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Electoral Bond Scheme

Published: 14th Oct, 2019

Government Notifies Electoral Bonds again though SC is examining the validity of Scheme.


Government Notifies Electoral Bonds again though SC is examining the validity of Scheme.


  • A bond is a debt security which borrowers issue to raise money from investors, who are willing to lend them a sum for a certain amount of time.
  • Electoral bonds are bearer instrument in the nature of a Promissory Note that is payable to the bearer on demand.
  • The Government of India notified the Electoral Bond Scheme in January 2018.
  • Bond can be purchased by an Indian citizen or a company incorporated or established in India.
  • Only political parties registered under Section 29A of the Representation of the Peoples Act, 1951, which have secured no less than 1% votes in the last Lok Sabha elections, are eligible to receive electoral bonds.
  • These bonds can be bought from selected branches of State Bank of India only.
  • Political parties are allotted a verified account by the Election Commission and all the electoral bond transactions are done through this account only.
  • The donors can buy these electoral bonds and transfer them into the accounts of the political parties as a donation.
  • The electoral bonds are available in denominations from Rs 1,000 to Rs 1 crore.
  • Electoral bonds will be valid for 15 daysfrom the date of purchase.
  • No interest will be given by the banks on these bonds.
  • Donations will be tax deductible, and the benefitting political party will get a tax exemption for the amount received.
  • They can be bought by a donor with a KYC-compliant Names of the donors are kept confidential.
  • Bonds can be purchased in January, April, July and October months of each year.

Previous System of funding

  • Before the budget of 2017, if a political party got a donation of less than Rs. 20,000 from a donor, then it was not mandatory to reveal the source of fund.
  • This rule was misused and near about all the political parties said that they received 90% of their political fund in the denomination of less than Rs. 20000.
  • So a huge amount of black money was generated and used in the election campaigning.
  • On the basis of the recommendation of the Election Commission, in Budget 2017 the government reduced the limit of anonymous donation to Rs. 2000 only.
  • The concept of Electoral bonds was introduced in the Finance Bill 2017, and was facilitated through multiple amendments in the Finance Act 2017.

Examples from around the world

  • While there have been electoral trusts in India, the concept of electoral bonds is new for India and the world.
  • United States has Political Action Committees which receives money from individual and corporate donors, and manages them. They do not have any scheme that allows the citizen to directly purchase a bond and donate the same to a political party.


  • The Communist Party of India (Marxist) and the NGO Association for Democratic Reforms (ADR) had moved to the SC against the electoral bonds.
  • They argued, ordinary citizens will not know who is donating how much to which political party, and it would add to the woes of the Indian democracy.
  • It may also tilt the balance in favour of one political party. For example, in FY 2018, the ruling party received 95% of the total bonds
  • Private corporate interests may take precedence over the needs and rights of the people of the State in policy considerations.

Supreme Court’s stand

  • According to SC, if the identity of the buyers of electoral bonds is not known, the efforts of the government to curtail black money in elections would be "futile".
  • It has directed the Finance Ministry to reduce window of purchasing electoral bonds.
  • It has directed all political parties to furnish receipts of funding received through electoral bonds and details of identity of donors in a sealed cover to the Election Commission.

Central Governments stand

  • Electoral Bond Scheme is an alternative to cash donations to ensure transparency in political funding, and check the use of black money for funding elections.
  • Political party have to file returns before the EC as to how much money has come through electoral bonds, which will provide
  • The right of the buyer to purchase bonds without having to disclose his preference of political party is in furtherance of his right to privacy.
  • Keeping the identity of the donor anonymous is also an extension to his right to vote in secret ballot.
  • Allegations that nobody would know about the donors is wrong, as the Income Tax department will have access to this information.

It can be said that the release of electoral bonds will restrict the generation of black money up to some extent. But the rule that identity of the donors will be kept confidential may make futile the exercise to eliminate black money, as it may just end up making Black money White.


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