Introduction - Electoral Bond Scheme, 2018 - Income Tax - Ready Reckoner - Income Tax

Introduction - Electoral Bonds Scheme, 2018 The Government notified the Electoral Bond Scheme , 2018 on January 02, 2018 to establish and cleanse the system of political funding in the country. Broad features of the said Scheme are under: Electoral Bond (EB) would be a bearer instrument in the nature of a Promissory Note and an interest free banking instrument. A citizen of India or a body incorporated in India is eligible to purchase the bond . Electoral bond would be issued for a certain value denominations from the specified branches of the State Bank of India (SBI). Tenor of the Electoral Bonds is for 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 have 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. It will not carry the name of payee or the donor. The 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 scheme of EB is to provide anonymity to the donors but at the same time establish a transparent political funding system. Bonds can be purchased only after making payment through a KYC compliant account. Further, the bond shall be encashed by an eligible political party only through a designated bank account with the authorised bank. Electoral Bond is envisaged as an additional banking instrument for giving donations to registered political parties. [ source ] Government has notified time to time press release in respect of Sale of Electoral Bonds through State Bank of India The Government of India has notified the Electoral Bond Scheme 2018 vide Gazette Notification No. 20 dated 2 nd January 2018 (as amended vide Gazette Notification dated 7 th November, 2022 ). As per provisions of the Scheme, Electoral Bonds may be purchased by a person (as defined in item No. 2 (d) of Gazette Notification), who is a citizen of India or incorporated or established in India. A person being an individual can buy Electoral Bonds , either singly or jointly with other individuals. Only the Political Parties registered under Section 29A of the Representation of the People 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 the Legislative Assembly of the State, shall be eligible to receive the Electoral Bonds . The Electoral Bonds shall be encashed by an eligible Political Party only through a Bank account with the Authorised Bank. [ source ] Land Mark Judgement As per land mark Judgement of the case Association For Democratic Reforms Anr. Versus Union of India Ors. - 2024 (2) TMI 812 - Supreme Court (LB) para No. 79. I, therefore, respectfully agree and also conclude that: (i) the Scheme (i.e. Electoral Bond Scheme, 2018) is unconstitutional and is accordingly struck down; (ii) proviso to Section 29C(1) of the Representation of the People Act, Section 182(3) of the Companies Act, 2013 , and Section 13A(b) of the Income Tax Act, 1961 , as amended by the Finance Act, 2017 , are unconstitutional, and are struck down; (iii) deletion of proviso to Section 182(1) to the Companies Act of 2013, thereby permitting unlimited contributions to political parties is unconstitutional, and is struck down; (iv) Section 31(3) of the RBI Act, 1934 and the Explanation thereto introduced by the Finance Act, 2017 are unconstitutional, and are struck down; (v) the ECI will ascertain the details from the political parties and the State Bank of India, which has issued the Bonds, and the bankers of the political parties and thereupon disclose the details and names of the donor/purchaser of the Bonds and the amounts donated to the political party. The said exercise would be completed as per the timelines fixed by the Hon ble the Chief Justice; (vi) Henceforth, as the Scheme has been declared unconstitutional, the issuance of fresh Bonds is prohibited; (vii) In case the Bonds issued (within the validity period) are with the donor/purchaser, the donor/purchaser may return them to the authorised bank for refund of the amount. In case the Bonds (within the validity period) are with the donee/political party, the donee/political party will return the Bonds to the issuing bank, which will then refund the amount to the donor/purchaser. On failure, the amount will be credited to the Prime Ministers Relief Fund.