Electoral Trusts in India are established under Section 25 of the Companies Act as non-profit entities with the principal aim to ensure transparent and accountable political funding. These trusts facilitate the orderly receipt and distribution of voluntary contributions to political parties registered under Section 29A of the Representation of the People Act, 1951. The primary objective of these trusts is to enhance transparency and reduce potential conflicts of interest by serving as a neutral intermediary in the funding of political parties.
► Functioning and Regulations
Electoral Trusts are authorized to collect funds from Indian citizens, domestic companies, Hindu Undivided Families, and other resident entities, provided they supply their PAN (Permanent Account Number) or, for non-resident Indians, their passport number. It is important to note that these trusts are prohibited from accepting donations from non-citizens, other electoral trusts, government companies, and any foreign entities. Furthermore, they are mandated by law to distribute at least 95% of their total annual contributions to eligible political parties before the end of the financial year.
► Government Oversight and Guidelines
The governance of Electoral Trusts is heavily regulated, with the Central Board of Direct Taxes (CBDT) playing a pivotal role. The CBDT, under the Electoral Trust Scheme 2013, specifies the operational guidelines and approval procedures for these trusts. An electoral trust must apply to the CBDT for approval, which can be granted for up to three years but may be withdrawn if the trust fails to comply with the regulations or ceases to operate legitimately.
► Political Contributions and Tax Implications
Political parties in India benefit from various privileges such as tax exemptions and access to state resources, although there is no direct state funding. Under Section 29B of the Representation of the People Act, 1951, political parties are permitted to accept voluntary contributions. The Companies Act, 2013, further allows companies to donate a portion of their profits to political parties or electoral trusts, which is deductible from their income tax under specific conditions.
► Reporting and Transparency
Electoral Trusts are required to maintain high levels of transparency by submitting annual reports and audit details to the Election Commission of India. These reports must include comprehensive information about the contributions received and the donations made to political parties.
► Conclusion
Electoral Trusts play a crucial role in promoting transparency and accountability in political financing in India. By regulating political donations through these trusts, the government aims to minimize undue influence and foster a more transparent electoral process.
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