Electoral Trusts in India are established as non-profit entities under Section 25 of the Companies Act. Their main purpose is to ensure transparent and accountable political funding. These trusts act as a neutral intermediary for the orderly receipt and distribution of voluntary contributions to political parties registered under Section 29A of the Representation of the People Act, 1951. The goal is to enhance transparency and minimize conflicts of interest.
Electoral Trusts are permitted to collect funds from Indian citizens, domestic companies, Hindu Undivided Families, and other resident entities, provided they supply their PAN (Permanent Account Number) or passport number for non-resident Indians. Importantly, these trusts cannot accept donations from non-citizens, other electoral trusts, government companies, or any foreign entities. They must distribute at least 95% of their total annual contributions to eligible political parties by the end of the financial year.
The governance of Electoral Trusts is strictly regulated, with the Central Board of Direct Taxes (CBDT) playing a key role. Under the Electoral Trust Scheme 2013, the CBDT sets forth operational guidelines and approval procedures. An electoral trust must apply for approval from the CBDT, which can be granted for a maximum of three years. Approval may be revoked if the trust fails to comply with regulations or ceases legitimate operations.
Political parties in India enjoy various privileges, including tax exemptions and access to state resources, although they do not receive direct state funding. According to Section 29B of the Representation of the People Act, 1951, political parties can accept voluntary contributions. The Companies Act, 2013, allows companies to donate a portion of their profits to political parties or electoral trusts, which can be deducted from their income tax under specific conditions.
Electoral Trusts must maintain high transparency levels by submitting annual reports and audit details to the Election Commission of India. These reports must provide comprehensive information about the contributions received and donations made to political parties.
Electoral Trusts play a vital role in promoting transparency and accountability in political financing in India. By regulating political donations through these trusts, the government aims to reduce undue influence and foster a more transparent electoral process.
Q1. What are Electoral Trusts in India?
Answer: Electoral Trusts are non-profit entities established under the Companies Act to promote transparency in political funding by collecting and distributing contributions to political parties.
Q2. Who can contribute to Electoral Trusts?
Answer: Contributions can be made by Indian citizens, domestic companies, and resident entities, but not by non-citizens or foreign entities.
Q3. What percentage of contributions must Electoral Trusts distribute?
Answer: Electoral Trusts are required to distribute at least 95% of their total annual contributions to eligible political parties before the financial year ends.
Q4. What is the role of the CBDT in regulating Electoral Trusts?
Answer: The Central Board of Direct Taxes (CBDT) sets operational guidelines and approval procedures for Electoral Trusts, ensuring compliance with financial regulations.
Q5. How do Electoral Trusts enhance transparency in political funding?
Answer: By acting as a neutral intermediary and requiring detailed reporting, Electoral Trusts promote accountability in political donations, thereby enhancing transparency.
Question 1: What is the primary purpose of Electoral Trusts in India?
A) To collect taxes
B) To ensure transparent political funding
C) To manage government funds
D) To regulate political parties
Correct Answer: B
Question 2: Which entity regulates the functioning of Electoral Trusts?
A) Reserve Bank of India
B) Central Board of Direct Taxes
C) Election Commission of India
D) Ministry of Finance
Correct Answer: B
Question 3: What is the minimum percentage of contributions that Electoral Trusts must distribute to political parties?
A) 50%
B) 75%
C) 90%
D) 95%
Correct Answer: D
Question 4: Who can contribute to Electoral Trusts?
A) Only foreign entities
B) Indian citizens and domestic companies
C) Government organizations
D) Non-resident Indians only
Correct Answer: B
Question 5: Which act governs the establishment of Electoral Trusts in India?
A) Income Tax Act
B) Companies Act
C) Representation of the People Act
D) Finance Act
Correct Answer: B
Question 6: What must Electoral Trusts submit to maintain transparency?
A) Monthly financial statements
B) Annual reports and audit details
C) Quarterly tax returns
D) Donor privacy reports
Correct Answer: B
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