Overview

Electoral reforms is an extremely sensitive subject especially for a country like ours. We all know how political parties are being funded and how elections have been managed all these years in our country, which is one of the world’s largest democracies with diverse political ideologies ranging from extreme left to extreme right. Money power and muscle power eventually defined who ruled us, at the end of any election season.

Cash (black money) has been the life-blood of Indian political system all these years, without many exceptions. The populace of a democracy are greatly influenced and inspired by the political system itself. The proof of the pudding is in the eating. Our parallel economy and lack of faith in the financial main-stream is a direct result of the larger example, which every one looked at and adopted, including the businessmen and the common man on the streets.

It requires real courage for the Government, which has been catapulted to that position from being a regular political outfit. It is extremely hard for introducing any kind of political or electoral reforms, for a political dispensation, having been used to the very same methods for accumulating cash to manage itself during all times including election times. The government in so many words has admitted that political funding was the root for all corruption which was plaguing India.

It is heartening that a Government, after so many decades of independence, has decided on political and electoral reforms and has defined in clear terms by its action, that probity is long overdue and the political system cannot continue being a wrong example for the entire populace.

Kudos to the Finance Minister for limiting cash receipts for political parties @ Rs.2000 per transaction and prescribing receipts through banking and electronic channels and making Income Tax returns for political parties compulsory. The concept of electoral bonds is very-very interesting.

So, lets wait for amendment to the RBI Act and lets brace for interesting times in our country.

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Extract of the Finance Ministers Speech on the subject
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165. An effort, therefore, requires to be made to cleanse the system of political funding in India. Donors have also expressed reluctance in donating by cheque or other transparent methods as it would disclose their identity and entail adverse consequences. I, therefore, propose the following scheme as an effort to cleanse the system of funding of political parties:

(a) In accordance with the suggestion made by the Election Commission, the maximum amount of cash donation that a political party can receive will be `2000/- from one person.

(b) Political parties will be entitled to receive donations by cheque or digital mode from their donors.

(c) As an additional step, an amendment is being proposed to the Reserve Bank of India Act to enable the issuance of electoral bonds in accordance with a scheme that the Government of India would frame in this regard. Under this scheme, a donor could purchase bonds from authorised banks against cheque and digital payments only. They shall be redeemable only in the designated account of a registered political party. These bonds will be redeemable within the prescribed time limit from issuance of bond.

(d) Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act.

Needless to say that the existing exemption to the political parties from payment of income-tax would be available only subject to the fulfilment of these conditions. This reform will bring about greater transparency and accountability in political funding, while preventing future generation of black money.