Electoral Bonds

Contents

1 Introduction of Electoral Bonds
2 Conclusion:

Introduction of Electoral Bonds

The Indian government adopted electoral bonds to clean up the political fundraising system.

Electoral bonds (EBs) are “bearer” instruments, much like monetary notes. They are available in denominations of 1,000 rupees ($12), 10,000 rupees ($120), 100,000 rupees ($1,200), one million rupees ($12,000), and ten million rupees ($120,000.Electoral bonds facilitate financial contributions to political parties by enabling individuals, groups, or corporations to purchase and gift them to their preferred party. These bonds are non-interest-bearing and can be redeemed by the recipient party after a short holding period of 15 days.

While parties are compelled to divulge the identities of all cash contributors of more than 20,000 rupees ($240), the names of those contributing through EBs are never revealed, regardless of the amount.

Since their establishment, EBs have been the major means of political fundraising, accounting for 56% of all funding in Indian politics, according to an ADR analysis. Electoral bonds have gained significant popularity due to their provision of anonymity in monetary contributions to political parties. However, this veil of secrecy has also sparked concerns regarding transparency and accountability, with critics fearing that it could potentially conceal illicit activities or wrongdoing within the political sphere.

When the Modi government enacted the new law allowing this type of funding, it also eliminated several requirements intended to improve transparency in political funding: a previous law capping corporate donations was repealed, companies were no longer required to disclose their donations in their statements, and foreign companies, which had previously been prohibited from funding Indian parties, could now do so through Indian subsidiaries.

Electoral Bonds were introduced in India in 2018 as a novel financial tool designed to streamline political donations. They offer a mechanism for individuals and corporations to contribute funds to political parties while ensuring anonymity, as the identity of the donor remains undisclosed to both the public and the receiving political party. This unique feature aims to encourage greater participation in the political process by safeguarding the privacy of donors while promoting transparency in political funding. These bonds are issued in specific denominations by notified branches of the State Bank of India and have a validity period within which they must be used, with only registered political parties being eligible to receive donations through Electoral Bonds. However, they have been subject to controversy and legal challenges due to concerns about transparency, potential misuse for money laundering, and the influence of corporate donations on political parties. Electoral Bonds, introduced in 2018, aim to facilitate political donations while preserving donor anonymity. Despite their popularity, concerns persist regarding transparency, potential misuse, and the influence of corporate donations on political parties.

Definition:

Electoral bonds are bearer banking products used to pay qualifying political parties in India.
These bonds, like bearer bonds or promissory notes, have the issuer (typically a bank) acting as custodian and paying the bondholder (the political party).
Because electoral bonds are bearer instruments, no ownership information is recorded, and the person holding the document is considered to be the owner. The donor’s name and other information are not recorded on the instrument, rendering electoral bonds anonymous.

Purpose:

Electoral bonds were created to increase openness in political spending.
They increase openness by requiring that political parties accept funds through legitimate banking channels that are audited by government officials.
The contributors’ identities are kept hidden, eliminating the danger of intimidation or punishment based on political affinities.

Eligibility and Usage:

Any individual or corporation may acquire electoral bonds to support eligible political parties.
To acquire electoral bonds, a political party must first register under Section 29A of the Representation of the People Act, 1951.
These bonds allow contributors (individuals and companies) to give to registered political parties while remaining anonymous.

How They Work:

Individuals and businesses can buy electoral bonds using their bank accounts.
The payee’s name does not appear on the electoral bonds.
They have a 15-day shelf life and can be used to donate to political parties.
Political parties can only cash election bonds in approved bank accounts.

Congress Petitioner Against Electoral Bonds:

Dr. Jaya Thakur, a Congress petitioner, contested the legality of the electoral bond system before the Supreme Court. Recently, the court ruled in her favour, declaring the scheme illegal. However, Dr. Thakur feels that the party has not sufficiently acknowledged her contributions to the cause.

Flaw in Supreme Court’s Electoral Bonds Verdict:

The Supreme Court’s decision that corporate donations have the same privacy rights as people, even though corporations do not have voting rights, allows for future manipulation. This judgment has highlighted issues of openness and accountability.

SC Strikes Down Electoral Bonds Scheme:

The Supreme Court’s decision to annul the electoral bonds program cited a violation of constitutional rights, particularly the right to information and freedom of expression. The court deemed the anonymity afforded by electoral bonds as detrimental to transparency and accountability in the electoral process.

Challenges to the Scheme in the Supreme Court:

Violates Right to Information: Critics claim that electoral bonds violate citizens’ right to knowledge.
Backdoor Lobbying and Quid Pro Quo: There are concerns that companies are using electoral bonds to pay bribes to political parties in power.
Opens the Door to Shell Companies: Amendments allow even loss-making or non-business entities to donate.
Opaque and not completely anonymous: Anonymity raises worries about corruption.
Can be used for non-election purposes: The moniker “Electoral Bond” is deceptive because the funds can be utilized for any purpose following withdrawal.
Potential for Corruption: Critics argue that the plan shields criminals from prosecution under anti-corruption legislation.

Conclusion:

The Electoral Bonds scheme has sparked significant debate and scrutiny since its introduction. Supporters argue that it serves to enhance transparency in political funding by routing donations through formal banking channels while safeguarding the anonymity of donors. They contend that it acts as a deterrent against the influx of untraceable funds into the political arena.

Electoral bonds were introduced in India as a means to enhance transparency in political funding. These bearer instruments allow individuals and corporations to donate to eligible political parties while maintaining anonymity. However, recent judicial rulings have cast doubt on their effectiveness and potential shortcomings. In essence, electoral bonds aim to strike a balance between supporting political parties and ensuring transparency throughout the donation process.

While electoral bonds represent a significant step towards reforming political finance and promoting transparency in elections, concerns persist regarding their impact on accountability and the risk of undue influence. The anonymity of donors and the lack of disclosure regarding their identities raise ethical and democratic concerns, leading to ongoing debates and legal challenges. Consequently, further revisions and scrutiny are necessary to address these issues and safeguard the integrity of India’s democratic system.

Critics argue that the lack of transparency surrounding donor identities undermines the democratic process, potentially enabling influence-peddling and corruption. Electoral bonds could exacerbate the problem of corporate influence in politics by allowing businesses to make undisclosed contributions.

Originally intended to enhance transparency and combat the use of illicit funds in political financing, the lack of clarity regarding donor identities and the potential for misuse present significant ethical and democratic challenges. Therefore, additional reforms and oversight are imperative to address these complexities and uphold the integrity of the electoral process.

are electoral bonds tax free

Under Sections 80GG and 80GGB of the Income Tax Act of 1961, electoral bonds issued by persons or companies were exempt from taxes. Section 13A of the Income Tax Act allowed political parties to collect the funds.

electoral bonds scheme UPSC

Electoral bonds, akin to promissory notes, are financial instruments available for purchase by businesses and individuals in India through the State Bank of India (SBI). These bonds can then be gifted to a political party of choice, which retains the option to encash them. However, it’s essential to note that only the authorized account of a registered political party is eligible for redeeming these bonds. This system is intended to facilitate legitimate and transparent financial contributions to political parties while ensuring accountability and compliance with regulations.