Electoral Bonds



What are Electoral Bonds (EBs)?

  • These are interest-free bearer instruments (like Promissory Notes) that will be available for purchase from the State Bank of India within a designated window of 10 days in every quarter of the financial year.
  • An additional period of a month will be notified in the year of elections to Lok Sabha. The life of the bond would be only 15 days.
  • EBs can only be encashed in a predeclared account of a political party (which) will have to disclose the amount to the Election Commission.


How will the Bonds help?

  • The current system of cash donations from anonymous or pseudonymous sources is wholly non-transparent, and the donor, the donee, the quantum of donations and the nature of expenditure are all undisclosed.
  • Proponents claim that EBs will encourage political donations of clean money from individuals, companies, HUF, religious groups, charities, etc. After purchasing the bonds, these entities can hand them to political parties of their choice, which must redeem them within the prescribed time.


Will EBs make the system transparent?

  • According to the supporters of EBs,
    • some element of transparency would be introduced in as much as all donors declare in their accounts the amount of bonds that they have purchased and all parties declare the quantum of bonds that they have received.
  • Opponents, however, highlight that
    • the voters will not know which individual, company, or organisation has funded which party, and to what extent.
    • At the same time, the fact that the SBI — and by implication, the government — will know who is getting what from whom can open up the possibility of arm twisting or harassment of those seen to be supporting parties or ideologies that are opposed to the government.


How has India addressed the issue of election funding so far?

  • In 1968, corporate funding was banned.
  • In 1974, the Supreme Court ruled that party spending for a candidate must be included in calculating the candidate’s election spend (K.L. Gupta vs A.N. Chawla), but Parliament legislated against the order the following year.
  • In 1979, political parties were exempted from income- and wealth tax, provided they filed annual returns including audited accounts, listed donations of Rs 10,000 and above, and disclosed the identities of such donors.
  • An amendment to the Companies Act in 1985 restored corporate funding. Companies could donate up to 5% of their average net profit over the previous three years.
  • More changes came based on Reports on election funding, such as the Dinesh Goswami Committee Report (1990), and the Indrajit Gupta Committee Report (1998), which recommended partial state funding of elections.
  • In 1996, the Supreme Court ruled that political parties must file returns by February 20, as required by the I-T and Wealth Tax Acts. The court also declared that a party’s expense will not include its candidates’ expenses, if the party had submitted audited accounts of its spends and incomes.
  • In 1998, the government provided partial state subsidy in the form of allocation of free time for national and state parties on state TV and radio.
  • In 2003, the NDA government made individual and company donations fully tax-deductible. However, the cap on how much companies could contribute remained. The government now wants to remove this limit through the Electoral Bonds; individual cash contributions to parties have been capped at Rs 2,000.


Has the Election Commission expressed a view on Electoral Bonds?

  • Not officially. It has been reported that the Commission feels it might need a year to review and assess the scheme.



Indian Express