What are electoral bonds ?
- Electoral bonds are interest-free bearer bonds or money instruments that can be purchased by companies and individuals in India from authorised branches of the State Bank of India (SBI).
- These bonds are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore.
- They can be purchased through a KYC-compliant account to make donations to a political party.
- The political parties have to encash them within a stipulated time.
- The name and other information of the donor are not entered on the instrument and thus electoral bonds are said to be anonymous.
- There is no cap on the number of electoral bonds that a person or company can purchase.
- The government brought in amendments to four Acts to introduce the Electoral Bond Scheme via the Finance Act of 2016 and 2017.
- These acts are Representation of the People Act, 1951, (RPA), the Companies Act, 2013, the Income Tax Act, 1961, and the Foreign Contributions Regulation Act, 2010 (FCRA), through the Finance Acts of 2016 and 2017.
- Before the scheme was introduced the political parties had to make public all donations above Rs 20,000.
- Also, no corporate company was allowed to make donations amounting to more than 7.5% of their total profit or 10% of revenue.
Who can receive funding via electoral bonds?
- Political parties that secured at least 1% of the votes polled in the recent Lok Sabha or State Assembly elections and are registered under the RPA can get a verified account from the Election Commission of India (ECI).
- The bond amounts are deposited in this account within 15 days of their purchase.
- The political party has to encash the amount within those 15 days, the amount received as a donation gets deposited into the Prime Minister’s Relief Fund.
- These bonds, however, are not available for purchase all the time.
- They are available for a period of 10 days in a gap of four months (January, April, July and October).
- They are also open for 30 days in Lok Sabha election years.
Syllabus: Prelims + Mains; GS II – Polity and Governance