The intention to adopt electoral bonds is to stop the influence of black money in politics specially during the election period.

The electoral bond scheme was introduced by the Government Of India to clean the funding system in our country. The electoral bonds issued covering this scheme are the bearer of banking instruments used for funding the authorised & eligible political parties in India. The intention to adopt electoral bonds is to stop the influence of black money in politics specially during the election period.

In 2017 the Government Of India introduced the electoral bond scheme in the finance bill and the same was implemented in 2018. These schemes of electoral bonds are the instruments or securities used to donate funds to the different political parties. These are similar to bearer bonds where the bank is the custodian and it pays the political parties who are the bondholders. As electoral bonds are only bearer instruments no ownership details are recorded and the holder of the document is assumed to be the owner. Similarly, the name & the information of the donor are also not entered on the instrument, and thus electoral bonds are anonymous in nature.

An electoral bond is a financial instrument used to make donations to political parties. The general public can also issue electoral bonds to fund eligible political parties of their choice. The political party should be eligible to run campaigns & must be registered under section 29A of the representation of the people’s act 1951 to collect electoral bonds.These electoral bonds play a similar role of banknotes payable to the bearer free of interest & demand.These electoral bonds can be purchased by any individual party digitally or through a demand draft or cheque. Since the political parties receive donations through formal banking system which are audited by the government authorities these bonds to promote transparency.Here the identity of the donors is anonymous & remains confidential to reduce the risk of intimidation or retaliation for their political affiliations.

Basically, the concept behind the introduction of electoral bonds was to reduce black money in politics & to provide a transparent & legal mechanism for individuals and entities to contribute to political parties. The electoral bonds serve as a means for donors of the bond to make donations to registered political parties while maintaining anonymity.

The electoral bonds can be purchased by any individual and entities making payments through a bank account.The electoral bonds will not have the name of the payee with a validity of fifteen days only during which it can be used to make donations to political parties.

These electoral bonds handed over to the political parties can be encashed only through designated bank accounts. The political parties have to file returns on the total electoral bonds received to the Election Commission Of India.

As specified by the central government electoral bonds are available for purchase for only ten days in January, April & October. An additional thirty days can be specified by the Centre in the year of the General election.

Only the political parties registered under section 29A of the representation of the people’s act 1951 & secured at least one percent of votes polled in the previous election to the Legislative Assembly or Parliament are eligible to receive the electoral bonds.

Any citizen of India having an entity or corporation established in India can purchase an electoral bond from the authorised State Bank Of India branches. The electoral bonds can be purchased individually or jointly with other individuals. Although purchases can be made through only KYC-compliant accounts to make donations to political parties.

Electoral bond donations made by individuals or entities are exempted from tax under section 80GG & section 80GGB under the Income Tax Act 1961. All political parties can receive donations as per the provisions of section 13A of the Income Tax Act.

The benefits of electoral bonds are as below:

Every electoral bond must be rendered by a bank account disclosed by the Election Commission Of India reducing malpractice.

These bonds help to hold back political parties that operate only to collect funds from the public since only registered parties attaining at least one percent of the votes in the General Election can get electoral funding.

Electoral bonds ensure that the government’s goal to make election funding completely digitised & safe is fulfilled.

Electoral bonds enhance transparency & accountability as political parties can redeem them through designated bank accounts.

As electoral fund payments are made through online modes, Demand Drafts or Cheques it discourages cash transactions and preserves donor anonymity. Very recently just before the 18th Loksabh Election 2024, the Supreme Court stuct down the electoral bond scheme that allows anonymous donations to political parties. The highly anticipated judgment came saying that the electoral bonds scheme violated freedom of speech and expression under Article 19(1)(a) of the constitution.

The Supreme Court ruled the information about the funding of political parties is essential for the effective exercise of the choice of voting redeemed despite accounting for over twenty-six percent of all sales scheme which introduced through the Finance Act 2017 said the Chief Justice Chadrachud.

By the order of the Supreme Court the State Bank Of India which is the issuing bank of electoral bonds have to furnish the details of the political parties that received electoral bonds since the year 2019 to the Election Commission Of India. Within twenty-one days. Concurrently the ECI has been asked to publish the details on its official website in line with the details submitted by the SBI.

The SC told on the electoral bond issue that the electoral bond scheme has been stuck down as unconstitutional. In this verdict, the SC said the scheme violated the RTI of citizens impacting the fundamental rights of free speech & expression under Article 19(1)(a) of the constitution.

The transparency in political funding cannot be achieved by granting absolute exemptions. The Apex Court ordered the issuing bank SBI to forthwith stop the issue of electoral bonds.

The SBI has been asked to furnish the details of the political parties that received the contributions to the ECI by March 2024. Additionally the electoral bonds that have not been encashed by political parties have to be returned to the purchaser. The Apex Court also quashed amendments to the IT Act and the representation of people’s act which had made the donations anonymous. In a major observation, the SC said the electoral scheme would aid the political party that was in power, and said it also held that the scheme cannot be justified by claiming that it would help to filter the inflow of black money in politics. Resulting the economic inequality leading to differing levels of political engagement. Access to information leads to influencing policymaking and also leading to quid pro quo arrangements may also help a political party in power.

The judgment amended to the Companies Act allowing blanket corporate political funding was unconstitutional. The Chief Justice Of India said it violated the RTI of citizens about possible quid pro quo. Before the amendment of the Companies Act in 2017 the loss making firms in India were not allowed to contribute electoral bonds.

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