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How is the donation system to political parties in India regulated?

The system of giving political donations in India is regulated by the Representation of the People Act, 1951, the Income Tax Act, 1961, and the Foreign Contribution Regulation Act, 2010, and Company’s Act. Donations can be made by individuals or companies, as long as they are disclosed. In addition to this, donations can also be […]

The system of giving political donations in India is regulated by the Representation of the People Act, 1951, the Income Tax Act, 1961, and the Foreign Contribution Regulation Act, 2010, and Company’s Act. Donations can be made by individuals or companies, as long as they are disclosed. In addition to this, donations can also be made in the form of electoral bonds, which are a new instrument of donations introduced by the government in 2018. An individual can donate up to Rs 2,000 without disclosing their identity. Any donations above this amount need to be made through a cheque or digital payment, and the donor’s name and other personal details must be disclosed. Similarly, all companies can make contributions to political parties, but it is mandatory for them to disclose the same in their annual reports, with some exceptions. It should be noted that there is no cap on the limit of donations companies can make to political parties, which often raises concerns. Companies can make contributions to political parties using any instrument.
Foreign donors can also donate to Indian political parties as long as they receive certifications from the Ministry of Home Affairs Foreign Contribution Regulation Act, 2010 (FCRA). Another controversial instrument which was introduced in 2018 as a new way of making political donations is the electoral bond. An electoral bond is a bearer financial instrument like a Promissory Note, issued by scheduled commercial banks after authorization from the central government to donors for making donations to political parties only against cheques and digital payments. Electoral bonds remain a controversial form of donation as the identity of the donor remains anonymous, and the details of the transaction are not disclosed to the public, raising serious concerns about transparency in political funding.

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