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First time: An electoral trust declares donation


In what is probably the first instance of an electoral trust donating money through electoral bonds, an electoral trust funded by the MP Birla Group has declared a donation of Rs 3 crore through electoral bonds in 2019-20.

The Trust hasn’t revealed the names of the political parties that received this money, citing anonymity guaranteed under the electoral bond scheme.


GS-II: Polity and Governance (Government Policies and Interventions for Good Governance, Initiatives for Transparency and Accountability in Governance)

Dimensions of the Article:

  1. ADR’s arguments against non-disclosure of names of political parties
  2. About the Electoral Trust Scheme
  3. What are Electoral Bonds?
  4. Issues with electoral funding
  5. Need for electoral bonds:

ADR’s arguments against non-disclosure of names of political parties

  • According to the Association of Democratic Reforms (ADR), this “practice is against the spirit of the Electoral Trusts Scheme, 2013 and Rule 17CA of the Income Tax Rules, 1962 which make it mandatory for trusts to furnish each and every detail about the donor contributing to the trust”.
  • Therefore, if Electoral trusts start adopting this precedent of donating through bonds, which do not permit disclosure norms and discourage transparency rules/laws then it is like going back in time before the Electoral Trusts Scheme, 2013 was incorporated.
  • In such a scenario, it will be a complete mayhem of unfair practices i.e., total anonymity, unchecked and unlimited funding, free flow of black money circulation, corruption, foreign funding, corporate donations and related conflict of interest etc.
  • Such a practice completely negates the very purpose behind the inception of the Electoral Trusts Scheme, 2013 and Rule 17CA of the I.T Rules, 1962.

About the Electoral Trust Scheme

  • Electoral Trust is a non-profit organization formed in India for orderly receiving of the contributions from any person.
  • Electoral Trusts are relatively new in India and are part of the ever-growing electoral restructurings in the country.
  • Electoral Trusts Scheme, 2013 was notified by the Central Board of Direct Taxes (CBDT) and the provisions related to the electoral trust are under Income-tax Act, 1961 and Income tax rules-1962.
  • It lays down a procedure for grant of approval to an electoral trust which will receive voluntary contributions and distribute the same to the political parties.
  • A political party registered under section 29A of the Representation of the People Act, 1951 shall be an eligible political party and an electoral trust shall distribute funds only to the eligible political parties.
  • Electoral Trusts are designed to bring in more transparency in the funds provided by corporate entities to the political parties for their election related expenses.
  • The Election Commission had also circulated guidelines for submission of contribution reports of electoral trusts to submit an annual report containing details of contributions received by the electoral trusts and disbursed by them to political parties in the interest of transparency.

What are Electoral Bonds?

  • 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 cheque.

Issues with electoral funding

  • Opacity in donations: Political parties receive majority of their funds through anonymous donations (approximately 70%) through cash. Also, parties are exempted from income tax, which provides a channel for black money hoarders.
  • Lack of action against bribes: The EC sought insertion of a new section, 58B, to RPA, 1951 to enable it to take action if parties bribe voters of a constituency, which has not come to light.
  • Allowing foreign funding: Amendment of the Foreign Contribution (Regulation) Act (FCRA) has opened the floodgates of foreign funding to political parties, which can lead to eventual interference in governance.
  • Lack of transparency: Despite provisions under section 29 of RPA, 1951, parties do not submit their annual audit reports to the Election Commission. Parties have also defied that they come under the ambit of RTI act.

Need for electoral bonds:

  • Electoral Bonds limit the use of cash in political funding.
  • It also reduces using illicit means of funding and the ‘system’ was wholly opaque and ensured complete anonymity.
  • To curb black money – payments made for the issuance of the electoral bonds are accepted only by means of a demand draft, cheque or through the Electronic Clearing System or direct debit to the buyers’ account”.
  • Limiting the time for which the bond is valid ensures that the bonds do not become a parallel currency.
  • Eliminate fraudulent political parties that were formed on pretext of tax evasion, as there is a stringent clause of eligibility for the political parties in the scheme.
  • Electoral Bonds protect donors from political victimization- as non-disclosure of the identity of the donor is the core objective of the scheme.

-Source: The Hindu

December 2023