Electoral bonds were introduced as an instrument for donations to registered political parties through authorised banking channels, with confidentiality of donor identity vis-à-vis the public. The scheme operated under the Electoral Bond Scheme notified by the Government of India until struck down by the Supreme Court.
The Finance Act, 2017 and subsequent amendments modified provisions relating to political contributions, cash donation limits, and reporting in books of accounts. Companies and individuals must now comply with the post-judgment framework.
This article summarises the historical scheme, disclosure requirements, and current compliance considerations for corporates and donors.
Background of the electoral bond scheme
Electoral bonds were bearer instruments issued by specified branches of the State Bank of India in prescribed denominations. Donors purchased bonds and political parties encashed them within validity. The scheme aimed to channel political funding through banking rails rather than cash.
Key features (when operative)
- Available to Indian citizens and bodies incorporated in India.
- Donation only to eligible political parties with prescribed vote share.
- KYC for purchaser; party encashment within 15 days of issue.
- Donor identity not disclosed to public; available to authorised agencies under law.
Supreme Court judgment and aftermath
In Association for Democratic Reforms v. Union of India (2024), the Supreme Court struck down the electoral bond scheme and related amendments as unconstitutional. The Election Commission was directed to publish donor and encashment data. Entities must align policies with transparent political contribution norms.
Tax and company law disclosure
Companies Act
Section 182 of the Companies Act, 2013 restricts corporate political contributions and requires board and shareholder approvals beyond thresholds. Contributions must be disclosed in profit and loss account.
Income-tax Act
Section 13A exempts income of political parties subject to conditions including maintenance of books and no acceptance of anonymous donations above prescribed limits. Donors do not receive deduction under Section 80GGB/80GGC for electoral bonds; cash donations above ₹2,000 to parties are prohibited.
Practical guidance for corporates
- Review political donation policy post-scheme withdrawal; use transparent bank transfers within legal limits.
- Retain board resolutions and shareholder approvals for contributions.
- Reconcile historical electoral bond transactions in audit files and CARO representations.
- Train management on prohibited anonymous funding and FCRA overlap for foreign sources.
Comparison of contribution modes
| Mode | Current status | Disclosure |
|---|---|---|
| Electoral bond | Scheme struck down | Historical data published per court directions |
| Account payee cheque / digital | Permitted within limits | Books and statutory filings |
| Cash to political party | Not allowed above ₹2,000 | N/A |
This article summarises professional topics for general information. Political funding law continues to evolve; verify current statutes and obtain advice before making contributions.