The Supreme Court has recently reserved its judgment on the contentious Electoral Bonds Scheme, introduced by the central government. Prior to this scheme, the Electoral Trusts (ET) Scheme, which was introduced in 2013, was used for electoral funding. Both schemes have their own characteristics and implications on India’s election process, which serve as key highlights in the current discourse.
Understanding the Electoral Trusts Scheme
The Electoral Trusts Scheme was first rolled out in 2013. It was established by the Central Board of Direct Taxes (CBDT) with the specific purpose of aiding companies in the distribution of political contributions. Companies registered under Section 25 of the Companies Act, 1956 are granted permission to apply for Electoral Trust approval.
Electoral Trusts are required to renew their application every three fiscal years. The scheme outlines a procedure for obtaining approval for an electoral trust whereby the trust receives voluntary donations and disburses them to political parties. The rules and regulations relating to the electoral trust are outlined under the Income-tax Act, 1961 and Income tax rules-1962.
Contributions to Electoral Trusts
Individuals, companies, or even resident associations can make contributions to Electoral Trusts. Notably, the scheme does not allow contributions from non-Indian individuals or foreign entities, nor from other registered electoral trusts.
Distribution of Funds Mechanism
Under the scheme, Electoral Trusts may allocate up to 5% of total annual funds towards administrative expenses. The rest, a full 95%, is mandated for distribution to eligible political parties – those registered under the Representation of the People Act, 1951. Trusts are obliged to keep comprehensive records detailing receipts, distribution, and donors and recipients.
Audit of Accounts Process
There is a requirement for each electoral trust to have its accounts audited by a certified accountant. The audit report must then be submitted to the Commissioner of Income-tax or the Director of Income-tax.
Overview of Electoral Bonds
Introduced as a financial instrument for political donations, Electoral Bonds are available in multiples of Rs. 1,000, Rs. 10,000, Rs. 1 lakh, Rs. 10 lakh and even Rs. 1 crore. These bonds, issued and encashed by the State Bank of India, are redeemable in the registered account of a political party within fifteen days of issuance.
Purchasing Electoral Bonds
Indian citizens or entities established in India can purchase these bonds during ten-day windows specified by the Central Government in January, April, July, and October each year. The name of the donor is not mentioned on the bond.
Electoral Trust Scheme and Electoral Bonds Scheme: A Comparison
The functioning of ETs is generally regarded as transparent, with both donors and beneficiaries disclosed. They also adhere to a robust reporting system, submitting annual contribution reports to the Election Commission of India (ECI). This transparency provides a comprehensive record of donations and their allocation.
In contrast, the EB Scheme introduces a level of opacity due to donor anonymity, making it difficult to trace the origins of contributions.
A brief analysis of funding trends from 2013-14 to 2021-22 reveals a significant increase in political funding through these government schemes, particularly through the EB scheme.
Political Party Receipts
Data from the Association for Democratic Reforms (ADR) indicates a single political party received 72% of total donations through ETs in 2021-22, and 57% of funding via EBs between 2013-14 to 2021-22. Their report also finds that over 55% of political party funding was derived from EBs.
Last Modified: February 22, 2024