Introduction:-
The Electoral Bonds are the instruments or securities used to donate funds to the political parties. These bonds are similar to promissory notes, where the bank is the custodian and pays the bondholder (political party). The name and the details or other information the donor are not disclosed in the instrument, i.e., electoral bonds are anonymous. Any citizen of India or a entity /company in India, who wishes to donate to a political party for more than Rs 2,000 can do by way of electoral bonds.
These are interest free bearer bonds or money instruments that can be purchased by any individual or company in India from authorized branches of SBI [ state bank of India]
These bonds are sold in 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and 1crore they can be purchased through digitally or DD or cheque in the name of any political party.
The Central government notified the electoral bond scheme on 2nd Jan 2018.
The Electoral Bond Scheme was amended on November 7th,2022 to extend the number of days for selling bonds from 70 to 85 in a year when assembly elections were to be held. This change was made just before the Gujarat and Himachal Pradesh elections.
WHY WERE THE ELECTROAL BONDS ARE INTRODUCED?
The electoral bonds are introduced to bring transparency in political funding in India. The main aim of introduction of electoral bonds was to reduce black money in politics and to provide a transparent, fair and legal mechanism for individuals and entities to contribute to political parties. To ensure that all the donations made to parties are deposited into their account without disclosing donor details to public.
INTRODUCTION OF ELECTORAL BONDS
The government, during the 2017-18, had introduced the idea of electoral bonds to ensure the fair political funding system and promote the cashless economy. They had notified these bonds in 2018. The government had brought amendments to four Acts to introduce the Electoral Bond Scheme via the Finance Act of 2016 and 2017.
These acts includes The Representation of the People Act, 1951, The Companies Act, 2013, the Income Tax Act, 1961, and the Foreign Contributions Regulation Act, 2010 , through the Finance Acts of 2016 and 2017. Before the introduction of this scheme the political parties had to make all donations public received by them which are above Rs 20,000. Also, no corporate company was allowed to make donations amounting to more than 7.5% of their total profit or 10% of revenue.
ELIGIBILITY
The parties who secured 1% of the votes polled in the previous general election to the Legislative Assembly or House of the People are eligible to receive electoral bonds. And also the political party to receive bonds should be registered under sec 29A of the Representation of the people Act,1951.
VALIDITY OF ELECTORAL BONDS
The validity or maturity of electoral bonds is 15 days from the date of their issuance.
WHO CAN PURCHASE THE ELECTORAL BONDS?
The individual and entities can purchase the bonds from the bank account by making payment. The electoral bonds given to political parties can be used only through bank accounts which are notified to ECI. The political parties had to file returns to the Electoral Commission on the total electoral bonds they have received. Electoral bonds can be purchased in January, April, July and October, which are available only for 10 days as specified by the Central Government. The Central government can specify an additional 30-day period in a general election year.
Any citizen of India and entity/corporation established in India can purchase the electoral bonds from the authorized branches of [SBI] state bank of India. The purchase can be joint with others or individually. purchases can be made through only KYC-compliant accounts to make donations to a political party.
The following persons in India can purchase an electoral bond:
* A Hindu Undivided Family (HUF) .
* A company.
* A firm.,
* An Association of Persons (AOP) or a Body of Individuals (BOI), whether incorporated or not.
* Every other artificial juridical person.
* Any office, branch or agency owned or controlled by an artificial judicial person.
TAX EXEMPTION
The donations made under the Electoral bonds i.e made by individuals or entities are tax-exempt under Section 80GG and Section 80GGB under the Income Tax Act, 1961. Any Political present and registered in India can receive donations as per the provisions of Section 13A of the Income Tax Act.
PRE – IMPLEMENTATION OF ELECTORAL BONDS
Before the introduction of the bonds, it is necessary to all the political parties to disclose all the Details of the donor who has donated more than 20,000 as a fund to the parties during their filing of Income tax-returns.
POST -IMPLEMENTATION OF ELECTORAL BONDS
The main aim of introduction of the bonds is to bring transparency and fair in the
Funding of political parties through electoral bond, it made a change, not necessary to disclose
the details of the donor and it remains as anonymous. So the party need not have compulsion
to disclose the details during their income tax returns, it led to deposit of so much income in
the account of the parties, as income from unknown sources.
PUBLIC INTEREST LITIGATION
The electoral bonds is subjected to legal challenge, criticism and filed PIL in the supreme court. On two grounds, it has resulted as complete lack of transparency in political funding in India and passing bill as money bill circumventing Rajya Sabha, infringes upon the doctrine of separation of powers and the people fundamental right to information, both are integral components of the basic structure of the Constitution. The PIL was initiated in October 2017.
