Corporate Political Funding: Electoral Bonds and Other Reforms

Corporate Political Funding

Electoral bonds were introduced by the BJP-led NDA government in January 2018 with an aim to make funding to political parties transparent. It allows a political donor to purchase bonds from authorised banks which can be redeemed by parties only through registered accounts in a prescribed time frame.

An electoral bond is designed to be a bearer instrument like a Promissory Note — in effect, it will be similar to a bank note that is payable to the bearer on demand and free of interest. It can be purchased by any citizen of India or a body incorporated in India.

Electoral Bonds may be purchased by a person, who is a citizen of India or incorporated or established in India. A person being an individual can buy Electoral Bonds, either singly or jointly with other individuals.

Only the Political Parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last General Election to the House of the People or the Legislative Assembly of the State, shall be eligible to receive the Electoral Bonds.

The Electoral Bonds shall be enchased by an eligible Political Party only through a Bank account with the Authorized Bank (SBI). State Bank of India (SBI), has been authorised to issue and encash Electoral Bonds through its 11 Authorised Branches (not all).

Electoral Bonds shall be valid for fifteen days from the date of issue. The bonds will be issued in multiples of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh and ₹1 crore. The bonds will be available for purchase for a period of 10 days each in the beginning of every quarter, i.e. in January, April, July and October. Electoral bonds will not bear the name of the donor. The intention is to ensure that all the donations made to a party will be accounted for in the balance sheets without exposing the donor details to the public.

Other Reforms:

1. Earlier, companies can only contribute up to 7.5% of their average net profits in the past three financial years to political parties. Also, they were required to disclose the amount of contributions made and the names of the political parties to which they were made. Now, the government has included an amendment to the Companies Act of 2013 to do away with the 7.5% of net profits limit and the requirement for a company to disclose the name of political parties to which they donate.

2. All corporate donations to political parties shall be made by a cheque, electronic means, a bank draft or any other instrument notified by the government.

1. Outlook India
2. The Hindu
3. Indian Express (Image)

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