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Jan 03, 2018 04:31 PM IST | Source: Moneycontrol.com

One step forward or two steps back? Everything you need to know about electoral bonds

The aim of these bonds is to reduce the amount of anonymous funding that political parties receive during elections.

The government on Wednesday came out with norms for political funding in the form of electoral bonds, a scheme first announced in the Union Budget 2017.

The concept of electoral bonds immediately found takers because it could be used to track the exact amount of funding received by a political party.

However, little is known about these bonds since this is the first time they will be introduced in India. Listed below are a few features:

- Tax-free: Electoral bonds are completely tax-free and essentially work like bearer bonds rather than government or corporate bonds.

- No interest: Unlike corporate or government bonds, electoral bonds will not have a coupon on them, which means the buyer of these bonds will not receive any kind of interest on the instrument.

- Short-term validity: Electoral bonds will only be valid for a period of 15 days from the date of purchase.

- Only for funding political parties: Electoral bonds can only be used to provide funding to registered political parties, who can then redeem them through a designated bank account. They cannot be used for any other purpose.

- Anonymity: The identities of people donating money to political parties through electoral bonds will not be known to the receiver of the money.

- Available only at specific times of the year: These bonds will only be made available for purchase for a period of 10 days each in the months January, April, July and October. For a general election year, the government will separately notify an additional one-month period for the same.

In addition to this, the government said that people looking to buy these bonds can buy them in multiples of Rs 1,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore. The intention is to reduce the amount of anonymous funding that political parties receive during elections.

However, analysts have said that these bonds might end up doing the exact opposite – increase opacity in political funding. This may lead to misuse of funds, considering the lack of disclosure norms for individuals buying these bonds.
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