Electoral Bond is a financial instrument (similar to a promissory note) for making donations to political parties. These are issued by Scheduled Commercial banks upon authorisation from the Central Government to intending donors, but only against cheque and digital payments (it cannot be purchased by paying cash). These bonds shall be redeemable in the designated account of a registered political party within the prescribed time limit from issuance of bond.
Electoral bond was announced in the Union Budget 2017-18. Required amendments to the Reserve Bank of India Act, 1934 (Section 31(3)) and the Representation of People Act, 1951 were made through Section 133 to 136 of Finance Bill, 2017.
Electoral Bond is an effort made to cleanse the system of political funding in India. The scheme of electoral bonds addresses the concerns of donors to remain anonymous to the general public or to rival political parties. From the bonds, no details of the donor nor of the intended political beneficiary can be made out. So electoral bond cannot be identified or associated with any particular buyer or political party. However, some security features are encoded into the bonds to avoid issuance of fake /forged bonds. These include a random serial number invisible to the naked eye. However, the number is not noted by the SBI in any record associated with buyer or political party depositing a particular electoral bond. The number is not being used or can be used to track the donation or the buyer. The issuing bank is not sharing the serial number with anybody including the Government and users as per the press release issued by Ministry of Finance on 17 April 2018.
Government notified the Scheme on 2 January 2018. As per the scheme electoral bond means a bond issued in the nature of promissory note which is a bearer banking instrument not carrying the name of the buyer or payee;The text of the Article written by the Union Finance Minister, Shri Arun Jaitley on Necessity of Electoral Bonds may be seen here.
It is an interest free banking instrument issued on a non-refundable basis and are not available for trading. Further, no loan would be provided against these bonds. A citizen of India or a body incorporated in India will be eligible to purchase the bond. It would be issued/purchased for any value, in multiples of Rs.1,000, Rs.10,000, Rs.1,00,000, Rs.10,00,000 and Rs.1,00,00,000 from the Specified Branches of the State Bank of India (SBI). The purchaser would be allowed to buy Electoral Bond(s) either singly or jointly with other individuals, only on due fulfilment of all the extant KYC norms and by making payment from a bank account either using a cheque or electronically. It will not carry the name of payee. Electoral Bonds would have a life of only 15 days during which it can be used for making donation only to the political parties registered under section 29A of the Representation of the Peoples Act, 1951 and which secured not less than one per cent of the votes polled in the last general election to the House of the People or a Legislative Assembly. Further, the Electoral Bonds under the Scheme shall be available for purchase for a period of 10 days each in the months of January, April, July and October, as may be specified by the Central Government. An additional period of 30 days shall be specified by the Central Government in the year of the General election to the House of People. The Electoral Bond(s) shall be encashed by an eligible political party only through a designated bank account with the authorised bank. No payment shall be made to any payee political party if the bond is deposited after expiry of the validity period and the bond deposited by any political party to its account shall be credited on the same day.
The information furnished by the buyer shall be treated confidential by the authorised bank and shall not be disclosed to any authority for any purposes, except when demanded by a competent court or upon registration of criminal case by any law enforcement agency. No commission, brokerage or any other charges for issue of bond shall be payable by the buyer against purchase of the bond.
State Bank of India (SBI) has been authorised to issue and encash Electoral Bonds initially at its 4 Authorised Branches. The first issue of the Scheme was opened in March 2018. Accordingly, the first sale of Electoral Bonds commenced from 1 March 2018 for a period of 10 days i.e. up to 10 March 2018.
Further, in accordance with the suggestion made by the Election Commission, the maximum amount of cash donation that a political party can receive is stipulated at Rs. 2000/- from one person, pursuant to the announcement in Union Budget 2017-18. However, Political parties will be entitled to receive donations by cheque or digital mode from their donors. Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act. Existing exemption to the political parties from payment of income-tax would be available only subject to the fulfilment of these conditions.
As per Section 29C(1) of The Representation of People Act, 1951, the political party needs to disclose the details of non-governmental corporations and persons who donate more than Rs. 20,000 to it in a financial year. Vide the Finance Bill 2017, it has been specified that no report needs to be prepared in respect of the contributions received by way of an electoral bond.
This reform is expected to bring about greater transparency and accountability in political funding, while preventing future generation of black money.