It is expensive to both run a political campaign and manage a political party. Bringing party workers together and creating publicity by promoting them require a copious amount of funding. Parties usually maintained anonymity with respect to their source of funding for these campaigns. This lack of transparency has led the government to introduce an electoral bond scheme to the general public with the goals of curbing corruption in politics and black money markets. This new scheme was introduced in the 2017–2018 budget announcement.

What are Electoral Bonds?

Bearer banking instruments are referred to as ‘electoral bonds,’ meaning the general public can issue these bonds to fund eligible political parties. A political party that classifies as eligible to run campaigns must be registered in the Representation of the People Act, 1951, under Section 29A. Additionally, to classify as a registered political party, the party should secure not less than 1% of votes polled from the prior general election to the legislative assembly.

How does the electoral bond scheme work?

Electoral bonds issued by any Indian corporate body, citizen, registered agency/association, or Hindu Undivided Family can be used to donate funds to the political parties of their choice that classify as eligible to the campaign. Electoral bonds are available in the following denominations and can be issued by RBI-notified banks such as SBI (State Bank of India) and more: ₹1000, ₹10,000, ₹1,00,000, ₹10,00,000, and ₹1,00,00,000. No matter the denomination, electoral bonds are valid for 15 days after the day they have been issued.

The electoral bonds issued by the public or corporation are received by political parties. The political parties are then expected to approach the electoral commission to file returns on the total electoral bonds they have received. As an issuer of electoral bonds, there are certain limitations on when bonds can be issued. For instance, one is allowed to issue bonds for a period of ten days in the months of January, April, and then in the latter half of the year in July and October. If it is an election year, one will have a 30-day period to issue electoral bonds.

There are tax benefits to issuing electoral bonds. The electoral bond donor gets a tax advantage for the same. Under the income tax act, one’s electoral bond donations are tax-exempt under Section 80GGC/80GGB. What’s more, the political party on the receiving end of the donations can also receive a donation as per the Income Tax Act’s Section 13A.

Advantages of Electoral Bond Scheme

– These bonds As the donor’s identity will remain unknown during the transaction, this is not complete transparency and the scope for malpractice may still exist. Unchecking foreign funding could be one potential amoral outcome of maintaining donor anonymity and protecting their right to secrecy. Foreign funding that is unregulated could be carried out with the intent to adversely affect the country’s personal interests. protect the anonymity of the issuer or issuing party. They do not showcase the name of the donor atop of the bond copy that is formally issued. Hence, the identity of the donor is protected. All transactions for donations are also carried out digitally or via cheques.

– It works to aid in the government’s goal to make election funding more secure and digitized. Any donation above 2000 is now legally required to be in the form of cheques of electoral bonds.

– All bonds issued are to be redeemed by bank accounts that have been disclosed by the Election Commission of India, hence, visibility of any potential malpractice is strengthened.

– The widespread use of electoral bonds can aid in curbing fake political parties who operate with the goal of simply collecting funds from the public. This is because only registered parties who have attained at least 1% of the votes in the general election can receive electoral funding.

Criticisms of Electoral Bond Scheme

– Some critics argue that electoral bonds have been brought into operation with the goal of choking the funding available to opposition parties.

– Electoral bonds do not threaten the formation of shell companies in any way. These companies could be created simply with the goal of funding one political party over another. This is further promoted by the limit of donating 7.5% of the company’s annualized profits towards a political party being abolished.


The goal of transitioning to electoral bonds is to move in the direction of transparency regarding the sources of political funding. This scheme offers a novel way to protect the rights of the donor while digitizing donations through electronically issued bonds. How well this scheme has worked for the country is yet to be known.

Leave a Reply

Your email address will not be published. Required fields are marked *