Political funding refers to financial contributions received by political parties and used for activities such as:
Political funding is important because elections require substantial financial resources.
Political funding must balance:
Political parties' need for resources
with
Transparency and citizens' right to know who funds political parties.
Political parties require funds to:
However, excessive or opaque political funding can create risks such as:
Therefore:
Political funding is a transparency + accountability + democratic equality issue.
Political parties can receive funds through legally permitted sources such as:
Political parties are subject to statutory reporting and disclosure requirements.
For example, Section 29C of the RPA, 1951 requires political parties to report contributions above the prescribed threshold to the Election Commission, subject to the law applicable to the relevant period.
An Electoral Bond was a financial instrument introduced by the Government of India for making donations to political parties.
The scheme was introduced through changes made by the:
Finance Act, 2017
and the Electoral Bond Scheme was notified in 2018.
The Supreme Court described the scheme as one that introduced anonymous financial contributions to political parties.
The stated policy objectives included:
Instead of:
Cash donation
the donor could use:
Banking instrument → Political party
The basic mechanism was:
Donor
↓
Authorised bank
↓
Purchase Electoral Bond
↓
Give bond to eligible political party
↓
Political party deposits bond
↓
Authorised bank
↓
Party receives funds
The scheme therefore used a banking channel rather than direct cash transfer.
Electoral Bonds could be purchased by eligible persons/entities through authorised banking channels.
The bonds were not ordinary bearer bonds available for unrestricted use.
They were specifically designed for:
Political contributions to eligible political parties.
The scheme allowed Electoral Bonds to be encashed by political parties satisfying the prescribed eligibility conditions.
The scheme was therefore not an unrestricted donation mechanism for every political organisation.
One of the central features was:
Donor identity was not disclosed publicly through the political party's ordinary contribution reporting mechanism.
This anonymity became the central constitutional issue before the Supreme Court.
The identity was not necessarily unknown to the banking system.
The major issue was:
Public disclosure of the donor-recipient relationship.
The controversy centred on:
Citizens could not know who donated through Electoral Bonds.
Large donors could potentially influence political parties.
The 2017 amendments permitted unlimited corporate contributions.
The scheme raised questions about whether political parties and the public had equal access to information about political funding.
Citizens may need information about political funding to make informed electoral choices.
Before the Electoral Bond framework, political parties were required to report specified contributions under:
Section 29C of the Representation of the People Act, 1951
The Finance Act, 2017 inserted an exception for contributions received through Electoral Bonds.
Thus, the political party's statutory contribution report did not require disclosure of the donor's identity for Electoral Bond contributions in the same manner.
The India Code text records this Electoral Bond exception in Section 29C.
The Finance Act, 2017 also amended the:
Companies Act, 2013
The amendment removed the earlier restriction that limited corporate political contributions to a specified percentage of the company's average net profits.
This effectively permitted unlimited corporate political contributions, subject to the statutory framework then in force.
The Supreme Court specifically examined this amendment.
Before the 2017 amendment, corporate political contributions were subject to restrictions.
The amendment permitted:
Unlimited corporate contributions to political parties.
This raised concerns that:
This is the most important current-affairs fact.
On:
15 February 2024
a Constitution Bench of the Supreme Court struck down the:
Electoral Bond Scheme
and the related amendments introduced through the Finance Act, 2017.
The Court held that the non-disclosure of political funding information violated citizens' right to information under Article 19(1)(a).
The Supreme Court connected political-funding transparency with:
Right to information
under Article 19(1)(a).
Citizens have a legitimate interest in knowing:
Who is financially supporting political parties?
because political funding can influence:
Information about political funding can be essential for informed democratic choice.
Article 19(1)(a) protects freedom of speech and expression.
The Supreme Court has interpreted this provision as including a:
Right to information
in appropriate contexts.
The Electoral Bonds judgment applied this principle to political funding.
Article 19(1)(a)
↓
Freedom of speech and expression
↓
Right to information
↓
Information about political funding
↓
Informed electoral choice
The Supreme Court also held that the amendment permitting unlimited corporate political contributions was:
Arbitrary and violative of Article 14.
The Court's judgment therefore addressed both:
→ Right to information
and
→ Equality / non-arbitrariness
The Court's subsequent order records these conclusions.
The judgment can be reduced to two major constitutional conclusions:
Non-disclosure of political funding
↓
Violates citizens' right to information
↓
Article 19(1)(a)
Unlimited corporate political contributions
↓
Arbitrary
↓
Article 14 violation
The Supreme Court declared the Electoral Bond Scheme unconstitutional.
