The need to disclose political donations

The need to disclose political donations


The legal scrutiny of electoral bonds in the Supreme Court prompts a crucial examination of their potential impact on India’s democracy and rule of law.


GS-02 (Government Policies & Interventions, Representation of People’s Act)

Mains Question:

Discuss the significance of the Supreme Court’s review of the electoral bonds and its potential implications for democracy and rule of law in India. (100 words)

Understanding Political Funding:


Political Funding refers to the methods employed by political parties to generate financial resources for their campaigns and day-to-day operations. It involves acquiring funds to promote the party’s objectives and intended actions, crucial for securing votes.

Statutory Framework:

  • Representation of the People Act (RPA): Key legal provisions governing political funding.
  • Section 29B: Enables parties to accept voluntary contributions from individuals and companies (excluding Government Companies).
  • Section 29C: Mandates parties to declare donations exceeding 20,000 rupees, with non-compliance leading to the loss of tax relief under the Income Tax Act, 1961.

Funding Methods in India:

  • Individual Persons:
    • Permitted under Section 29B of the RPA, allowing political parties to receive donations from individual persons.
  • State/Public Funding:
    • Government allocates funds directly to political parties. Tax-funded direct financing is prohibited in India.
    • Includes non-direct methods like media access, public rally spaces, and transport facilities, regulated under Indian laws.
  • Corporate Funding: Governed by the Companies Act, 2013.
    • Companies must be at least three years old to donate to a political party.
    • Capped at 7.5% of average net profits over the last three financial years.
    • Contributions must be disclosed in the company’s profit and loss account.
    • Board of Directors’ approval is mandatory.
    • Violations may result in fines up to 5 times the contributed amount, with liable officers facing imprisonment for up to six months.

Dimensions of the Article:

  • Global Norms on Political Funding
  • Importance of Disclosure
  • Limits on Donations
  • Electoral Justice and Rule of Law
  • Critique of Electoral Bonds

Global Norms on Political Funding:

  • Countries such as the United States and members of the European Union have historically embraced laws that mandate transparency in political funding.
  • The Publicity Act in the U.S., enacted in 1910, demanded full disclosure of political contributions, and limits were imposed on both contributions and campaign spending.
  • Similarly, the European Union, in 2014, set limits on donations to political parties and required detailed disclosure, fostering an environment of accountability. The U.K. also regulates political party funding through the Political Parties, Elections and Referendums Act 2000, highlighting the global trend toward transparency and accountability.

Importance of Disclosure:

  • Public disclosure of political funding is fundamental to the democratic process, ensuring transparency and fostering citizens’ trust in political parties. Transparent accounts are pivotal for upholding the rule of law and combating corruption in electoral and political processes.
  • The disclosure of donors above a certain threshold amount is seen as a necessity to maintain the integrity of the democratic system. The link between wealth and power needs to be carefully managed to prevent the erosion of trust in the electoral process.

Limits on Donations:

  • The imposition of limits or caps on political donations is another common feature in global legal regulations. Unchecked large donations have the potential to undermine democracy, as they can influence election outcomes disproportionately.
  • By placing restrictions on the amount of money political parties can accept, these regulations aim to ensure a level playing field and prevent the undue influence of wealth on the democratic process.

Electoral Justice and Rule of Law:

  • The concept of electoral justice plays a crucial role in upholding the rule of law in a democracy. Ensuring that every aspect of the electoral process aligns with the law is vital for protecting citizens’ electoral rights.
  • An electoral justice system guarantees free, fair, and genuine elections, safeguarding the democratic principles that form the bedrock of the political system.

Critique of Electoral Bonds:

  • The challenge to electoral bonds revolves around their inherent lack of transparency, which goes against the democratic requirements of openness and fairness in elections. Simply deeming them unconstitutional may not suffice; a comprehensive legislative approach is necessary. The need for a separate law mandating the public disclosure of donor identities, reporting large donations promptly to the election commission, and auditing political party accounts by an independent authority becomes evident.

Way Forward:

  • The outcome of the Supreme Court’s deliberations on electoral bonds holds profound implications for India’s democratic fabric. By aligning with global norms that emphasize transparency and donation limits, India can strengthen its electoral processes.
  • The call for a separate legislation underscores the urgency of enacting measures to secure public trust, uphold electoral justice, and fortify the principles of democracy in the country.