Daily Current Affairs : 12-July-2023
In recent news, the Association of Democratic Reforms reported that electoral bonds have emerged as the primary source of political party donations in India. Electoral bonds, introduced through the Finance Bill in 2017 and further notified under the Electoral Bond Scheme of 2018, were intended to enhance transparency in political funding while safeguarding the anonymity of donors. In this essay, we will explore what electoral bonds are, how they work, and their implications on political financing.
What are Electoral Bonds?
Electoral bonds are financial instruments resembling promissory notes that can be purchased by any Indian citizen or company incorporated in India from select branches of the State Bank of India. The bondholders can then donate these bonds to eligible political parties of their choice without revealing their identity. These bonds are akin to bank notes, bearing no interest, and are payable to the bearer on demand. Both individuals and companies can acquire these bonds digitally or through cheque payments.
Mechanism of Electoral Bonds
Electoral bonds are issued in denominations of Rs 1,000, Rs 10,000, Rs 100,000, and Rs 1 crore, and are available at designated SBI branches. Once acquired, political parties can encash these bonds through their verified accounts within a 15-day window. The purchase of electoral bonds is open for 10 days at the beginning of each quarter, with an extended period of 30 days during the year of Lok Sabha elections.
One crucial feature of electoral bonds is their anonymity; the donor’s name does not appear on the bond, ensuring that the political parties remain unaware of the identity of their contributors. This provision was introduced to encourage individuals and corporations to make political donations without fear of retaliation or bias.
Eligibility for Electoral Bonds
To be eligible to receive electoral bonds, a political party must be registered under section 29A of the Representation of the Peoples Act, 1951, and have secured at least one percent of the votes polled in the most recent General or Assembly elections. The Election Commission of India (ECI) verifies the accounts of eligible parties, and electoral bond transactions can only be made through these verified accounts.
Taxation and Financial Implications
One of the primary advantages of electoral bonds is that donations made through these bonds are tax-deductible. Donors can claim deductions on their donations, while the recipient political parties receive tax exemptions, provided they file the necessary returns. This provision aims to incentivize political funding through legal channels, increasing transparency and accountability in the system.
Controversies and Concerns
While the concept of electoral bonds was introduced with the intention of bringing transparency to political funding, several concerns have been raised regarding its effectiveness and potential loopholes. Some of the key controversies include:
- Anonymity vs. Transparency: Critics argue that the anonymity of donors compromises transparency in political funding. Without knowing the source of donations, it becomes difficult to assess any potential conflicts of interest.
- Influence of Corporations: With companies being eligible donors, there are concerns that electoral bonds may enable corporations to influence political decisions covertly, impacting public policies.
- Inequality in Funding: Smaller political parties and independent candidates might struggle to access significant funding through electoral bonds, leading to an uneven playing field in elections.
Important Points:
- Electoral bonds are financial instruments similar to promissory notes used for political party donations in India.
- Citizens and companies can buy electoral bonds from select State Bank of India branches and donate them to eligible political parties.
- The bonds are free of interest and payable to the bearer on demand.
- Introduced in 2017, the Electoral Bond Scheme of 2018 aimed to bring transparency to political funding while keeping donor identities private.
- Bonds are issued in denominations of Rs 1,000, Rs 10,000, Rs 100,000, and Rs 1 crore.
- Political parties can encash bonds through their verified accounts within a 15-day validity period.
- Bonds can be purchased for 10 days at the beginning of each quarter, with an extended period of 30 days during Lok Sabha elections.
- Donor identities are not disclosed on the bonds, ensuring anonymity.
- Eligible parties must be registered under section 29A of the Representation of the Peoples Act and have secured at least one percent of the votes in recent elections.
- Electoral bond transactions can only be made through verified accounts allotted by the Election Commission of India.
- Donations made through electoral bonds are tax-deductible for donors, and recipient parties receive tax exemptions.
- Critics raise concerns about the lack of transparency due to anonymous donations.
- There are worries that electoral bonds may allow corporations to influence political decisions discreetly.
- Smaller parties and independent candidates may face challenges in accessing significant funding through electoral bonds, leading to unequal funding distribution.
Why In News
According to a recent report by the Association of Democratic Reforms, Electoral bonds emerged as the primary channel for political party donations, solidifying their role in shaping the financial landscape of Indian politics. As the utilization of Electoral bonds continued to rise, their impact on funding political activities became more pronounced, raising concerns about transparency and accountability within the electoral system.
MCQs about Electoral Bonds
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What are electoral bonds?
A. Financial instruments issued by political parties
B. A type of promissory note for political party donations
C. Tax deductions for corporate donors
D. Government-issued currency for election expenses
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What is the primary purpose of electoral bonds in political party donations?
A. To ensure transparency and accountability in political funding
B. To encourage corporate influence in political decision-making
C. To limit the financial contributions of individuals and companies
D. To disclose donor identities to the public
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How can individuals and companies purchase electoral bonds?
A. From any nationalized bank in India
B. Online through a government portal
C. From select branches of the State Bank of India
D. Through political party websites
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What is the validity period for electoral bonds?
A. 30 days
B. 60 days
C. 90 days
D. 15 days
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