{"id":62839,"date":"2025-12-29T18:12:31","date_gmt":"2025-12-29T12:42:31","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=62839"},"modified":"2025-12-30T12:32:09","modified_gmt":"2025-12-30T07:02:09","slug":"political-funding-in-india","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/29-12-2025\/political-funding-in-india","title":{"rendered":"Financial Asymmetry in Political Funding in India"},"content":{"rendered":"\n<p><strong>Syllabus: GS2\/ Polity and Governance<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Ahead of successive electoral cycles, concerns have intensified regarding transparency in India\u2019s political funding framework, with unequal access to private donations distorting electoral competition.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Political Funding in India<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Individual Donations: <\/strong>Section 29B of the Representation of the People Act (RPA) 1951, permits political parties to accept donations from individual persons.\n<ul class=\"wp-block-list\">\n<li>The Election Commission of India&#8217;s Transparency Guidelines require the disclosure of donations over <strong>\u20b920,000<\/strong> under the Act.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>State\/Public Funding:<\/strong> State funding of elections in India involves the government providing financial support to political parties and candidates.\n<ul class=\"wp-block-list\">\n<li><strong>Direct Funding:<\/strong> Monetary assistance directly to parties\/candidates for campaign expenses.<\/li>\n\n\n\n<li><strong>Indirect Funding:<\/strong> Includes subsidized media access, tax benefits, free public spaces for campaigns, and support for utilities, transport, and security.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Corporate Funding: <\/strong>Governed under<strong> Section 182 of the Companies Act, 2013. <\/strong>Corporate donations were banned in India from <strong>1969 until 1985.<\/strong> Key conditions for Donation are as;\n<ul class=\"wp-block-list\">\n<li>Companies must be at least <strong>three years old.\u00a0\u00a0<\/strong><\/li>\n\n\n\n<li>Donations are capped at <strong>7.5%<\/strong> of the average net profits made during the three immediately preceding financial years.\u00a0\u00a0<\/li>\n\n\n\n<li>Contributions must be disclosed in the company\u2019s profit and loss account.\u00a0<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Challenges in the Existing Funding Framework<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Concentration of political finance: <\/strong>Political funding is <strong>heavily skewed<\/strong> in favour of a few dominant parties, leading to an uneven distribution of financial resources and weakening electoral competition.<\/li>\n\n\n\n<li><strong>Weak transparency:<\/strong> Disclosure requirements are inadequately enforced, and key information on <strong>donor\u2013party linkages<\/strong> remains outside the public domain, limiting meaningful citizen scrutiny.<\/li>\n\n\n\n<li><strong>Lack of internal party accountability:<\/strong> Most political parties function without enforceable norms of internal democracy, transparent decision-making, or rigorous financial auditing.<\/li>\n\n\n\n<li><strong>Unlimited party spending<\/strong> on more ambitious, sophisticated and professional campaigns has resulted in increasing costs of elections.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Electoral Trust Scheme<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Electoral Trust Scheme: <\/strong>The electoral trust scheme was introduced by the government in <strong>2013.<\/strong><\/li>\n\n\n\n<li>Electoral trusts are one of the<strong> funding channels for political parties.<\/strong>\n<ul class=\"wp-block-list\">\n<li>They became a preferred source of political donation for companies in 2024-25 after the SC scrapped the <strong>electoral bonds scheme in 2024.<\/strong><\/li>\n\n\n\n<li><strong>Both schemes <\/strong>are meant to facilitate donations to political parties by corporations and individuals.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Eligibility: <\/strong>Any company registered under the Companies Act can form an electoral trust.\n<ul class=\"wp-block-list\">\n<li>Any citizen of India, a company registered in India, or a <strong>firm or Hindu Undivided Family<\/strong> or association of persons living in India, can donate to an electoral trust.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Three trusts<\/strong>, Prudent Electoral Trust, Progressive Electoral Trust and New Democratic Electoral Trust, accounted for <strong>98 percent<\/strong> of all contributions in <strong>2024-25.<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>How do These Trusts Function?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Renewal Requirement:<\/strong> Electoral trusts must apply for renewal every three financial years to continue operating.<\/li>\n\n\n\n<li><strong>Eligible Beneficiaries: <\/strong>Donations can be made only to political parties registered under Section 29A of the Representation of the People Act, 1951.<\/li>\n\n\n\n<li><strong>Mandatory Disbursement Rule: <\/strong>At least 95% of total contributions received in a financial year must be donated to eligible political parties.\n<ul class=\"wp-block-list\">\n<li>The remaining 5% may be used only for administrative expenses.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Disclosure of Donor Identity:<\/strong> PAN is mandatory for resident Indian contributors.\n<ul class=\"wp-block-list\">\n<li>Passport number is required for NRIs at the time of contribution.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Accounting &amp; Oversight: <\/strong>Trusts must maintain audited accounts, disclosing donors, recipients, and disbursements to the CBDT and the Election Commission of India (ECI).<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Recommendations on State Funding<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Constituent Assembly debate: <\/strong>The earliest discussions on the cost of elections were held in the Constituent Assembly in <strong>1948.\u00a0<\/strong>\n<ul class=\"wp-block-list\">\n<li>They argued in favour of the need for the state\/public treasury to bear election expenditure in a regulated, least expensive and organised manner.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Indrajit Gupta Committee (1998):<\/strong> Supported state funding to level the playing field for all parties.<\/li>\n\n\n\n<li><strong>Law Commission of India (1999):<\/strong> Advocated for total state funding, conditional on parties not accepting other funds.<\/li>\n\n\n\n<li><strong>Second Administrative Reforms Commission (2008):<\/strong> Recommended partial state funding to reduce undue financial influence.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Reforms needed in political funding in India<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A <strong>comprehensive political finance law <\/strong>should aim to ensure equity, transparency, and accountability across parties.<\/li>\n\n\n\n<li>Electoral trusts should be mandated to<strong> publicly disclose donor\u2013party linkages<\/strong>, enabling informed citizen oversight.<\/li>\n\n\n\n<li>Political parties should be brought under the <strong>Right to Information Act <\/strong>to enhance financial and organisational transparency.<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/opinion\/columns\/going-forward-rbis-rupee-policy-must-not-repeat-errors-of-recent-history-10443766\/?ref=infinite\" target=\"_blank\" rel=\"noopener\"><strong>IE<\/strong><\/a><\/p>\n\n\n\n<p><br><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong>Context<\/strong><\/p>\n<li class=\"ms-5\">Ahead of successive electoral cycles, concerns have intensified regarding transparency in India\u2019s political funding framework, with unequal access to private donations distorting electoral competition.<\/li>\n<p><\/p>\n<p><strong>Political Funding in India\u00a0<\/strong><\/p>\n<li class=\"ms-5\">Individual Donations: Section 29B of the Representation of the People Act (RPA) 1951, permits political parties to accept donations from individual persons.<\/li>\n<li class=\"ms-5\">The Election Commission of India&#8217;s Transparency Guidelines require the disclosure of donations over \u20b920,000 under the Act.<\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/29-12-2025\/political-funding-in-india\" class=\"btn btn-primary btn-sm float-end\">Read More<\/a><br \/><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-62839","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/62839","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=62839"}],"version-history":[{"count":3,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/62839\/revisions"}],"predecessor-version":[{"id":62860,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/62839\/revisions\/62860"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=62839"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=62839"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=62839"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}