Electoral Bond Scheme
Electoral Bond Scheme
With the aim to cleanse the political funding system in India and to keep up with the Government’s hope to transform into a cashless economy, the Union Finance Minister Arun Jaitley expanded some of the aspects of the Electoral Bond Scheme that was announced along with the Budget of 2017. This Scheme has been formulated to keep an account of the donations made to all the major political parties in India. This article talks about the Electoral Bond Scheme that deals with the sale of these bonds at Authorised Bank Branches and the notification for the same published by the Ministry of Finance.
Notification from the Ministry of Finance
Sale of Electoral Bonds at Authorised Branches of the State Bank of India (SBI)
The government of India has issued the Electoral Bond Scheme 2018 vide Gazette Notification No. 20 dated 02nd January 2018. Electoral Bonds may be purchased by an individual (as defined in item No. 2 (d) of the Gazette Notification), who is an Indian citizen/ incorporated/ established in the country as per the provisions of the Scheme. A person being an individual may purchase Electoral Bonds, either singly or jointly, with other individuals. Political Parties that are registered under Section 29A of the Representation of the People Act of 1951 (43 of 1951) and those who have secured a minimum of 1% of the votes polled in the previous General Election to the Legislative Assembly of the State or the House of the People, shall only be eligible to obtain Electoral Bonds. A qualified Political Party shall encash the Bonds through a Bank account with an Authorized Bank only.
State Bank of India/ SBI has been authorised with the issuance and encashment of Electoral Bonds through its Authorized Branches in the months of March, April and May 2019 as per below-mentioned schedule.
- From the 1st of March, 2019 to the 15th of March, 2019
- From the 1st of April, 2019 to the 20th of April, 2019
- From the 6th of May, 2019 to the 10th of May, 2019 as stated in the latest notification.
The Electoral Bonds shall be valid for 15 calendar days from the date of issuance, and no payment would be made to any Political Party if the Electoral Bond is deposited after the expiry of its validity period. The Electoral Bond deposited by a qualified Political Party in its account shall be credited on the same day.
Eligibility for Purchase and Encashment
The following are eligible to purchase or encash Electoral Bonds under the Electoral Bond Scheme.
- The Bonds under this Scheme could be purchased by a person who is an Indian citizen or an incorporated/ established entity in India.
- An individual is eligible to purchase bonds with other individuals, either singly or jointly.
- Only the political parties as per Section 29A of the Representation of the People Act, 1951 (43 of 1951) and have secured a minimum of 1% of the votes polled in the last general election to the Legislative Assembly or House of the People, as the case may be, would be eligible to obtain the bond.
- An eligible political party may encash the bond through a bank account with an authorised bank only.
Applicability of KYC Norms
The following are the applicability of Know Your Customer Norms concerning Electoral Bonds under this Scheme.
- The existing instructions issued by the RBI regarding Know Your Customer norms of a bank’s customer would apply for the buyers of the Electoral Bonds.
- The authorised bank may request for any additional information concerning the Know Your Customer documents if it seems necessary.
The following are the various documents required for proof of various essentials.
For purchase of Electoral Bonds
- Completed Application Form
- Copy of Citizenship Proof along with original documents for verification.
- KYC Documents along with original documents for verification.
For Proof of Citizenship
- Documents required for Individuals
- Passport or Voter’s ID
- Letter from the National Population Register for States of Jammu and Kashmir, Assam and Meghalaya.
- Documents required for Non-Individuals
- Certificate of Incorporation
- Partnership Deed
- Trust Deed
- Any document proving Incorporation or Establishment in India.
KYC Documents for Individuals
The individual’s Aadhaar with current address and Permanent Account Number/ PAN or Form No. 60 as prescribed in the Income Tax Rules of 1962 is required. In the case of unavailability of Aadhaar Number, the individual is required to furnish proof of application of enrolment for the Aadhaar. If PAN is not available or if the Aadhaar does not have the current address of the Individual, a certified copy of any of the following is to be submitted.
- Voter’s Identity Card
- Driving Licence
- Job Card issued by the NREGA and duly signed by an officer of the State Government.
- A letter from the National Population Register comprising of the details such as Name and Address.
Documents required for Entities
- Certificate of Incorporation
- Memorandum and Articles of Association
- PAN of the Company or Form 60 as per the Income Tax Rules of 1962, issued to officers, managers or employees in possession of an Attorney to transact on the Company’s behalf.
- A Resolution from the Board of Directors and a Power of Attorney granted to its officers, managers or employees to transact on its behalf.
- Aadhaar Number
- Self-attested KYC documents and photographs of each Beneficial Owner.
- Declaration of Beneficial Ownership on Specified Format.
Denomination of the Bonds
The Electoral Bonds would be issued in the following denominations under the Electrol Bond Scheme of 2018.
- INR 1,000
- INR 10,000
- INR 1,00,000
- INR 10,00,000
- INR 1,00,00,000
Validity of the Bond
The validity of the Electoral Bonds would be applicable as follows.
- The Electoral Bonds would be valid for 15 days from the Date of Issue. No payment will be made to any political party if the electoral bond is deposited after the expiry of the validity period.
- The electoral bond deposited by any political party would be credited on the very same day to the party’s registered bank account.
Procedure for Purchase of Bonds
The following procedure should be followed by every person who desires to purchase Electoral Bonds.
Step 1: Every buyer, who wishes to purchase electoral bonds, may apply with a physical or online application in the prescribed format given below.Electoral Bond Scheme - Application Form
Step 2: It is necessary for every application to contain particulars according to the format of the application form. Along with the application form, essential documents must be submitted as well. A non-KYC compliant application or any application that does not meet the requirements of the Scheme would be rejected.
Step 3: The bond issuing branch would issue the required bond, on receipt of the application and essential documents, if all the requirements are met.
Step 4: The information provided by the buyer would be treated in confidentiality by the authorised bank and would not be disclosed to any authority for any purpose. However, this would not be followed if the same if being demanded by a competent court or when any law enforcement agency registers a criminal case.
Step 5: The bond would be issued to a buyer from the same bank branch on a non-refundable basis.
Periodicity of Issuance
The Electoral Bonds under this Scheme would be available for purchase by any person for 10 days each for March, April, May and July as declared by the Central Government. The Central Government would specify an additional period of 30 days in the year of general elections to the House of People.
No interest would be applicable on the purchase and encashment of Electoral Bonds under the Electoral Bond Scheme.
Issuing Offices & Commission Payable
There would be no commission, brokerage or any charges applicable to the buyer on the purchase of Electoral Bonds under this Scheme.
All the payments for the issuance of the electoral bonds would be accepted in Indian Rupees by way of cheque, demand draft, Electronic Clearing System or through direct debit to the buyer’s bank account. Where the payment is made through a cheque or a demand draft, the same would be drawn in favour of the issuing bank of the bond.
Encashment of the Bond
An eligible political party can only encash the electoral bond by depositing the same in the designated bank account of the party. The authorised bank would deposit the number of electoral bonds not encashed within the validity period of 15 days to the Prime Minister’s Relief Fund.
The face value of the electoral bonds would be counted as income in terms of voluntary contributions received by a political party that is eligible, for exemption from Income Tax under Section 13A of the Income Tax Act of 1961.
Trading of Bonds
The Electoral Bonds issued or purchased under the Electoral Bond Scheme would not be eligible for the trading of any sorts.