ELECTORAL
TRUST SCHEME - POLITY
News: Electoral Bonds and Electoral
Trusts: What are they, and how do they differ?
What's
in the news?
●
Electoral Bonds, now under challenge
before the Supreme Court, have become the primary route of political funding
since they were launched in 2018.
●
The key difference between the Trusts and
Bonds is in the degrees of transparency they offer, and the Bonds Scheme's
focus on the anonymity of donors.
Electoral
trusts:
●
They are set up by companies with the
objective to distribute the contributions received from other companies and
individuals to the political parties.
●
The companies which are registered under
section 25 of the of the Companies Act,
1956 are only eligible to make an application for approval as an electoral
trust
Eligible
persons for electoral trusts:
●
An individual
who is a citizen of India.
●
A company
registered in India is an association of persons (Indian residents).
●
The contributor’s PAN (in case of a
resident) or passport number (in case of an NRI) is required at the time of
making contributions.
How
are funds distributed by electoral trusts?
●
For administrative expenses, the electoral
trusts are permitted to set aside a maximum
of 5 percent of the total funds collected during a financial year.
●
The remaining 95 per cent of total income
of the trusts including any surplus from the previous financial year is
required to be distributed to eligible political parties.
Laws/Rules
associated with electoral trusts:
●
The Central Government amended the Income
Tax Rules, 1962 on January 31, 2013, to insert Rule 17CA which lists the
functions of electoral trusts approved by the Central Bureau of Direct Taxes
(CBDT).
●
The Central Government, also launched ‘The
Electoral Trusts Scheme, 2013 which specified the eligibility and procedure for
registration as an electoral trust apart from laying down the format for their
registration.
Difference
between electoral trusts and electoral bonds:
●
The electoral trusts route is transparent on contributors and
beneficiaries.
●
Electoral
bonds, on the other hand, are exempt from disclosure requirements.
○
Parties inform the ECI of the aggregate
donations received through EBs, but give no details of the donors, which they
are required to do in case of donations in cash or by cheque or bank
transactions over Rs.20,000 each.
Further
Reference - Electoral Bonds