ELECTORAL BONDS

Saturday Brain Storming Thought (210) 17/02/2024

ELECTORAL BONDS

Electoral Bonds are instruments/securities that are used to donate funds to political parties

Key Features of Electoral Bonds

1) Electoral Bonds may be purchased by a person who is a citizen of India or incorporated or established in India

2) A person being an individual can buy Electoral Bonds, either singly or jointly with other individuals

3) Only the political parties registered under section 29A of the Representation of the people Act, 1951 (43 of 1951) and which secured not less than 1% of the votes polled in the last General Election to the House of the People or Legislative Assembly of the state, shall be eligible to receive the Electoral Bonds

4) The Electoral Bonds shall be encashed by an eligible Political Party only through a Bank account with the authorized Bank

5) State Bank of India has been authorised to issue and encash Electoral Bonds through its 29 Authorized Branches

6) The bond shall be valid for fifteen calendar days from the date of issue and no payment shall be made to any payee political party if the Electoral Bond is deposited after the expiry of the validity period

7) The Electoral Bond deposited by an eligible Political Party shall be credited on the same day

8) Electoral Bond would be issued/purchased for any value, in multiples of Rs 1000, 10,000, 1,00,000, 10,00,000, 1,00,00,000 from the specified branches of the State Bank of India (SBI)

Use of Electoral Bond

Electoral Bond is a type of instrument that functions like a Promissory Note and an Interest-free banking tool

Any Indian Citizen or organisation registered in India can buy these bonds after fulfilling the KYC norms laid down by the RBI

Electoral Bonds upsc

The Electoral Bonds scheme allows corporations and individuals to anonymously donate money to political parties by purchasing electoral bonds from SBI

Notably, the SBI has sole access to the details of those who purchased electoral bonds

Electoral Bond verdict

The Supreme Court has struck down Electoral Bonds scheme on Thursday 15/02/2024

The Supreme Court said that the Electoral Bond Scheme violates right to information, can lead to quid pro quo

The Supreme Court of India delivered it’s verdict on controversial Electoral Bond Scheme, the court called it ‘unconstitutional’ and struck it down

Electoral Bond – Chronology of events

1) 2017 – The Electoral Bond Scheme was introduced in the Finance Bill

2) 14 September 2017 – NGO Association for Democratic Reforms, lead petitioner, moves SC challenging the scheme

3) 3 October 2017 – SC issues notices to Centre and EC on PIL filed by the NGO

4) 2 January 2018 – The Central government notifies the Electoral Bond Scheme

5) 7 November 2022 – The electoral bond scheme was amended to increase the sale days from 70 to 85 in a year where any assembly election may be scheduled

6) 16 October 2023 – The SC bench headed by CJI DY Chandrachud refers to pleas against the scheme to a five-judge Constitution

7) 31 October 2023 – A five-judge Constitution bench headed by CJI DY Chandrachud commences hearing on pleas against the scheme

8) 2 November 2023 – Supreme Court reserves verdict

9) 15 February 2024 – SC delivers unanimous annulling the scheme

Controversy with Electoral Bonds

1) One of the main criticisms of electoral bonds is the lack of transparency regarding the source of funds

2) The doner’s identity is not disclosed to the public or Election Commission

3) It was difficult to track the origin of political contributions

Purpose of Electoral Bond Scheme

The scheme was pitched as an alternative to cash donations made to the political parties of the countries, as an attempt to bring transparency in political funding

Foreign Funding in Electoral Bonds

Pursuant to the amendments, blanket permission has been given for foreign funding to Indian political parties so long as it is routed through a company registered in India

By purchasing electoral bonds, without reference to ownership or control of such Indian registered companies

Documents required for Buying Electoral Bonds

1) Application form and pay-in-slip

2) Copy of citizenship proof

3) KYC documents

4) in the case of payment from a bank account other than SBI, a proforma from the remitting branch, as provided on the SBI website, declaring the source of funds on the letterhead of the branch, signed and stamped by the branch manager

Citizenship proof documents

In case of Individuals

1) Passport

2) Voter ID card

3) Letter from the national population register for the states of Assam, Jammu, Kashmir and Meghalaya

In the case of non-individuals

1) Certificate of incorporation

2) Partnership deed or trust deed

3) Any other document showing incorporation or establishment in India

Electoral Bonds tax exemption

1) Electoral Bond donations made by individuals or entities are tax-exempt under Section 80GG and Section 80GGB under the Income Tax Act, 1961

2) Political parties can receive donations as per provisions of Section 13A of the Income Tax Act

Benefits of Electoral Bonds

1) Every electoral bond must be redeemed by a bank account disclosed by the ECI, thus reducing malpractice

2) Electoral Bonds help to hold back political parties that operate only to collect funds from the public since only registered parties attaining at least 1% of the votes in the general election can get electoral funding

3) Electoral Bonds ensure that the governments goal to make election funding entirely digitised and safe is fulfilled

4) Electoral Bonds enhance transperancy and accountability as political parties can redeem them through designated bank accounts

5) Since Electoral Funds payments are made through online modes, DD or Cheque, it discourages cash transactions and preserves doner anonymity

Impact of Electoral Bonds on Indian Democracy

1) Between 2016-17 and 2021-22, 7 National parties and 24 Regional parties received a total donation of Rs 9,188.35 Crore from electoral bonds

2) The highest donations from electoral bonds, totalling Rs 3,438.8237 crore, were received in 2019-20

3) The year 2021-23 saw donations worth Rs 2,664.2725 crore through electoral bonds, with witnessed 11 Assembly elections

4) Out of the total donations of Rs 16,437.635 crore received by the 31 political parties, 55.90% came from electoral bonds, 28.07% from the corporate sector and 16.03% from other sources

Electoral Bonds Sales Data

1) 5 cities – Kolkata, Mumbai, New Delhi, Hyderabad and Chennai, accounted for 90% of all electoral bonds sold

2) Mumbai is the highest contributor at 26.16% of the total electoral bonds sold

3) Bengaluru accounted for just over 2% of the total bond sales despite being the tech capital of India

4) The New Delhi branch of SBI is the preferred choice for redeeming electoral bonds, with 64.55% of all bonds redeemed so far

5) Hyderabad and Kolkata were the second and third choices for redemption, while Mumbai had only 1.51% of all electoral bonds redeemed despite accounting for over 26% of all sales