposing the donor details to the public. The government said that electoral bonds would keep a tab on the use of black money for funding elections. In the absence of electoral bonds, donors would have no option but to donate by cash after siphoning off money from their businesses, the government said.

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Why is there a controversy over electoral bond?

• Experts are of the view that if the electoral bonds scheme had been introduced to bring about greater transparency, the government must not restrain from allowing details of such donations to be made public.
• Experts and several politicians say that since neither the purchaser of the bond nor the political party receiving the donation is required to disclose the donor’s identity, the shareholders of a corporation will remain unaware of the company’s contribution. Voters, too, will have no idea of how, and through whom, a political party has been funded.
• Opponents of the electoral bond scheme argue that since the identity of the donor has been kept anonymous, it could lead to an influx of black money. Some others allege that the scheme was designed to help big corporate houses donate money without their identity being revealed. According to civil rights societies, the concept of donor “anonymity” threatens the very spirit of democracy.
• The Congress party said that the donations made through electoral bonds were equivalent to money laundering.

Restrictions that were done away with after the introduction of the electoral bond scheme

1. Earlier, no foreign company could donate to any political party under the Companies Act
2. A firm could donate a maximum of 7.5 per cent of its average three year net profit as political donations according to Section 182 of the Companies Act
3. As per the same section of the Act, companies had to disclose details of their political donations in their annual statement of accounts.

The government moved an amendment in the Finance Bill to ensure that this proviso would not be applicable to companies in case of electoral bonds. Thus, Indian, foreign and even shell companies can now donate to political parties without having to inform anyone of the contribution.

What does the Supreme Court have to say on electoral bonds?

• In its order, the Supreme Court said that while it wanted to hear the matter at length at a later stage, for the interim it wanted a situation where the balance was not tilted in anyone’s favour.
• It has asked political parties to reveal details of the donations they received through electoral bonds to the Election Commission.
• The poll panel, on the other hand, has been asked to keep all the details in a sealed cover until further orders of the top court.

Election Commission of India’s view on electoral bonds

• The Election Commission on April 10, 2019 told the Supreme Court of India that while it was not against the Electoral Bonds Scheme, it did not approve of anonymous donations made to political parties.
• “We are not opposed to electoral bonds…but want full disclosure and transparency. We are opposed to anonymity,” Senior Advocate Rakesh Dwivedi, appearing for the poll panel told the apex court.
• The poll panel’s submissions came during a hearing on bunch of pleas challenging the validity of electoral bonds in the apex court.

Reserve Bank of India on electoral bonds scheme

• According to an article published by HuffPost India on November 18, 2019, the RBI was critical of the scheme.
• The central bank had warned the government that the bonds would “undermine the faith in Indian banknotes and encourage money laundering.”