The top court, while delivering its judgment, said those electoral bonds that have not been encashed by the political parties have to be returned to the purchaser. 
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The top court, while delivering its judgment, said those electoral bonds that have not been encashed by the political parties have to be returned to the purchaser. In a landmark judgment earlier this week, the Supreme Court on Thursday scrapped the electoral bonds and termed them as “unconstitutional and manifestly arbitrary”. The bonds scheme, floated in 2017, provides blanket anonymity to political donors, like big corporations to make unlimited political donations.
A five-judge Bench headed by Chief Justice of India D Y Chandrachud also asked the State Bank of India to stop issuing electoral bonds immediately and submit all the details to the Election Commission by March 6. The poll panel will make all the donations public within a week of the receipt of information from the SBI, the SC said.
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Electoral bonds were implemented to enhance the transparency of political funding in India. The bonds facilitate transparency by enabling political parties to receive donations through official banking channels that are monitored by government agencies. Donors' identities were kept confidential and anonymous, thereby minimising the potential for intimidation or reprisals based on their political associations.
The electoral bonds made by individuals or entities were tax-exempt under Section 80GG and Section 80GGB under the Income Tax Act, 1961. Political parties could accept the donations as per the provisions of Section 13A of the Income Tax Act.
After the judgment and the SC directing SBI to stop issuing electoral bonds, the question arises whether firms, individuals can avail tax benefits this fiscal year FY23-24.
A government official told the Financial Express that for this fiscal, firms, individuals, and others can avail of the income tax benefits of 100% tax deduction while filing their returns before July 31, 2024, i.e for Assessment Year 2024-25.
As per clause 10 of the Electoral Bond Scheme (Gazette Notification dated 02.01.2018), no commission, brokerage or any other charges for the issue of a bond shall be payable by the buyer against the purchase of the bond. Also, no GST or any other taxes/cess are charged to the purchaser on purchasing electoral bonds.
Last month, the Ministry of Finance authorised SBI to issue and encash electoral bonds through its 29 branches from January 2 to January 11. With this, 30 tranches of electoral bonds were issued so far since its inception. Government data showed that over Rs 16,518 crore was collected through this mean.
Minister of State in the Finance Ministry Pankaj Chaudhry, in his reply in Lok Sabha, said: “The total value of Electoral Bonds purchased (Phase-I to Phase –XXX) from State Bank of India is about Rs 16,518 crore.” The commission paid to the State Bank of India by the Government of India for the issuance and redemption of Electoral Bonds from Phase I to Phase XXV is about Rs 8.57 crore. Also, the amount paid by the Government of India to Security Printing & Minting Corporation of India Ltd (SPMCIL) to date is about Rs 1.90 crore.
Refunds of electoral bonds
The top court, while delivering its judgment, those electoral bonds that have not been encashed by the political parties have to be returned to the purchaser.
The court noted electoral bonds within the validity period of 15 days, yet not encashed by political parties, must be returned by the parties to the purchaser. The SBI then has to refund the amount to the purchaser's bank account.
In reference to the directive, individuals who have procured electoral bonds in the last cycle may approach the specified State Bank of India branch where the aforementioned bonds were initially secured.
Subsequently, they are entitled to solicit a refund given that funds typically undergo transferal to their respective political parties within this set period.
SC ruling
Chief Justice of India DY Chandrachud in his note of the judgement said that the absolute non-disclosure of the source of political funding through electoral bonds promoted corruption, and a culture of quid pro quo with the ruling party to introduce a policy change or for bagging a license. The scheme and the amendments authorised “unrestrained influence of corporates in the electoral process”.
The apex court rubbished the Union government’s argument that the anonymity of political donors afforded by electoral bonds incentivised financial contributions through banking channels.
The court agreed that the fundamental right to privacy covers a person’s political affiliation. However, it said, there should be a balance between informational privacy and the voters’ right to information.
Chief Justice Chandrachud drew a clear distinction between donations by corporates for favours and contributions by individuals as a mark of their political beliefs.
Also read: Electoral bonds scrapped by Supreme Court: How purchasers can claim refunds now
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