Electoral Bonds: Working, Conditions, Advantages & Limitations

An electoral bond is like a financial tool used for making donations to political parties. The general public can also issue these bonds to fund eligible political parties.
A political party eligible to run campaigns must register in the Representation of the People Act, 1951, under Section 29A.
The bonds play a similar role as banknotes that are payable to the bearer free of interest and demand.
An individual party can purchase these bonds digitally or with the help of a DD or cheque. The electoral bonds were introduced on January 29, 2018, and the Narendra Modi-led NDA government notified the Electoral Bond Scheme 2018.

Any Indian corporate body, registered agency or undivided Hindu family can issue electoral bonds by donating funds to the political parties as per their choice that states as eligible to the campaign.
The RBI notified banks such as the State Bank of India (SBI) issue corporate bonds and are available in the following denominations:
₹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 being issued.
The political parties receive the electoral bonds issued by the public or corporations. The political parties expect to approach the electoral commission to file returns on the total electoral bonds they have received.
For example:
An individual is allowed to issue bonds for a period of ten days in the month of January, April and then in the latter 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 several tax benefits for issuing electoral bonds. The electoral bond donor gets an additional tax advantage for the same.
Under the Income Tax act, one’s electoral bond donations are considered tax-exempt under Section 80 GG and Section 80 GGB.
However, the political party on the receiving end of the donations can also receive a donation as per the Income Tax Act’s Section 13A.

Using electoral bonds is a straightforward process. The bonds will be issued in multiples of RS 1,000, RS 10000, RS 100,000 and RS 1 crore. However, the range is between RS 1,000 to RS 1 crore.
Electoral bonds are available at some branches of SBI. A donor having a KYC compliant account can purchase the bonds and can donate to a political party or individual of their choice.
The receiver collecting electoral bonds can encash the bonds through the party's verified account. However, the validity of electoral bonds is valid only for fifteen days.

The electoral bonds are available for purchase for ten days at the beginning of every quarter. The first ten days of January, April, July, and October is the purchase of electoral bonds specified by the government.
The government shall specify an additional period of 30 days in the year of the Lok Sabha elections.

1. Any party registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951) and has secured at least one per cent of the votes polled in the most recent General elections or Assembly elections entitled to receive electoral bonds.
The Election Commission of India (ECI) will allot a verified account to the party, and all the transactions of an electoral bond will be made through this account.
2. The electoral bonds will not bear the name of the donor. Thus, the political party might not be aware of the donor's identity.

Advantages

1. All electoral bonds issued are to be redeemed by a bank account that the Election Commission of India has disclosed; hence the malpractice is strengthened.
2. The widespread use of electoral bonds can help to hold back political parties who operate with the goal of simply collecting funds from the public. It is because only registered parties attaining at least 1% of the votes in the general election can receive electoral funding.
3. Electoral bonds work with the government goal to make election funding entirely safe and digitized. Therefore, any donation going above RS 2000 is not legally required to be in the form of electoral bonds and cheques.
4. All transactions of electoral bonds are carried out via cheques or digitally.

Disadvantages of Electoral Bonds

1. Some critics say that electoral bonds have been brought into operation with the primary purpose of choking the funding available to opposition parties.
2. Electoral bonds do not threaten financially stable companies in any way. The goal of these companies is to fund 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.

• When Can You Purchase Electoral Bonds?

The electoral bonds are available for purchase for ten days at the beginning of every quarter. The first ten days of January, April, July, and October is the purchase of electoral bonds specified by the government.

• How To Use Electoral Bonds?

Using electoral bonds is a straightforward process. The bonds will be issued in multiples of RS 1,000, RS 10000, RS 100,000 and RS 1 crore. However, the range is between RS 1,000 to RS 1 crore.
Electoral bonds are available at some branches of SBI. A donor having a KYC compliant account can purchase the bonds and can donate to a political party or individual of their choice.

• Who can issue Electoral Bonds?

Any Indian corporate body, registered agency or undivided Hindu family can issue electoral bonds by donating funds to the political parties as per their choice that states as eligible to the campaign.

Final Thoughts

The goal of transforming electoral bonds is to move them toward transparency regarding the sources of political funding.
This scheme offers the best way to protect the donor's rights while making donations digitally through electronically issued bonds.