Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

What are Electoral Bonds ?

Electoral bond was announced in the Union Budget 2017-18

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.

Electoral Bond is a financial instrument for making donations to political parties. These are issued by Scheduled Commercial banks upon authorization 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.

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

Government notified the Scheme on 2 January 2018.

The bonds are in the nature of promissory notes and the identity of the donor will not be known to the receiver.

The party can convert these bonds back into money via their bank accounts. The bank account used must be the one notified to the Election Commission and the bonds may have to be redeemed within a prescribed time period, which is 15 days.

Main Highlights of Electoral Bonds:

  • 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 fulfillment 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 authorized 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 authorized 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.

Compliance, Filing of Returns and Taxability

  • 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.
  • Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act.
  • 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.

Format of Application for Issue of Electoral Bond:

Source: Reserve Bank of India Act, 1934 (Section 31(3))


Published by

CA Gyati Gupta
(In Practice)
Category Income Tax   Report

10 Likes   6 Shares   8112 Views


Related Articles


Popular Articles

Follow Follow Book Book Book Business Course caclubindia books

CCI Articles

submit article

Stay updated with latest Articles!