What is the News?
The Supreme Court agrees to hear a plea on staying the fresh sale of Electoral Bonds. The hearing of the case has been set before the upcoming state assembly elections. It is important considering the dependency of political parties on electoral bond for funding.
What are Electoral Bonds?
- Electoral Bonds are interest-free bearer financial instruments for making donations to political parties. They were introduced by the Government of India by the Finance Bill, 2017.
- The bonds are issued in multiples of Rs. 1,000, Rs. 10,000, Rs. 1 lakh, Rs. 10 lakh and Rs. 1 crore without any maximum limit.
Key Features of Electoral Bonds:
- Firstly, eligibility: Only the registered Political Parties which have secured at least 1% of the votes polled in the last Lok Sabha elections or the State Legislative Assembly are eligible to receive the Electoral Bonds.
- Secondly, donors: Electoral bonds may be purchased by a citizen of India or entities incorporated or established in India. A person can buy Electoral Bond, either singly or jointly with other individuals.
- Thirdly, authorised Bank: The State Bank of India (SBI) has been authorized to issue and encash Electoral Bonds.
- Fourthly, validity: The Electoral Bonds shall be valid for fifteen calendar days from the date of issue. No payment shall be made to the Political Party if the Electoral Bond is deposited after the expiry of the validity period.
- Fifthly, political parties will create a specific account. This account will be verified by the Election Commission. The political parties will encash the electoral bond only in this verified account.
- Lastly, the Electoral Bond deposited by an eligible Political Party in its account shall be credited on the same day.
Arguments against Electoral Bonds:
- Anonymity: Neither the donor nor the political party is obligated to reveal whom the donation comes from.
- Black Money: The sale of electoral bond had become an avenue for shell corporations and entities to park illicit money and even proceeds of bribes with political parties.
- Tax Exemption: Electoral Bonds donations enjoy 100% tax exemption. Further, they need not be reported to the Income Tax department either.
- Removal of Cap on Net Profit Donations: The government has removed the eligibility cap for funding political parties. Earlier a company can make a political contribution only if it has 7.5% of the net average profit for three preceding financial years.
Source: The Hindu