The Indian Government recently implemented a type of financial instrument called electoral bonds. These bonds are meant to replace cash donations made to political parties, making them a more transparent and secure way for people to show their support for their chosen candidate or party in elections. These bonds can also be issued by the general public to fund eligible political parties. But what exactly are electoral bonds? How do they work? In this blog post, we will dive into the details of electoral bonds and explore everything you need to know.

What is an Electoral Bond?

An electoral bond functions similarly to a financial tool for making donations to political parties. These bonds can also be issued by the general public to fund eligible political parties.

Section 29A of the Representation of the People Act, 1951, requires a political party eligible to run campaigns to register.

The bonds function similarly to banknotes in that they are payable to the bearer free of interest and demand.

Individuals can purchase these bonds digitally or with the assistance of a DD or cheque. The electoral bonds were introduced on January 29, 2018, and the Electoral Bond Scheme 2018 was announced by the Narendra Modi-led NDA government.

How does the electoral bond scheme work?

Any Indian corporate body, registered agency, or undivided Hindu family can issue electoral bonds by donating funds to political parties of their choice that are eligible to run for office in the state.

Corporate bonds are issued by RBI-notified banks such as the State Bank of India (SBI) and are available in the following denominations: 1000, 10,000, 1,00,000, 10,00,000, and 1,00,00,000. Electoral bonds, regardless of denomination, are valid for 15 days after they are issued.

The electoral bonds issued by the public or corporations are distributed to political parties. Political parties plan to approach the electoral commission to file returns on the total number of electoral bonds received.

For example, an individual may issue bonds for ten days in January, April, and then again in July and October of the following year. If it is an election year, one has 30 days to issue electoral bonds.

Issuing electoral bonds has several tax advantages. The donor of an electoral bond benefits from an additional tax break.

Election bond donations are tax-exempt under Section 80 GG and Section 80 GGB of the Income Tax Act.

However, the political party receiving the donations may also receive a donation under Section 13A of the Income Tax Act.

How to use Electoral Bonds?

Using electoral bonds is a simple process. The bonds will be available in denominations of RS 1,000, RS 10,000, RS 100,000, and RS 1 crore. However The range is between RS 1,000 and RS 1 crore.

Electoral bonds are available at some SBI branches. A donor with a KYC-compliant account can purchase the bonds and donate to their preferred political party or individual.

The receiver collecting electoral bonds can encash the bonds through the verified account of the party. Electoral bonds, on the other hand, are only valid for fifteen days.

When can you purchase them?

At the start of each quarter, the electoral bonds are available for purchase for ten days. The government specifies the first ten days of January, April, July, and October for the purchase of electoral bonds.

In the year of the Lok Sabha elections, the government must specify an additional 30-day period.

Electoral Bonds – Conditions

1. Any party that has been registered under Section 29A of the Representation of the Peoples Act, 1951 (43 of 1951) and has received at least 1% of the votes cast in the most recent General or Assembly elections is eligible to receive electoral bonds. The Election Commission of India (ECI) will assign the party a verified account, and all electoral bond transactions will be conducted through this account.
2. The donor’s name will not appear on the electoral bonds. As a result, the political party may be unaware of the donor’s identity.

Advantages and Disadvantages of Electoral Bond Scheme

Advantages

• All electoral bonds issued must be redeemed through a bank account disclosed by the Election Commission of India, which strengthens the malpractice.
• The widespread use of electoral bonds can help to constrain political parties that exist solely to collect public funds. This is due to the fact that only registered parties with at least 1% of the vote in the general election are eligible for electoral funding.
• Electoral bonds contribute to the government’s goal of making election funding completely secure and digitised. As a result, any donation in excess of RS 2000 is not required by law to be in the form of electoral bonds and cheques.
• All electoral bond transactions are done with cheques or digitally.

Disadvantages

• According to some critics, electoral bonds were implemented with the primary goal of limiting the funding available to opposition parties.
• Electoral bonds pose no threat to financially stable companies. These companies’ goal is to fund one political party over another.
• This is further emphasized by the elimination of the limit of donating 7.5% of the company’s annualized profits to a political party.