Therefore:
Electoral Bonds can no longer be issued under the struck-down scheme.
The Court directed the authorised issuing bank to:
Stop issuing Electoral Bonds.
The:
State Bank of India (SBI)
was the authorised bank dealing with Electoral Bonds under the scheme.
The Supreme Court directed SBI to provide information regarding:
The Court then directed the Election Commission to publish the information.
The Supreme Court directed disclosure of Electoral Bond information through the Election Commission.
The ECI subsequently published Electoral Bond purchase and redemption data.
The ECI's website currently maintains a dedicated Disclosure of Electoral Bonds section containing data supplied by SBI and the Supreme Court Registry.
The Supreme Court directed that Electoral Bonds within their validity period that had not been encashed should not continue under the scheme.
The Court's directions were intended to give full effect to the judgment striking down the scheme.
Electoral Bonds are no longer an active political-funding mechanism.
Electoral Bonds:
Operational
Supreme Court:
Scheme struck down
Issuance:
Stopped
Disclosure:
Relevant historical data published by ECI
Do not describe Electoral Bonds as a currently operational donation mechanism.
Do not confuse the two.
A financial instrument under the 2017 scheme.
→ Struck down in 2024
A separate mechanism for political contributions.
→ Not the same as Electoral Bonds.
Electoral Bonds and Electoral Trusts are different political-funding mechanisms.
Broad concept:
Money given to a political party.
Specific financial instrument:
A mechanism that was used to make political donations.
Every Electoral Bond contribution was a political donation, but not every political donation was an Electoral Bond.
The Electoral Bond debate involved a fundamental policy tension.
Donors may argue:
Political preferences are private.
Citizens may argue:
Political funding can influence government and therefore should be disclosed.
When does donor privacy yield to the citizen's right to information?
The Supreme Court gave greater weight to the public's right to know in the Electoral Bond context.
The Electoral Bond framework was defended as a way to:
Cash
↓
Less transparent
↓
Banking instrument
↓
More formal financial trail
The Court focused on whether:
Anonymity of political funding was compatible with citizens' right to information.
The Court concluded that the non-disclosure of political funding information violated Article 19(1)(a).
Financial formalisation alone does not necessarily guarantee democratic transparency.
One concern surrounding opaque political funding is:
Quid pro quo
Meaning:
Financial contribution
↓
Potential expectation of:
Government favour/policy benefit
This does not mean every political donation is a quid pro quo.
Rather:
Opaque large-scale funding can create a risk of undisclosed influence.
Corporate contributions can be important for political parties because companies may have significant financial resources.
However, unlimited corporate contributions raise questions about:
The Supreme Court specifically found the 2017 amendment allowing unlimited corporate contributions to be arbitrary and violative of Article 14.
A company is not itself an elector.
However, companies can legally contribute to political parties subject to applicable law.
The question becomes:
Should a corporate entity be able to contribute unlimited amounts to political parties?
The Electoral Bond judgment addressed this issue in the context of the 2017 amendment.
Section 182 of the Companies Act concerns:
Political contributions by companies.
The 2017 amendment altered the earlier framework and enabled unlimited corporate contributions.
The Supreme Court subsequently struck down the relevant amendment.
Companies Act Section 182
↓
Corporate political contributions
↓
2017 amendment
↓
Unlimited contributions
↓
2024 Supreme Court judgment
↓
Amendment struck down
Section 29C deals with:
Declaration of donations received by political parties.
It requires reporting of contributions above the prescribed threshold, subject to statutory provisions.
The Electoral Bond exception inserted in 2017 was part of the provisions struck down in the Supreme Court judgment.
The Electoral Bond framework was not created through one isolated law.
The Finance Act, 2017 amended several laws, including:
The Supreme Court examined the constitutional validity of these amendments.
Finance Act 2017 → Legal foundation for Electoral Bonds
The Finance Act, 2017 amended the RBI Act to permit the Central Government to authorise a scheduled bank to issue Electoral Bonds.
The Supreme Court judgment discusses this statutory change.
SBI subsequently functioned as the authorised bank under the Electoral Bond Scheme.
The 2017 framework also amended provisions of the Income-tax Act.
The purpose included providing the relevant tax treatment to political contributions made through the Electoral Bond mechanism.
