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Electoral Bonds scheme for political funding

Capital Market 

A major step was taken during the led by Shri The Act was amended to include a provision that donations made to political parties would be treated as expenditure and would thus give a advantage to the donor. If the political party disclosed its donations in a prescribed manner, it would also not be liable to pay any A political party was expected to file its returns both with the income-tax authorities and It was hoped that donors would increasingly start donating money by Some donors did start following this practise but most of them were reluctant to disclose the details of the quantum of donation given to a political party. This was because they feared consequences visiting them from political opponents. The law was further amended during the to provide for pass through electoral trust so that the donors would park their money with the electoral trusts which in turn would distribute the same to various political parties. Both these reforms taken together resulted in only a small fraction of the donations coming in form of cheques.

In order to make a serious effort to carry forward this reform process, it was announced in Union Budget Speech for the year 2017-18 that the existing system would be substantially widened and donations of clean money could be made to political parties in several ways. A donor could enjoy a tax deduction by donating in Donors were also free to donate moneys online to political parties. A donation to a political party could not exceed an amount of Rs.2000/-. In addition, a scheme of electoral bonds was announced to enable clean money and substantial transparency being brought into the system of political funding.

Donations made online or through cheques remain an ideal method of donating to political parties. However, these have not become very popular in since they involve disclosure of donor's identity. However, the electoral bond scheme, which was placed before the Parliament a few days ago, envisages total clean money and substantial transparency coming into the system of political funding.

A donor can purchase electoral bonds from a only by a banking instrument. He would have to disclose in his accounts the amount of political bonds that he has purchased. The life of the bond would be only 15 days. A bond can only be encashed in a pre-declared account of a political party. Every political party in its returns will have to disclose the amount of donations it has received through electoral bonds to the The entire transactions would be through banking instruments. As against a total non-transparency in the present system of donations where the donor, the donee, the quantum of donations and the nature of expenditure are all undisclosed, some element of transparency would be introduced in as much as all donors declare in their accounts the amount of bonds that they have purchased and all parties declare the quantum of bonds that they have received. How much each donor has distributed to a political party would be known only to the donor. This is necessary because once this disclosure is made, past experience has shown, donors would not find the scheme attractive and would go back to the less-desirable option of donating by In fact the choice has now to be consciously made between the existing system of substantial cash donations which involves total unclean money and is non-transparent and the new scheme which gives the option to the donors to donate through entirely a transparent method of cheque, or through electoral bonds. While all three methods involve clean money, the first two are totally transparent and the electoral bonds scheme is a substantial improvement in transparency over the present system of no-transparency.

The Government is willing to consider all suggestions to further strengthen the cleansing of political funding in It has to be borne in mind that impractical suggestions will not improve the cash denominated system. They would only consolidate it."

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, January 08 2018. 08:46 IST