Electoral trusts: How political donations are routed after electoral bonds

With the Supreme Court striking down the electoral bonds scheme in February 2024, corporate political funding in India has shifted back to an older, more transparent channel — electoral trusts. Data for 2024–25 shows a sharp rise in donations through these trusts, underlining how they have once again become central to the political finance ecosystem.

Why electoral trusts are back in focus

Electoral trusts gained renewed prominence after the Supreme Court of India invalidated the electoral bonds scheme, holding that anonymous political funding violated citizens’ right to information. In the immediate aftermath, companies seeking a lawful and compliant way to donate to political parties increasingly turned to electoral trusts.

This shift is evident in official disclosures to the Election Commission of India. In 2023–24, only five trusts reported donations worth ₹1,218.36 crore. In 2024–25, nine trusts reported contributions, with total donations surging to ₹3,811 crore — more than a threefold increase in a single year.

What exactly are electoral trusts?

Electoral trusts are non-profit entities set up to receive voluntary contributions from individuals and companies and distribute them to registered political parties. The scheme governing them was notified in January 2013 by the UPA government, five years before the electoral bonds framework was introduced.

The core objective was to create a formal, regulated channel for political donations that ensured disclosure of both donors and recipients. Unlike electoral bonds, which masked donor identities from the public, electoral trusts are required to submit detailed annual reports to the Election Commission, listing contributors and beneficiary parties.

Who can set up a trust and who can donate?

Under the 2013 scheme, any company registered under the Companies Act can establish an electoral trust. Donations to these trusts are governed by Section 17CA of the Income Tax Act, 1961.

Eligible donors include:

• Indian citizens
• Companies registered in India
• Firms and Hindu Undivided Families (HUFs)
• Associations of persons residing in India

Foreign contributions are prohibited, aligning electoral trusts with broader restrictions on political funding under Indian law.

How many electoral trusts operate in India?

While the number of registered electoral trusts has fluctuated over the years — from just three in 2013 to a peak of 17 in 2021–22 — only a handful are active in any given financial year.

In 2024–25, three trusts accounted for nearly 98% of all contributions:

• Prudent Electoral Trust (formerly Satya Electoral Trust)
• Progressive Electoral Trust
• New Democratic Electoral Trust

Prudent Electoral Trust alone received ₹2,668.46 crore from multiple companies, making it by far the largest conduit of political funding. The Progressive Electoral Trust channelled donations primarily from Tata Group companies, while the New Democratic Electoral Trust received funds largely from Mahindra Group firms.

How do electoral trusts function in practice?

Electoral trusts operate under strict compliance rules:

• They must apply for renewal every three financial years.
• At least 95% of the contributions received in a financial year must be donated to political parties registered under the Representation of the People Act, 1951.
• Only up to 5% can be retained for administrative expenses.

Donations must be made through banking channels — cheque, demand draft, or electronic transfer. Donors are required to disclose their Permanent Account Number (PAN), or passport details in the case of non-resident Indians, ensuring traceability.

Why electoral trusts are considered more transparent

Transparency is the defining feature of the electoral trust model. Trusts are mandated to maintain audited accounts and submit annual statements to both the Central Board of Direct Taxes (CBDT) and the Election Commission.

These disclosures include:

• Names of all contributors
• Amounts donated by each donor
• Details of political parties that received funds

This makes electoral trusts one of the few political funding mechanisms where the public can scrutinise both sides of the transaction — who pays and who benefits.

What this means for political funding going forward

The post-electoral bonds phase suggests that corporate donations are unlikely to diminish; instead, they are being rerouted through mechanisms that meet constitutional and statutory requirements. Electoral trusts, with their disclosure norms and regulatory oversight, now form the backbone of this system.

For policymakers and voters alike, the challenge will be to ensure that transparency translates into accountability — and that rising donation volumes do not dilute the spirit of electoral fairness that the Supreme Court sought to reinforce by striking down anonymous funding.