Electoral Bonds


    In News

    • As per the SBI report, the total amount collected by parties through the Electoral Bond (EB) Scheme has gone up to Rs 10,246 crore from various anonymous donors since its introduction in 2018.
      • In the 21st sale of EBs conducted in July 2022, parties received another Rs 389.5 crore from EB purchases.

    Electoral Bonds Scheme

    • About:
      • Introduced with the Finance Bill, 2017, the EB Scheme was notified on January 29, 2018.
      • An electoral bond is an instrument through which anyone can donate money to political parties.
      • It is like a promissory note that can be bought by any Indian citizen or company incorporated in India with no limit.
      • Only the political parties registered under Section 29A of the Representation of the People Act, 1951 and have secured not less than 1% of the votes polled in the last general election to the House of the People or the Legislative Assembly, are eligible to receive electoral bonds.
    • Procedure:
      • The SBI Bank has been authorised to issue and encash Electoral Bonds.
      • The bonds are sold by the SBI in denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore.
      • One can purchase these bonds only digitally or through cheques.
    • Miscellaneous: 
      • A bearer instrument does not carry any information about the buyer or payee and the holder of the instrument (which is the political party) is presumed to be its owner.
      • There is no limit on the number of bonds an individual or company can purchase. 
      • Individuals, groups of individuals, NGOs, religious and other trusts are permitted to donate via electoral bonds without disclosing their details.
    • Electoral Trust:
      • Electoral Trust is a Section 25 Company or a non profit company created in India for orderly receipt of the voluntary contributions from any person and for distributing the same to the respective political parties, registered under Section 29A of the Representation of People Act, 1951.
      • The sole purpose of this is to collect donations on behalf of a political party and then route it to the concerned political party.
    • Taxability:
      • 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.

    Image Courtesy: BS 

    Benefits of Electoral Bonds

    • More Transparency: It helps the political parties to operate in a more transparent manner with the election commission, regulatory authorities and the general public at large.
    • Ensures Accountability: Donations through Electoral Bonds will only be credited in the party bank account disclosed with the ECI. Every political party shall be obliged to explain how the entire sum of money received has been expended.
    • Income for Parties: More than half the total income of national parties and the regional parties analysed by ADR for the financial year 2018-19 came from electoral bonds donations.
    • Discouraging Cash: The Purchase will be possible only through a limited number of notified banks and that too through cheque and digital payments. Cash will not be encouraged. 
    • Maintains Anonymity: The individuals, groups of individuals, NGOs, religious and other trusts are permitted to donate via electoral bonds without disclosing their details. Therefore, the identity of the donor is being preserved. 


    • Disclosure of the amounts: Even major political parties have not disclosed the amount they received through electoral bonds. 
    • Distorting Democracy: The introduction of electoral bonds is “distorting democracy” in India. Only 23 political parties are eligible for redemption of electoral bonds.
    • Hindering Right to Know: Before the introduction of electoral bonds, political parties had to disclose details of all its donors, who have donated more than Rs 20,000. The change infringes the citizen’s ‘Right to Know’ and makes the political class even more unaccountable.
    • Shallow Anonymity: Anonymity does not apply to the government of the day, which can always access the donor details by demanding the data from the State Bank of India (SBI). This implies that the only people in the dark about the source of these donations are the taxpayers.
    • Unauthorised Donations: In a situation where the contribution received through electoral bonds are not reported, it cannot be ascertained whether the political party has taken any donation in violation of provision under Section 29B of the RPA, 1951 which prohibits the political parties from taking donations from government companies and foreign sources.
    • Crony-Capitalism: It could become a convenient channel for businesses to round-trip their cash parked in tax havens to political parties for a favour or advantage granted in return for something. 
    • Loopholes: Corporate Entities may not enjoy the benefit of transparency as they might have to disclose the amount donated to the Registrar of Companies; Electoral bonds eliminate the 7.5% cap on company donations which means even loss making companies can make unlimited donations etc.

    Way Ahead 

    • In the case of continuance of the Scheme, the principle of anonymity of the bond donor enshrined in the Electoral Bond Scheme, 2018 must be done away with.
      • All political parties which receive donations through Electoral Bonds should declare in their Contributions Reports the total amount of such donations received in the given financial year, along with the detailed particulars of the donors as against each Bond; the amount of each such bond and the full particulars of the credit received against each bond
    • The government should reconsider and modify certain provisions of the Electoral Bonds Scheme to ensure full disclosure and transparency.
    • At the same time, the bonds should ensure that the funds being collected by the political parties are accounted for clean money from the appropriate channels without any obligation of give and take.

    Source: IE