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Electoral Bonds: All You Need to Know

Posted by Admin on January 3, 2018 | Comment

Electoral Bonds

What is an Electoral Bond?

Generally, a bond refers to something where the principal and interest money are involved. The electoral bonds have no such aspects, they are more like bearer cheques. An electoral bond is a legal and neat method to financially fund a political party.

The government has prohibited the practice of hard cash funding and the only way to support a political party of your choice is through the electoral bonds only.

One can buy these bonds by purchasing them digitally or making payment through cheques. The bonds are usually issued by a dignified bank, such as RBI. The bank also issues specific denomination for buying the bonds, for example, 1000, 1 lakh or even a crore. You can then gift them to any registered political party. However, the receiver will not know the benefactor’s identity, but the bank will have all the details.

Political parties can convert the bonds back to money through their bank accounts, the one they have registered with the Election Commission. Also, they have to cash the bonds in a prescribed number of days, after which they expire. The bank is the sole custodian until the political party for which the bond was intended, redeems it.

Why are they Important?

A political party has to report all the donations exceeding ₹20,000 to the Income Tax department. But according to previous trends, a lot of hard cash flow happened in smaller amounts, which went unreported in the department’s records. And electoral bonds deliver a great fix to the problem since all the money transfer gets registered with the notified bank.

Also, through the electoral bonds procedure, the name of the donor will remain unknown to the party. Earlier when names were known, the nature of money transfer from the donor to the political party easily turned into hard cash flow. Now with electoral bonds, the donor’s balance sheet would also reflect the donation they have made. This effectively cleanses the system.

2018 Picture of the Electoral Bonds

Finance minister Arun Jaitley released a statement on January 2, 2018, specifying all the norms for the electoral bonds. The bonds can be bought from specified branches of State Bank of India after all the Know Your Customer (KYC) norms are fulfilled. They can be purchased for ten days in the months of January, April, July and October. In addition, they can be bought only in the multiples of rupees 1000, 10,000, 1 lakh and 1 crore. All Indian citizens are eligible to buy the bonds.

The statement released by Mr. Jaitley also sheds light on the political parties which are eligible to get benefit from the bond. The people can donate to only those parties which are registered under the section 29A of the Representation of the People Act, 1951. Plus, the political party should have garnered more than 1% of the votes polled in the last conducted general elections.

A political party is required to give one bank account details to EC and the bonds are to be encashed within 15 days.