Many of India's biggest industrial houses have taken advantage of a new law to set up electoral trusts but the transparency in corporate donations to political parties still remains a major issue."" Discuss critically."
Section 13B of Income Tax Act 1961 provides that the companies looking to provide funding to political parties can set up, Electoral Trust which would be a non-profit company. Tax benefits were provided to such companies who fund political outfits through electoral trusts. The idea was to ensure transparency. In order to enhance transparency government introduced electoral bond through which corporates can purchase time-limited bonds from banks and then transfer those bonds to bank accounts of political parties. However, the issue is that though funds will flow through the formal banking system, corporations need not disclose purchases or the political parties. This may result in crony capitalism. Along with that, the cap on corporates donations was removed. Also the provision according to which firms must declare their political contributions in their profit and loss statements is abolished. So this has made political donations more opaque. Though the limit of cash donations is reduced to 2000, the fact that donations below 20000 need not to be disclosed, will still continue. There are 3 major issues in political funding. First, is undocumented cash, Second, is virtually no transparency regarding political contributions. Through electoral bond information about donor and receiver will remain hidden. Third, political parties are not subject to any independent audit.
Political parties should lead by coming under the ambit of RTI, especially with respect to their funding. There should be a transparent mechanism for political financing. Donar details of all donors should be made available under the RTI.