06 October 2022

Why do all political parties need money as donations?

In 2022, the political party funding in India via electoral bonds till March had peaked upto Rs 1213 crore due to Assembly elections held in five states (Punjab, Uttar Pradesh, Manipur, Goa, and Uttarakhand). 

Looking at such big figures, one might ask what these political parties actually do with the amount! Before learning about that, let’s focus on understanding what political funding is!

What is Political Funding?

Political funding refers to the methods through which political parties raise funds to finance their campaigns and other election functions.

Parties need these funds to extend their reach to the public by-

  •  Organizing rallies in public places

These rallies serve the objective of gaining a large number of public attention.

  • For media promotions

In the 2014 and 2019 elections, political parties like BJP and Congress promoted their star candidates (Narendra Modi and Rahul Gandhi respectively) through different channels and advertisements. Such promotions made these parties spend a lot of money from their funding. 

  • For their posters

During Lok Sabha elections, it is very common to see candidate’s posters and pictures in almost every corner of the constituency. Printing of these posters and people putting them up in almost every corner of their constituency requires a lot of money. 

  • For their transportation

Candidates often have to travel to many places to pitch themselves to the public and win their votes. Costs for such travelling are often used from party funds.

  • For bribing voters

Despite being illegal, Note for vote is still practised by many Indian parties to win their voter’s support.

What amount can one donate to a Political Party? 

Even though there is a limit in donation made from a single source, there is no such limitation on how many contributions (from different sources) are made to the party (under Section 80GGB of Income Tax Act). However, if the amount donated from a single donor exceeds Rs 20,000, then the party must report this to the Election Commission.

Benefit of these donations

The benefit of political donations is that donors can claim tax exemption (for 100% deduction) under section 80GGB and 80GGC of Income Tax Act. 

Ways through which political parties raise funds

Political parties raise funds through-

  • Individual person:

According to Section 29B of RPA (Representation of people Act), parties can voluntarily accept contributions from a person or company which is not under government jurisdiction.

  • State/ Public funding:

This refers to the fund and other resources provided by the government to political parties for their election related functions

State funding is of two types- Direct Funding (fund provided by government to the parties) and Indirect Funding (providing other facilities like free access to public places for their rallies, media and so on). Direct funding is prohibited in India but Indirect funding is allowed in a regulated manner. 

  • Corporate Funding:

This method of funding is governed under the Companies Act, Section 182.

Parties like BJP and Congress have received huge amounts of funding through this method (705.81 crore rupees from 2987 corporate donors to BJP and 198.16 crore to Congress respectively). 

  • Electoral trusts, electoral bonds and funding from foreign companies (under the FCRA, 2018) are also some methods through which political parties raise funds. 

It is very clear that a large amount of money is required by a political party to increase their chances of winning, however,  these donations can be used in wrong ways too such as:

  • Voters getting paid to vote for a particular candidate,
  • Illegal / black money being used by political parties as donations,  
  • Hiring goons to capture booths and making voters forcefully vote for one leader.