The Supreme Court will consider whether petitions challenging the constitutionality of the electoral bonds scheme should be referred to a Constitution Bench.
What are Electoral Bonds?
- Electoral bonds are banking instruments that can be purchased by any citizen or company in order to make donations to political parties without disclosing the donor’s identity.
- It is similar to a promissory note that can be purchased from select State Bank of India branches by any Indian citizen or company incorporated in India.
- The citizen or corporation can then donate to any eligible political party of his or her choice.
- Individuals or parties will be able to purchase these bonds digitally or by check.
About the scheme
- A citizen of India or a body incorporated in India will be eligible to purchase the bond
- Such bonds can be purchased for any value in multiples of ₹1,000, ₹10,000, ₹10 lakh, and ₹1 crore from any of the specified branches of the State Bank of India
- The purchaser will be permitted to purchase electoral bonds only if all existing KYC requirements are met and payment is made from a bank account.
- The bonds will be valid for 15 days (15 days time has been prescribed for the bonds to ensure that they do not become a parallel currency).
- Donors who contribute less than 20,000 to political parties through the purchase of electoral bonds are not required to provide their personal information, such as their PAN (PAN).
The scheme’s objective
- Transparency in political donations: To ensure that the funds raised by political parties are accounted for or clean money.
Who has the authority to redeem such bonds?
- The Electoral Bonds may only be redeemed by an eligible Political Party through a bank account with an Authorized Bank.
- Only political parties that have been registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and have received at least 1% of the votes cast in the last General Election to the Lok Sabha or the State Legislative Assembly are eligible to receive Electoral Bonds.
Restrictions that are done away
- Previously, under the Companies Act, no foreign company could donate to any political party.
- According to Section 182 of the Companies Act, a company may donate up to 7.5 percent of its average three-year net profit as political donations.
- Companies were required to disclose details of their political donations in their annual financial statements under the same section of the Act.
- The government proposed an amendment to the Finance Bill to ensure that this provision does not apply to companies that issue electoral bonds.
- Thus, Indian, foreign, and even shell companies can now donate to political parties without informing anyone.
Issues with the Scheme
- Opaque funding: While the identity of the donor is captured, it is not revealed to the party or public. So transparency is not enhanced for the voter.
- Income tax breaks may not be available for donations made through electoral bonds. This forces the donor to choose between anonymity and tax savings.
- Donors are not anonymous: The donor’s privacy is jeopardised because the bank will know their identity.
- Differential advantages: These bonds will benefit any party in power because the government will know who gave what money and to whom.
- Donations are unlimited: The electoral bonds scheme and amendments in the Finance Act of 2017 allows for “unlimited donations from individuals and foreign companies to political parties without any record of the sources of funding”.
Way ahead
- However, the concerns about the electoral bond scheme extend beyond its obvious unconstitutionality.
- The concern about the possibility of misappropriation of funds is very real.
- The EC has demanded that a law be passed requiring political parties to have their accounts audited by an auditor chosen from a panel suggested by the CAG or EC. This should be highlighted.
- Another viable option would be to create a National Election Fund to which all donations could be directed.
- This would alleviate the donors’ fictitious fear of political retaliation.
Source: https://www.ndtv.com/india-news/supreme-court-to-hear-requests-challenging-electoral-bond-scheme-in-march-3739276#:~:text=The%20Supreme%20Court%20today%20said,the%20third%20week%20of%20March.