The Electoral Bond scheme was therefore a:
Multi-statute legal framework
rather than simply a banking product.
| Law | Connection |
|---|---|
| RPA 1951 | Political-party donation disclosure |
| Companies Act 2013 | Corporate political contributions |
| RBI Act 1934 | Authorisation for Electoral Bond issuance |
| Income-tax Act 1961 | Tax treatment |
| Finance Act 2017 | Amendments creating framework |
The Supreme Court examined these interconnected amendments in its 2024 judgment.
Political parties influence:
↓
Political funding can influence political parties.
↓
Citizens therefore have an interest in knowing:
Who funds political parties?
↓
Non-disclosure affects informed political choice.
↓
Right to information under:
Article 19(1)(a)
↓
Electoral Bond anonymity was unconstitutional.
↓
Potentially large political influence
↓
No adequate relationship between contribution and corporate political purpose
↓
Court examined:
Article 14
↓
2017 amendment permitting unlimited corporate contributions:
Arbitrary
Political funding is not merely a financial issue.
It affects:
Can wealthy donors have disproportionate influence?
Can citizens know who funds parties?
Can parties be held accountable for relationships with donors?
Can voters make informed decisions?
↓
Informed citizen
↓
Informed electoral choice
↓
Knowledge of political funding
↓
Accountability
Transparency in political funding is connected with informed democratic participation.
For UPSC Mains, present both sides.
Encouraged banking channels.
Political donations moved through a financial instrument.
Protected political preferences of donors.
Bank-based contributions created transaction records.
Could reduce some forms of unaccounted cash.
Citizens could not know the donor-party relationship.
Unlimited corporate contributions raised concerns.
The public lacked information necessary to assess political funding.
Large undisclosed contributions could create concerns about influence.
Political parties receiving funds could avoid public disclosure of donor identity.
Electoral Bonds attempted to formalise political donations and move funding away from cash.
Formal banking channels do not by themselves guarantee democratic transparency if the ultimate donor identity remains undisclosed to citizens.
The Court ultimately held that the non-disclosure violated Article 19(1)(a).
Electoral Bonds were introduced partly against the problem of cash-based political funding.
But the debate shifted from:
"Cash vs banking channel"
to:
"Banking channel + anonymity vs transparency"
Transparency concerns do not disappear merely because money moves through banks.
With Electoral Bonds struck down, political parties continue to receive contributions through other legally permitted mechanisms.
The ECI continues to publish political-party contribution reports and expenditure-related information under the applicable framework.
Striking down Electoral Bonds did not eliminate political donations.
It eliminated:
That particular funding mechanism.
Political funding continues through mechanisms governed by:
Political funding continues; Electoral Bonds do not.
Finance Act introduces the legislative framework.
↓
Electoral Bond Scheme becomes operational.
↓
Supreme Court directs that relevant Electoral Bond information be collected by the ECI while the constitutional challenge is pending.
↓
Supreme Court strikes down the Electoral Bond Scheme and relevant amendments.
↓
SBI submits Electoral Bond purchase/redemption information.
↓
ECI publishes the information.
The Supreme Court's orders record the disclosure directions and the ECI's role in publishing the data.
The Court directed:
Issuing bank:
Stop issuing Electoral Bonds.
SBI:
Provide purchase information.
SBI:
Provide redemption information.
Information:
Include purchaser and denomination details.
Political parties:
Identify contributions received through the bonds.
ECI:
Publish the information.
These directions were part of the Court's effort to give full effect to the judgment.
The ECI now maintains an online disclosure section containing:
This provides a public record of the historical Electoral Bond transactions.
"Electoral Bonds are currently used by political parties."
❌ Incorrect.
The Electoral Bond Scheme was struck down by the Supreme Court in February 2024 and issuance was stopped.
These are different topics.
Concern:
Political party funding
Concern:
Campaign expenditure by candidates/parties
Do not confuse:
Donation received by political party
with:
Candidate's election expenditure ceiling.
| Political Funding | Election Expenses |
|---|---|
| Money received by party | Money spent on election |
| Donations/contributions | Campaign expenditure |
| Section 29C relevant | Section 77 relevant |
| Party contribution reports | Candidate expense accounts |
| Electoral Bonds were one former mechanism | Expenditure ceiling remains relevant |
The Election Commission has an important role in transparency.
It maintains/publishes:
The ECI's current portal provides political-party contribution reports for multiple financial years.
Political parties registered under:
Section 29A, RPA 1951
operate within the statutory political-party framework.
The ECI administers registration and related political-party compliance mechanisms.
