FUNDING OF ELECTIONS – ROLE OF INDIA INC

By Ruma Dubey

As elections come calling, corporate India would be in a quandary just as me and you. For us, the big question is whom to vote and for companies, it is much before elections – which political party should they donate to and how much?

Today, contribution to political parties, which comes under ‘donation’ in most balance sheets, is a legal activity and companies have formed ‘Trusts’ to make these donations. When payments are made in cheque, India Inc can claim tax rebates but the Finance Bill for current fiscal has stated that donations in cash will not get any rebates.  This clamp down on cash is to discourage anonymous cash contributions/ donations to political parties and help identify the donor. Cheque payment brings in transparency and the EC can check if any money has come from foreign sources, as it is not allowed. Central Bureau of Direct Taxes (CBDT) specify that electoral trusts are not permitted to receive foreign funding, these rules were formed only on 31st January, 2013. Hence, the details of all donors who made any contribution to thepolitical parties through electoral trusts should be made public so as to ensure transparency in the financial aspect of functioning of political parties.

But we would have to be too naïve to think that cash does not get exchanged at all. When a huge NRI diaspora or ‘foreign funds’ want to contribute to one leader or political party, naturally, they are not going to wait for tax rebates and hawala routes are sure to get busy. Election is indeed the time when major portion of the black money comes back into the system.

Today, we have something known as the Electoral Trust – where companies are allowed to set up these trusts mainly for the purpose of funding political parties and companies get tax benefits for funds given to various political outfits. The Trust gets tax benefits only if they distribute 95% of total contributions received by them in any financial year to the registered political parties within that year itself. NRIs can make contributions to these Trusts and no contribution by cash is allowed.

Just as we vote for a political party expecting an improvement in quality of life, companies also contribute, knowing fully well that leaders need to be kept humoured or else their various projects, sanctions might never come in. This is a tacit understanding between the party and company – you scratch my back, I scratch yours. Both need each other and each needs to keep the other happy to ensure he is not ousted out.  Corporates are some of the biggest contributors to political parties and fighting elections needs lots of money. It is payback time only after elections are over.

The companies would have another big question – how much to give each party? Do they contribute based on opinion polls, giving more to the party whom they think will come into power or do they follow an equitable mode of distribution?  Given below are a few significant points which are self explanatory about this entire funding process.