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  1. Union Budget 2017 – political funding: Anonymity of donor is still preserved

Union Budget 2017 – political funding: Anonymity of donor is still preserved

With political funding being a preferred channel to launder black money in the country, finance minister Arun Jaitley announced a R2,000 cap on donations where the source need not be disclosed—well below the current R20,000 one—in his Budget speech in Parliament on Wednesday. The finance minister stated that the situation had “only marginally improved” since […]

By: | New Delhi | Published: February 2, 2017 7:34 AM
The finance minister stated that the situation had “only marginally improved” since the time the Representation of Peoples Act, the Companies Act and the Income Tax Act were last amended to incentivise transparent donation to parties and reporting of the same to authorities. The finance minister stated that the situation had “only marginally improved” since the time the Representation of Peoples Act, the Companies Act and the Income Tax Act were last amended to incentivise transparent donation to parties and reporting of the same to authorities.

With political funding being a preferred channel to launder black money in the country, finance minister Arun Jaitley announced a R2,000 cap on donations where the source need not be disclosed—well below the current R20,000 one—in his Budget speech in Parliament on Wednesday. The finance minister stated that the situation had “only marginally improved” since the time the Representation of Peoples Act, the Companies Act and the Income Tax Act were last amended to incentivise transparent donation to parties and reporting of the same to authorities.

A recent analysis by the Association for Democratic Reforms (ADR) showed that over 69% of the income declared by both national and regional parties between 2004-04 and 2014-15 was from undisclosed sources. The lower cap on donations from sources that need not be disclosed can be bypassed by simply showing a greater number of contributions of up to R2,000—a real change would have been if cash donations had been dispensed with or had to have their source disclosed no matter how small the amount.

Jaitley has also proposed a change to the RBI Act to bring in electoral bonds that a donor can purchase and donate to a political party without her/its name showing in the party’s books. Though mandating the bond can only be purchased by cheque or a digital platform makes it that much more difficult for black money to be passed on to parties, the anonymity of such donors is still preserved. The move is not likely to help eliminate corruption given there is no way to ascertain who made these donations; without that, to what end the donations were made becomes that much more difficult to gauge.

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Also, though the Budget talks of cleaning up political funding, it doesn’t talk of capping what a party can spend on a candidate’s constituency—the candidate in a big Parliamentary constituency can herself spend up to R70 lakh—nor for what a friend/relative of a candidate can spend. Jaitley, in his speech, reiterated that parties will have to file returns in a time-bound manner—the ADR analysis shows, 41 of 52 regional parties had not filed a return for at least one financial year in the past 11 years; 12 of them had never filed a contribution report since 2004-05.

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