Thursday , April 18 2024

Electoral Bonds: What are Electoral Bonds? How did political parties benefit?

Electoral Bonds: The Supreme Court on Thursday, February 15, delivered its verdict on petitions challenging the validity of the electoral bond scheme. The Supreme Court has canceled the electoral bond scheme while giving its verdict. It is a system that has allowed anonymous funding of political parties.

A five-judge bench headed by Chief Justice of India DY Chandrachud had reserved its verdict in the case on November 2 last year. Other judges include Justices Sanjiv Khanna, BR Gavai, JB Pardiwala and Manoj Mishra.

What is an electoral bond?

Electoral bonds are financial instruments that act as promissory notes or bearer bonds that can be purchased by individuals or companies in India. Bonds are declared specifically for contribution of funds to political parties.

These bonds are issued by the State Bank of India (SBI) and are sold in multiples of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh and ₹1 crore. Donations made by corporates and foreign organizations under the scheme are 100% tax exempt, while the identity of the donors is kept confidential by both the bank and the recipient political parties.

How to donate?

The bonds can be purchased through a KYC-compliant account for donating to a political party. Once the money is transferred, political parties have to encash the donations within a specified time. Importantly, there is no limit on the number of electoral bonds that can be purchased by an individual or company.

Who can get money from electoral bonds?

As per the provisions of the scheme, only those political parties which are registered under Section 29A of the Representation of the People Act, 1951 and have secured at least 1 per cent of the votes in the last Lok Sabha or State Assembly elections. Assembly can obtain election bonds.

Electoral Bond Scheme and Case

The Electoral Bandeau Scheme was first announced by former Finance Minister Arun Jaitley during the 2017 budget session. Later, it was notified as a source of political funding in January 2018 through the Finance Bill amending the Finance Act and the Representation of the People Act. To implement this scheme, the Center has made several amendments in the Companies Act, Income Tax Act, Foreign Contribution Regulation Act (FCRA) and Reserve Bank of India Act.

However, several petitions were filed in the Supreme Court challenging the constitutional validity of the electoral bond scheme, including those filed by the CPI(M), Congress and several NGOs. The hearing of this case started on October 31 last year. Several arguments were made by the petitioners on this scheme, including its legality and potential threat to the country.

According to the petitioners, the scheme violates the Right to Information, opens doors to shell companies and promotes corruption. Rajya Sabha MP and senior lawyer Kapil Sibal said a political party can use donations for any purpose other than elections. However, the Center has said that the scheme ensures “transparency” and is “a powerful check on the use of illicit money in elections”.