Electoral Bond Scheme {चुनावी बांड योजना}

Electoral Bond Scheme {चुनावी बांड योजना}

Updated on May 27, 2020

An electoral bond is known as a promissory note that can be bought by any Indian citizen or company incorporated in India from some select branches of State Bank of India. The citizen or corporate can donate the purchased bond to any eligible political party of his or her choice. The electoral bonds are the same as banknotes that are payable to the bearer on demand as well as are free of interest. There is no interest in the electoral bond. The person is also able to purchase these bonds digitally or through cheque. With the Finance Bill (2017), the electoral bonds were introduced. On January 29, the Electoral Bond Scheme 2018 was notified by the Narendra Modi-led NDA government.

How to Use Electoral Bonds?

To use electoral bonds is very simple. The person can buy electoral bonds in multiples of Rs 1,000, Rs 10,000, Rs 100,000 and Rs 1 crore. So we can say the range of electoral bonds varies between 1,000 to Rs 1 crore. You can buy these bonds at some branches of State Bank of India. The only person who has a KYC-compliant account can buy the bonds and can then donate them to the party or any individual of his choice. Now, the receiver can encase the bonds through the party's verified account. The electoral bond's validity is only fifteen days. There are a total of 29 specified SBI branches are in different cities like New Delhi, Gandhinagar, Chandigarh, Bengaluru, Bhopal, Mumbai, Jaipur, Lucknow, Chennai, Kolkata and Guwahati which provides these bonds.

The person can buy these bonds for 10 days at the beginning of every quarter. The first ten days of January, April, July, and October have been specified by the government of India for the purchase of electoral bonds. An extra period of 30 days also will be specified by the government in the year of the Lok Sabha elections.

Who can Purchase an Electoral Bond?

Any person or organization can purchase the bond. In the case of a person he or she must be a citizen of India while in the case of a company, it should be incorporated or established in India. 

  • An individual citizen
  • A Hindu undivided family
  • A company
  • A firm
  • A society of persons or a body of individuals, incorporated or not
  • Other persons or agencies
  • Any party that is registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951) and has got at least one percent of the votes in the most recent General elections or Assembly elections is eligible to get electoral bonds.
  • To provide the electoral bond to the eligible party a verified account by the Election Commission of India (ECI) and the bonds will be directly transferred to that verified account.
  • There is no detail about the donor represented, so the political party might not be conscious of the donor's identity.

The Tax Imposed on Electoral Bonds

The finance minister Arun Jaitley made it clear that the donations would be tax-deductible. The person who is donating bonds will able to get a deduction and the recipient. The political party will also get tax exemption and provided the political party files returns.

Reasons Behind Introduction

  • The main reason behind the introduction of electoral bonds in India revelled by the Narendra Modi-led government that to ensure all the donations made to a party will be accounted for in the balance sheets and not exposing the donor details to the public.
  • The government also said that electoral bonds would able to keep a tab on the use of black money for funding elections.
  • The government said that the donor does not have any other option rather than donating cash after siphoning off money from their businesses.

Disagreement over Electoral Bond

There are a lot of disagreements that were raised by the public in the introduction of electoral bonds. These assumptions are given below. 

  • Some experts said that if the electoral bonds are introduced by the government to bring transparency and to stop the use of black money, then the government must not restrain or fear to share the details of the donor.
  • Experts, as well as several politicians, say that since neither the buyer of the bond nor the political party getting the donation is required to disclose the donor's identity.
  • The shareholders of a company will remain uninformed of the company's contribution. Voters will have no idea of how, and through whom, a political party has got funds.
  • Some experts argue about the scheme they said that the donor's identity had been kept anonymous and it may even lead to an influx of black money.
  • Some people argue and accused that the scheme was introduced to help big corporate houses give money without their identity being revealed.
  • As per the civil rights societies, the concept of donor "secrecy" threatens the very spirit of the democratic system.
  • Some leaders of the Congress party said that the donations made with electoral bonds were the same as money laundering.

Removed Limits

  • With the help of this scheme, foreign companies could donate to any political party under the Companies Act. Still, before this scheme, there was no option for a foreign company to donate to any political party.
  • Under this scheme, a corporation can donate a maximum of 7.5 percent of its average three-year net earnings as political donations as per Section 182 of the Companies Act.
  • According to Section 182 of the Companies Act, the companies are obliged to share details of their political donations in their yearly statement of accounts.
  • The government amended the Finance Bill to make sure that this requirement would not be valid to companies in case of electoral bonds.
  • Under this scheme now Indian, foreign as well as even shell companies can donate to political parties without notifying anyone of the contribution.

Supreme Court Statement on Electoral Bonds

On April 12, 2019, the Supreme Court ordered all the political parties to submit complete details of donations that are received through electoral bonds to the Election Commission of India. The Finance Ministry was also asked to reduce the window to buy electoral bonds from 10 days to 5 days. The high court is yet to fix a date for inquiry other pleas against the electoral bonds.

Reserve Bank of India Statement on Electoral Bond Scheme

According to various sources as well as reports, the RBI was serious about the scheme. The central bank also warned the government that the bonds would weaken the faith in Indian banknotes as well as encourage money laundering.

Frequently Asked Questions

Q: What is the Electoral Bond Scheme?

Electoral Bond is a bearer Banking tool that is used for funding to eligible Political Parties without mentioning the name of the donor.

Q: What is the validity limit for electoral bonds?

The Electoral Bonds will be valid for only Fifteen Days from the Date of Issue as an Electoral Bond is issued on January 1, 2018, will be valid up to January 15 2018. 

Q: What are the eligibility criteria to buy and sell electoral bonds?

The Electoral Bonds under this Scheme can be purchased by a person, who is a Citizen of India or Incorporated that is established in India.

Q: Can a person redeem these Electoral Bonds in any Account?

No, the Electoral Bonds cannot be redeemed by an individual; these are redeemed only by an eligible Political Party by depositing the same in their selected Bank Account maintained with Authorized Bank.


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WRITTEN BY Varsha Verma

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