Donations to political parties in India are governed by several laws and regulations designed to bring transparency to political funding while allowing parties to raise funds for their functioning. Here’s an overview of the key aspects of donating to political parties in India:
🏛️ Legal Framework
- Representation of the People Act, 1951
- Requires political parties to report donations over ₹20,000 to the Election Commission of India (ECI).
- Income Tax Act, 1961
- Political parties registered with the ECI and not engaged in commercial activities are exempt from paying income tax on donations, if they maintain audited accounts and file returns.
- Companies Act, 2013
- Companies can donate any amount (earlier capped at 7.5% of average profits of the last 3 years), but must disclose donations in their financial statements.
💸 Modes of Donation
- Cash Donations
- Permitted up to ₹2,000 per donor per party. Anything above that must be through non-cash means (cheque, bank transfer, digital, etc.).
- Cheque/Bank Transfer/Digital Payments
- Common and traceable method, required for donations above ₹2,000.
- Electoral Bonds
- Introduced in 2018.
- Anonymous mode of donation issued by SBI in specific windows.
- Redeemable only by registered political parties.
- Highly controversial due to lack of transparency; recently struck down by the Supreme Court of India in February 2024 for violating the right to information of citizens.
🧾 Tax Benefits
- Individuals & Companies:
- Donations to registered political parties (not through cash) are eligible for tax deduction under Section 80GGC (individuals) and 80GGB (companies).
- Deduction is 100% of the donated amount (no upper limit), if made via non-cash methods.
📋 Reporting & Transparency
- Political parties must:
- File contribution reports with the ECI annually.
- Declare donor details for donations above ₹20,000 (excluding electoral bonds previously).
- Maintain audited accounts.
- Donors should:
- Maintain proof of donation (receipt, transaction ID, etc.).
- Ensure donations are made through legal channels.
📢 Recent Developments (as of 2024–2025)
- Electoral Bonds Verdict (Feb 2024):
- SC struck down the scheme as unconstitutional.
- SBI was ordered to disclose details of all bond donors and recipients, which has started a major political funding transparency debate.
