Electoral bonds are instruments or securities that are used to provide finance to political parties. They were introduced with the Finance Bill of 2017. The Electoral Bonds were issued in 2018. These bonds are similar to bearer bonds or promissory notes in that the issuer (bank) serves as the custodian and pays the person who has the bonds (political party).
The issuance of electoral bonds is a method of political fundraising that has several challenges and issues. Since these issues are constantly mentioned in the news, the topic is significant for the UPSC Mains. Let’s learn about Electoral bonds, its features, importance, and drawbacks in detail for a better understanding of UPSC aspirants preparing for General Studies Paper II.
Electoral Bonds – Introduction
The current government, in order to combat both problems (black money and corruption), has suggested a series of measures connected to political fundraisings, such as the issuance of Electoral Bonds.
The following are the characteristics of electoral bonds and the process involved:
- Notified banks issue these bonds.
- The donor could approach these banks and buy the bonds.
- The donor will be able to purchase the bonds by check or digital payment. As a result, the contributors’ identities are shielded (if the donors are identified, they may get caught up in political rivalry-especially if the donor is a businessman).
- These bonds are donated to the political party by the donor.
- The political party must deposit it in an account registered with the Election Commission of India.
Importance of the Electoral Bonds
They make certain that the monies gathered by political parties are accounted for or clean money.
Concerns with respect to Electoral Bonds
Despite the fact that the Electoral Bond Plan works as a deterrent to old-fashioned under-the-table donations because bonds are issued with cheques and digital paper trails of transactions, many critical elements of the scheme offer cause for concern.
Drawbacks of Electoral Bonds
- Although the RPA (Representation of People Act 1951) requires political parties to declare donations over Rs 20000, there is no rule that precludes these parties from declaring donations less than Rs 20000, but the parties lack the political will and hence do not disclose them.
- Political parties have often delayed submitting audited reports to the ECI. According to ADR, between 2011 and 2015:
- the BJP delayed submissions by an average of 182 days.
- By 166 days, Congress
- NCP is delayed by 87 days.
Worse, some political parties do not even file their returns. There is scant evidence that action has been taken against the parties who have either delayed or failed to file their returns.
- Political parties can continue to collect funds via checks and digital payments (but will have to file returns to the Income Tax authority)
As a result, there are certain reservations about the use of electoral bonds. So, how do we get out of this?
- According to T S Krishnamurthy (Former CEC), the government will have no idea how many times the bond was sold in the market before it was cashed by the political party. So it would be preferable if the EC established an Election Fund and ECI gathered donations for various political parties (with compulsory PAN number)
- The Indrajit Gupta Committee made the aforementioned idea about establishing an election fund.
Electoral Bond – What is Section 8 Company?
Is a legal entity as defined in Section 25 of the Companies Act of 1956?
US 25 allows the formation of a charitable company without the need to establish a Trust or a Society, which will exist as a legal entity, but the catch is that any company formed under this section must use/re-invest all income towards the same goal, i.e., unlike a regular company, no money will leave the company in the form of profits or dividends.
Advantages
- Very simple to set up
- There are no minimum capital requirements.
- Much easier to run – easy to join the board of directors, a minimum quorum for the board of directors meetings, and so on.
- Tax benefits are available.
