Why in the News?
A recent report by the Association for Democratic Reforms (ADR) revealed that over half of registered unrecognised political parties (RUPPs) linked to Bihar have failed to comply with mandatory financial disclosure norms for FY 2023–24.
Key Findings of ADR Report:
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Political Funding in India:
- Overview: Political funding refers to financial resources raised by political parties or candidates to sustain organisational operations and election campaigns.
- Purpose: Ensures participation in democratic processes, electoral competitiveness, and mass outreach.
- Sources of Funding:
- Individuals: Citizens contribute voluntarily; deductions under Section 80GGB (Income Tax Act).
- Corporates: Donations governed by Section 182 (Companies Act, 2013).
- State Support: Indirect subsidies (media access, tax exemption) allowed; direct funding prohibited.
- Electoral Trusts (2013): Channel corporate contributions transparently.
- Electoral Bonds (2018): Introduced donor anonymity; struck down by Supreme Court (2024) for violating transparency and citizens’ right to information.
Legal Framework for Political Funding:
- Representation of the People Act, 1951 (RPA): Governs election conduct, contributions, and maintenance of accounts.
- Income Tax Act, 1961:
- Section 13A: Exempts tax only for parties maintaining audited accounts and disclosing donations.
- Section 80GGB/GGC: Offers tax benefits to individual and corporate donors.
- Companies Act, 2013:
- Section 182: Limits corporate donations to 7.5% of average net profits of the last three years.
- Mandates annual disclosure of political contributions.
- Election Commission Guidelines: Mandate submission of audited accounts and contribution reports above â‚ą20,000.
Mechanisms Governing Political Funding Disclosure:
- Disclosure Requirements:
- Under Section 29C (RPA, 1951): Political parties must disclose donations above â‚ą20,000 to the ECI annually.
- Under Sections 77–78 (RPA, 1951): Candidates must submit true election expenditure accounts within 90 days (Lok Sabha) or 75 days (Assembly).
- Violations invite disqualification up to three years (Section 10A).
- Transparency Gaps:
- Over 60% of party income from “unknown sources”, mainly due to inadequate enforcement and loopholes.
- Frequent delays, incomplete disclosures, and absence of independent audits persist.
- Judicial Oversight:
- Supreme Court judgments (e.g., PUCL v. Union, 2003) and 2024 ruling on Electoral Bonds strengthened citizens’ right to know funding sources.
- Reform Recommendations:
- Bring political parties under the Right to Information (RTI) Act.
- Lower disclosure threshold from â‚ą20,000 to â‚ą2,000.
- Establish National Election Fund for equitable, state-audited funding.
- Ensure real-time digital reporting and independent third-party audits.
| [UPSC 2021] Which one of the following effects of the creation of black money in India has been the main cause of worry to the Government of India?
Options: (a) Diversion of resources to the purchase of real estate and investment in luxury housing (b) Investment in unproductive activities and purchase of precious stones, jewelry, gold, etc. (c) Large donations to political parties and the growth of regionalism (d) Loss of revenue to the State Exchequer due to tax evasion* |
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