The Supreme Court considered a collection of petitions submitted by the non-governmental organization Association for Democratic Reforms, Common Cause (India), the Communist Party of India (Marxist), which contest the legality of the modifications made to the Reserve Bank of India Act, the Representation of the People Act, the Income Tax Act, the Companies Act, and the Foreign Contribution Regulation Act through the Finance Acts of 2016 and 2017.
The Election Commission of India submitted its opinion on the electoral bonds matter to the Supreme Court that the amendments in existing legislation, which permit the implementation of electoral bonds and curb the restriction on donations, including those from foreign origins, to political parties, would inevitably result in a surge in the utilization of illicit funds (black money) during the electoral process.
Furthermore, this alteration would have profound consequences on the transparency of financial contributions to political parties, ultimately leading to the manipulation of Indian policies.
CASE LAW:-
STATE BANK OF INDIA VS ASSOCIATION FOR DEMOCRATIC REFORMS AND OTHERS
On 15th February 2024, the Supreme Court of India declared the electoral bond scheme and the amendments to the Income Tax Act, the Representation of Peoples Act, and the Companies Act have been held to be unconstitutional.
A Five judge constitution bench held by Chief justice D.Y. Chandrachud and comprising Justices Sanjiv Khanna, B.R. Gavai, J.B.Pardiwala and Manoj Misra unanimously struck down the Union’s 2018 Electoral Bonds (EB) Scheme.
The Bench held that the Scheme violated the voters’ right to information enshrined in Article 19(1)(a) of the Constitution. Facts about funding to a political party is necessary for a voter/citizen to know for the exercise of their freedom to vote in an effective manner.
The amendments introduced by the Finance Act 2017 to the provisions of the companies Act 2013, allowing infinite funding of political parties by the corporate entities were held to be inconsistent and contradictory to the Article 14 of the Constitution.
The court also directed the SBI which was authorized bank to deal with the electoral bond scheme to submit details of the electoral bonds purchased by the contributors and redeemed by the political parties between 12 April 2019 till 15 February 2024.
The directions of the Court are as follows;
*The State Bank of India (SBI) shall stop release of electoral bonds.
* SBI shall submit details of the Electoral Bonds purchased from 12th April 2019 till date, to the Election Commission of India (ECI). The details shall include the date of purchase of each Bond, the purchaser name and the denomination of the Bond purchased.
* SBI shall submit the details of political parties which have received contributions through Electoral Bonds since 12 April 2019 to date to the ECI. This must include details of each Electoral Bond encashed by political parties, the date of encashment and the denomination of the Electoral Bond.
* SBI shall submit the above information to the ECI within three weeks from the date of this judgement (by 6 March 2024).
* The ECI shall publicize the information shared by SBI on its official website within 1 week from the receipt of the information (by 13 March 2024).
* Electoral bonds which are within the validity period of 15 days but have not yet been en cashed by political parties shall be returned by the party and refunded to the purchaser’s account.
CONCLUSION
The Electoral Bond Scheme was introduced by the BJP govt for to expose illegal money and increase transparency in political funding, but there exists an absence of publicly available documentation concerning the purchasers of individual bonds and the beneficiary of the corresponding donations. This lack of transparency confer the bonds liable to being deemed as “unconstitutional and problematic,” as it obstruct the taxpayers and citizens from obtaining knowledge about origins of the contributions. This violated the fundamental right Article 19(1)(a) and violates the right to information of the citizen, open doors to shell companies, promotes corruption, differentiates between corporations and citizens. The supreme court of India declared this scheme as unconstitutional.
FAQ
Who can buy electoral bonds?
Any citizen of India and entity /corporation established in India can buy the electoral bonds from the authorized branches of SBI [ state bank of India], either jointly or singly with other individuals.
Which party has got the highest electoral bond?
BJP party has received 6,060crore, highest among all the other parties.
Are electoral bonds tax free?
The electoral bonds are tax exempted under sec 80GG and sec 80GGB under the Income tax Act,1961.
What is the validity period of electoral bonds?
The validity period of electoral bond is 15days only, if the party does not deposit in their account before that period then it goes back to the purchaser.
Which bank issue the electoral bonds in India?
The state bank of India has the authority to issue the electoral bonds in India.
SUBMITTED BY;
P. SASI REKHA
FINAL YEAR B.A LLB
DR. BR AMBEDKAR COLLEGE OF LAW
ANDHRA UNIVERSITY