Financial instrument designed for political donations.
Person/entity purchasing the bond.
Eligible recipient of the bond.
Bank authorised to issue/handle bonds under the scheme.
Donor identity was not publicly disclosed through the ordinary contribution reporting mechanism.
Political party deposits the bond and receives the amount through the banking system.
Equality and non-arbitrariness.
→ Relevant to unlimited corporate contributions.
Freedom of speech and expression.
→ Includes right to information.
→ Relevant to citizens' right to know political funding.
Superintendence, direction and control of elections.
→ Relevant to ECI's broader election-administration role.
| Provision | Relevance |
|---|---|
| RPA Section 29A | Political-party registration |
| RPA Section 29C | Donation disclosure |
| Companies Act Section 182 | Corporate political contributions |
| RBI Act Section 31 | Framework relevant to issuance |
| Finance Act 2017 | Introduced amendments underlying scheme |
| Article 19(1)(a) | Right to information |
| Article 14 | Equality/non-arbitrariness |
Political parties must report specified contributions above the statutory threshold.
It creates:
Political funding transparency
The 2017 amendment created an exception for Electoral Bond contributions.
That exception was part of the legal framework invalidated by the Supreme Court.
Deals with:
Political contributions by companies
The 2017 amendment removed the earlier profit-linked limitation and enabled unlimited corporate contributions.
The Supreme Court held this amendment arbitrary and violative of Article 14.
| Aspect | Electoral Bonds |
|---|---|
| Introduced | 2017 legislative framework |
| Scheme notified | 2018 |
| Purpose | Political donations |
| Channel | Banking system |
| Main feature | Public anonymity |
| Major controversy | Transparency |
| Corporate funding | Unlimited contributions enabled by 2017 amendment |
| Constitutional challenge | Supreme Court |
| Judgment | 15 February 2024 |
| Status | Struck down |
| Issuance | Stopped |
| SBI | Authorised bank |
| ECI | Published disclosed data |
| Article 19(1)(a) | Right to information |
| Article 14 | Corporate contribution issue |
| Claimed Advantage | Major Concern |
|---|---|
| Reduced cash transactions | Donor anonymity |
| Banking channel | Lack of public transparency |
| Formal transaction | Potential political influence |
| Donor privacy | Information asymmetry |
| Easier financial transfer | Corporate funding concerns |
| Reduced physical cash | Potential quid-pro-quo concerns |
The judgment establishes an important democratic principle:
Political funding is not merely a private financial transaction when it has potential implications for political power and informed voting.
Therefore:
Political funding
↓
Political influence
↓
Citizens' electoral choices
↓
Right to information
↓
Article 19(1)(a)
But political funding can also reveal:
Knowledge of political funding can contribute to informed voting.
This reasoning was central to the Supreme Court's 2024 judgment.
Unlimited corporate contributions raise an additional issue.
→ Artificial/legal entity
→ Individuals with varying political preferences
→ Receives corporate contribution
A company's political contribution may not reflect the political preferences of all shareholders.
This was part of the broader constitutional concerns surrounding unlimited corporate political contributions.
Can protect:
Donor privacy
But can reduce:
Public accountability
Privacy
vs
Transparency
The Supreme Court's judgment placed significant weight on the public's right to know in the context of political funding.
Political funding reform should seek:
Electoral Bonds are currently operational.
❌ Incorrect.
The Supreme Court struck down the scheme in February 2024.
Electoral Bonds were issued directly by the Election Commission.
❌ Incorrect.
SBI was the authorised bank under the scheme.
Electoral Bonds were cash donations.
❌ Incorrect.
They were financial instruments routed through authorised banking channels.
Electoral Bond donor anonymity was the same as the donor being unknown to every authority.
❌ Incorrect.
The central constitutional issue concerned public disclosure of donor information.
The Supreme Court struck down Electoral Bonds only because they violated Article 14.
❌ Incorrect.
The Court also held the non-disclosure aspect violative of Article 19(1)(a).
The 2017 Companies Act amendment limited corporate political contributions to profits.
❌ Incorrect.
The amendment removed the earlier profit-linked ceiling and enabled unlimited corporate contributions; the Supreme Court later struck down that amendment.
The Electoral Bond judgment abolished all political donations.
❌ Incorrect.
It struck down the Electoral Bond mechanism, not political funding as a whole.
Electoral Bonds and Electoral Trusts are the same.
❌ Incorrect.
They are separate mechanisms.
