What is electoral bond? Know everything related to electoral bond

SBI sells over ₹400 cr. electoral bonds

The News

As per a RTI reply by the SBI, more than ₹400 crore worth of electoral bonds were sold by the State Bank of India (SBI) in the 10-day window of October, a sharp rise from the ₹32 crore worth of bonds sold in the July tranche.

RTI Data

The RTI data, also shows that there is next-to-no demand for electoral bonds of smaller denominations and the majority of the bonds sold were in the highest denomination of ₹1 crore.
The data shows that ₹401.73 crore worth of bonds were sold by SBI in the October 1-10 window, the fifth tranche in which the bonds were available for sale.
Within this, about 37.5% of the bonds (₹150.7 crore worth) were sold in Mumbai, the highest share among the 11 cities where the bonds were for sale. The city with the second highest sales was Kolkata (₹62.6 crore worth)..
The data from all five tranches shows that barely any electoral bonds were sold in the smaller denominations of ₹1,000, ₹10,000, and ₹1 lakh.
For example, in the March and April tranches, a total of just 17 bonds (2.2% of the total) were sold in the ₹1,000 denomination, and none was sold in the ₹10,000 denomination. In contrast, 450 bonds were sold in the ₹10 lakh denomination (58.6% of the total) and 291 in the ₹1 crore denomination (37.9% of the total).

These trends were largely similar in the October tranche as well. The ₹1,000 denomination made up 0.6% of the total bonds sold in October, the ₹10,000 denomination made up 2.6%, the ₹1 lakh denomination 5.7%, the ₹10 lakh denomination made up 41.6%, and the ₹1 crore denomination made up 49.3%.

Background

The concept of electoral bond was initiated in Union Budget 2017.
During the Budget presentation in February 2017, the Finance Minister had proposed that the maximum amount of cash donation that a political party can receive be capped at ₹2,000 and that parties be entitled to receive donations by cheque or digital mode, in addition to electoral bonds.
Later on Electoral bond scheme 2018 was introduced, in order to “cleanse the system of political funding in the country” and in keeping with the government’s desire to move to a cashless economy.
The electoral bond scheme, aims to account the donations made to all major political parties.

What is an electoral bond?

An electoral bond is designed to be a bearer instrument like a Promissory Note — in effect, it will be similar to a bank note that is payable to the bearer on demand and free of interest. It can be purchased by any citizen of India or a body incorporated in India.

How it can be used?

The bonds were issued in multiples of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh and ₹1 crore and were available at specified branches of State Bank of India.
The bonds could be bought by the donor with a KYC-compliant account.
Donors can donate the bonds to their party of choice which can then be cashed in via the party's verified account within 15 days.

What are the other conditions?

As per provisions of the Scheme, Electoral Bonds may be purchased by a person, who is a citizen of India or incorporated or established in India.
A person being an individual can buy Electoral Bonds, either singly or jointly with other individuals.
Only the Political Parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last General Election to the House of the People or the Legislative Assembly of the State, shall be eligible to receive the Electoral Bonds.
The Electoral Bonds shall be encashed by an eligible Political Party only through a Bank account with the Authorized Bank.
The electoral bonds will not bear the name of the donor.
In essence, the donor and the party details will be available with the bank, but the political party might not be aware of who the donor is.
The intention is to ensure that all the donations made to a party will be accounted for in the balance sheets without exposing the donor details to the public.
Electoral Bonds are valid for fifteen calendar days from the date of issue and no payment shall be made to any payee Political Party if the Electoral Bond is deposited after expiry of the validity period.
The Electoral Bond deposited by an eligible Political Party in its account shall be credited on the same day

Will it be tax deductible?