Electoral Bonds: Meaning, Price, and Eligibility

Electoral Bonds are a unique instrument introduced in India in 2018 to promote transparency in political funding. These bonds allow individuals and entities to contribute money to political parties without revealing their identity, ensuring anonymity while complying with the legal framework governing political donations.

In this comprehensive guide, we’ll dive into what electoral bonds are, how they work, their price structure, and the eligibility criteria for buying and using them.

What Are Electoral Bonds?

Electoral Bonds are specially designed bearer bonds that can be purchased by Indian citizens, companies, or organizations to donate to political parties in India. These bonds are issued by designated banks and can be bought by anyone who is eligible, but they can only be used for political donations.

Key Features of Electoral Bonds:

1. Bearer Instrument: Electoral Bonds are a bearer instrument, which means the person holding the bond is presumed to be its owner. This ensures anonymity in political donations, as there is no need to record the identity of the donor.

2. Denominations: The bonds come in different denominations, which makes them accessible to both small and large donors.

3. Use for Political Donations: These bonds can only be used for contributing to registered political parties that are eligible to receive donations under the Representation of People Act, 1951.

4. No Interest: Electoral Bonds do not earn any interest, as they are simply a medium for transferring funds to political parties.

5. Transparency: Although donors' identities are not disclosed to the public, the recipient political party must register the bond amount and the identity of the bondholder with the bank, which maintains records of these transactions.

How Do Electoral Bonds Work?

Electoral Bonds work as a medium for individuals or corporations to donate to political parties. The process for buying and using these bonds involves several steps:

1. Purchase of Electoral Bonds:

• Where to Buy: Electoral Bonds can only be purchased from State Bank of India (SBI), which has been authorized by the government to issue these bonds.

• Available Locations: These bonds can be purchased from any designated branch of the SBI in India.

• Timeframe for Purchase: Electoral Bonds are available for purchase during specific periods, which are announced by the government. They are typically available in windows of 10 days during each financial quarter.

2. Donating the Bonds:

• Once the bond is purchased, the holder can donate the bond to a political party.

• The bond can be transferred to the designated bank account of a political party that has registered to receive donations through electoral bonds.

• The political party will then encash the bonds, and the amount will be credited to its account.

3. Anonymity of Donors:

• The identity of the donor remains confidential to the public, but the bank maintains a record of the purchaser's details.

• The political party receiving the bond has to submit details of the donations received to the Election Commission and to the Income Tax authorities.

4. Expiry:

• Electoral Bonds have a limited validity of 15 days from the date of issue. If not encashed within this period, the bond becomes invalid.

Price (Denominations) of Electoral Bonds

Electoral Bonds are available in the following denominations:

• ₹1,000

• ₹10,000

• ₹1,00,000

• ₹10,00,000

• ₹1,00,00,000 (₹1 crore)

These bonds are available for purchase in multiple denominations, making it easier for people and organizations of different financial capacities to donate to political parties.

Eligibility for Buying Electoral Bonds

To purchase Electoral Bonds, the following eligibility criteria must be met:

1. Indian Citizens and Entities

• Individuals: Only Indian citizens are eligible to purchase electoral bonds. Non-resident Indians (NRIs) are not allowed to buy these bonds.

• Indian Companies and Entities: Any company, organization, or corporate entity that is registered in India and is not a foreign company under Indian law can purchase electoral bonds. The company must have a valid PAN (Permanent Account Number) and must be in compliance with Indian laws.

2. Indian Political Parties:

• Registered Political Parties: Only political parties that are registered with the Election Commission of India (ECI) and meet the criteria of Section 29A of the Representation of the People Act, 1951 are eligible to receive donations via electoral bonds.

• Minimum Vote Share Requirement: The political party must have received at least 1% of the total votes polled in the latest Lok Sabha or Assembly elections.

3. No Requirement for Public Disclosure:

• Donors are not required to disclose their identity publicly, making the process completely anonymous.

4. Valid Documentation:

• Individuals and organizations must provide valid documentation, such as an Aadhaar card for individuals, or PAN card for companies and entities, to prove their identity when purchasing electoral bonds.

Advantages of Electoral Bonds

1. Anonymity: Donors' identities are not publicly disclosed, which preserves privacy and prevents any undue influence in the electoral process.

2. Transparency in Political Funding: Though the bonds allow for anonymous donations, they introduce a formal system for funding political parties, reducing the risks associated with black money or unaccounted donations.

3. Ease of Transaction: The electronic nature of the bond makes it easy to transfer funds to political parties, which reduces the reliance on cash donations.

4. Legality: Electoral bonds offer a legal framework for individuals and organizations to contribute to political parties, eliminating the possibility of donations being questioned in the future.

5. Tax Benefits for Donors: Donations made to political parties are eligible for tax deductions under Section 80GGB or 80GGC of the Income Tax Act, depending on the type of donor (company or individual).

Criticism and Controversies

While electoral bonds aim to bring transparency and legitimacy to political donations, they have been subject to significant criticism. Here are a few points of contention:

1. Anonymity: The most significant criticism is the lack of transparency regarding the source of donations. While the donor's identity is protected, critics argue that this can lead to the undue influence of corporate interests in politics. There is a concern that this anonymity could result in the proliferation of "black money" in the political system.

2. Impact on Democracy: Many argue that the introduction of electoral bonds has increased the influence of big corporations and wealthy individuals in Indian politics. This could skew political decision-making in favor of large corporate donors, making it difficult for smaller political players to compete.

3. Lack of Public Disclosure: The absence of public disclosure regarding the identity of donors may lead to questions about foreign funding or donations from unethical sources, even though Indian political parties are barred from accepting foreign contributions.

4. Concerns from Opposition Parties: Opposition parties have expressed concerns that electoral bonds allow the ruling party to receive large sums of donations without transparency, giving it an unfair advantage in the election process.

Conclusion

Electoral Bonds are a unique financial instrument introduced to promote clean and transparent political funding. They provide a secure and anonymous method for donating to political parties, and their introduction was aimed at reducing the use of unaccounted or black money in elections.

While they offer certain advantages in terms of privacy and simplicity, they have also faced significant criticism, particularly about the lack of transparency and potential for increased corporate influence in politics. It is essential for both donors and political parties to carefully consider the implications of these bonds in the context of India’s democratic process.

As the system evolves, there may be further reforms to address these concerns and ensure that electoral funding remains fair and transparent for all stakeholders.

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