Political funding and election expenditure are identical.
❌ Incorrect.
Funding concerns money received; expenditure concerns money spent.
Article 19(1)(a) has no connection with political funding.
❌ Incorrect.
The Supreme Court specifically linked political-funding disclosure with citizens' right to information under Article 19(1)(a).
Consider the following statements:
Answer: 1 and 2 only
Consider the following statements:
Answer: 1, 2 and 3
Consider the following statements:
Answer: 1 and 3 only
Consider the following statements:
Answer: 1 and 2 only
Consider the following statements:
Answer: 1, 2 and 3
Consider the following statements:
Answer: 1 and 2 only
| Item | Connection |
|---|---|
| Article 14 | Unlimited corporate contribution issue |
| Article 19(1)(a) | Right to information |
| RPA Section 29C | Political donation disclosure |
| Companies Act Section 182 | Corporate political contributions |
| Finance Act 2017 | Legal framework for Electoral Bonds |
| SBI | Authorised bank |
| ECI | Publication of disclosed Electoral Bond data |
| Supreme Court | Struck down scheme |
| Question | Answer |
|---|---|
| What are Electoral Bonds? | Former financial instrument for political donations |
| Introduced through | Finance Act 2017 framework |
| Scheme notified | 2018 |
| Authorised bank | SBI |
| Major feature | Public donor anonymity |
| Main concern | Transparency |
| Judgment | 15 February 2024 |
| Status | Struck down |
| Article 19(1)(a) | Right to information |
| Article 14 | Corporate contribution issue |
| RPA provision | Section 29C |
| Companies Act provision | Section 182 |
| Who published data? | ECI |
| Are bonds currently issued? | No |
| Are political donations abolished? | No |
Political Parties
↓
Need financial resources
↓
Political Funding
↓
Sources:
Individuals
Companies
Other permitted mechanisms
↓
Need:
Transparency
Accountability
Donor privacy
↓
Electoral Bonds introduced
↓
Bank-based political donations
↓
Public anonymity
↓
Constitutional challenge
↓
Supreme Court — 15 February 2024
↓
Article 19(1)(a)
Right to know
Article 14
Corporate contribution issue
↓
Electoral Bonds struck down
↓
SBI disclosure
↓
ECI publication
↓
Political funding continues through other legal mechanisms
2017
→ Finance Act framework
↓
2018
→ Scheme operational
↓
Purpose
→ Political donations through banking channel
↓
Key feature
→ Public anonymity
↓
Problem
→ Transparency + corporate influence
↓
15 February 2024
→ Supreme Court strikes down scheme
↓
Article 19(1)(a)
→ Right to information
↓
Article 14
→ Unlimited corporate contributions arbitrary
↓
SBI
→ Disclose purchase/redemption data
↓
ECI
→ Publish data
↓
Current status
→ Electoral Bonds discontinued
Former financial instrument
Broad concept
Separate funding mechanism
Money spent on election
Money received/raised by political parties
Struck down in 2024
The Electoral Bond case transformed political funding from merely a question of financial regulation into a constitutional question of democratic transparency.
The key chain is:
Political Funding
↓
Political Influence
↓
Voter's informed choice
↓
Right to Information
↓
Article 19(1)(a)
At the same time:
Unlimited Corporate Contributions
↓
Potential disproportionate influence
↓
Article 14
↓
Arbitrary
Remember the entire topic through:
FUND → DISCLOSE → KNOW → INFLUENCE
Political parties need money.
↓
Citizens may need to know who funds them.
↓
Information helps voters make informed choices.
↓
Opaque funding can raise concerns about political influence.
↓
The Electoral Bond scheme was struck down because its non-disclosure framework violated the right to information under Article 19(1)(a), while the amendment enabling unlimited corporate contributions was held arbitrary under Article 14.
Electoral Bonds were introduced through the Finance Act, 2017 as a banking-based mechanism for political donations. Their defining feature was public anonymity of the donor, while the 2017 amendments also enabled unlimited corporate political contributions. On 15 February 2024, the Supreme Court struck down the Electoral Bond Scheme and related amendments, holding that non-disclosure of political funding violated citizens' right to information under Article 19(1)(a), and that unlimited corporate contributions were arbitrary and violated Article 14. The Court stopped further issuance and directed SBI to disclose purchase and redemption information, which the Election Commission subsequently published. Electoral Bonds are therefore a historical but highly important current-affairs topic, while political funding through other legally permitted mechanisms continues.
