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Ceiling for cash donations to political parties

Finance minister in the budget proposed a ceiling on cash donations by an individual to a political party. The move is aimed at bringing greater transparency in political funding. However political parties can receive donations by cheque or digital mode from donors.

The budget has also made filling returns mandatory for political parties.

Earlier post demonetization demands were made to check the role of black money in political funding.

Available data on political funding:

A report released on the source of funding of national and regional parties in India by the Association of Democratic Reforms (ADR) from 2004-05 to 2014-15 reveals that over two-third of the funds cannot be traced and are from unknown sources.

As per current rules political parties are not required to reveal names of individual donors that are contributing Rs. 20,000 or less. Certain parties declare NIL donations above this amount. The new proposal will force political parties across the board to rework their funding mechanisms and reveal details of their donors in public domain.

Implementation of the proposed measure:

Chanakya IAS AcademyIn line with the government scheme in this regard, the Reserve Bank of India Act would be amended to facilitate issuance of electoral bonds. A donor can purchase bonds from an authorized bank against cheque and digital payments. These bonds can be redeemed only in designated account of a registered political party and within the prescribed time limit. The move was welcomed across the political spectrum.

Constraints that will reduce the overall impact of the proposed measure:

  • The limit of cash donations is meaningless as such transfers are mostly unreported.
  • There exists no limit on corporate funding of political parties
  • There is absence of an overall limit on corporate funding to political parties.

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