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Source: The post is based on the article “Electoral Bonds and Electoral Trusts: What are they, and how do they differ?” published in “Indian Express” on 9th November 2023
Why in the News?
The Supreme Court has reserved its judgment on the challenge to the Electoral Bonds Scheme.
Before this Electoral Bonds (EB) Scheme, there was something called an Electoral Trusts (ET) Scheme which was introduced in 2013.
What is the Electoral Trusts (ET) Scheme?
Electoral Trusts (ET) is a Trust set up by companies with the sole objective to distribute the contributions received by it from other Companies and individuals to the political parties.
It was introduced through ‘The Electoral Trusts Scheme, 2013’.
Who can set up Electoral Trusts?
(1) Only such companies are eligible to make an application for approval as an Electoral Trust which are registered under section 25 of the Companies Act, 1956.
– The electoral trusts have to apply for renewal every three financial years.
Mechanism of distribution of funds by Electoral Trusts:
(1) For administrative expenses, the Electoral Trusts are permitted to set aside a maximum of 5% of the total funds collected during a financial year, along with any surplus carried forward from the previous financial year.
– The remaining 95% of total income of the Trusts, including any surplus from the previous financial year is required to be distributed to eligible political parties.
What are Electoral Bonds?
What is the difference between Electoral Bonds and Electoral Trusts (ET)?
| Difference | Electoral Bonds Scheme | Electoral Trusts Scheme |
| Introduced in | 2018 | 2013 |
| Purpose | To facilitate donations to political parties by corporates and individuals. | To facilitate donations to political parties by corporates and individuals. |
| Transparency | (1) It is exempted from disclosure requirements. (2) Government argues that this lack of transparency in donations through EBs is to maintain the privacy of donors. | (1) It is transparent on contributors and beneficiaries front. (2) It mandates to submit a report to the Election Commission of India on contributions from individuals and companies, and their donations to parties every year. |
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