Experts are intrigued by the new Income Tax Bill, 2025 retaining provisions related to electoral bonds, which were rendered unconstitutional by the Supreme Court last year, saying it could be because of legislative oversight or the government’s intention to bring it back in some other form.
Electoral bonds have been mentioned in the new Income Tax Bill’s Schedule VIII which deals with ‘Income not to be included in the total income of political parties and electoral trusts’.
In a judgement passed on February 15 last year, the Supreme Court had scrapped the Centre’s electoral bonds scheme of anonymous political funding, calling it “unconstitutional” as it was “violative” of the right to freedom of speech and expression and right to information.
Under the existing Income Tax Act, 1961, donations received from companies and individuals through electoral bonds are exempt in the hands of political parties.
The government has brought in a new Income Tax Bill to replace the 64-year old I-T Act. The 622-page Bill is a simplified version of the existing Act which has become complicated over the years because of over 4,000 amendments.
About the electoral bond related provisions in the new I-T Bill, AMRG & Associates Senior Partner Rajat Mohan said the mention of electoral bond provisions in the new Income Tax Bill could be because of a legislative oversight, or a deliberate move to keep the door open for a modified version of the scheme in the future.
“While the Supreme Court had strong and justified grounds for striking down the scheme, the concerns it highlighted can be addressed through structured dialogue and expert consultations. The government still retains the legislative authority to reintroduce a revised political donation framework, provided it aligns with constitutional principles and ensures transparency in electoral funding,” he said.
Mohan said mentioning of the electoral bond in the new Bill may be a strategic decision by policymakers to leave room for future electoral financing reforms.
Shardul Amarchand Mangaldas and Co Partner Rohit Garg said the changes in the new income tax bill are merely structural in nature. There have been no major changes in the substantive provisions and the charging sections. Every provision which was not rendered obsolete has been carried forward into the new Act.
“While the SC has ordered SBI to stop issuing electoral bonds, amendments have to be made under the relevant laws to reflect the judgement. If ever in the future, electoral bonds are re-issued, they will be allowed as a deduction. However, the question regarding details of the donors being made public will have to be addressed under the relevant Acts, as I-T Act merely deals with the taxability aspect,” Garg added.
State Bank of India (SBI) has issued electoral bonds worth Rs 16,518 crore in 30 tranches since the inception of the scheme in 2018.
As per Schedule VIII, a political party has to meet six conditions for claiming tax exemptions on voluntary contributions received by them.
One of the conditions states that “no donation exceeding Rs 2,000 is received by such political party otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as prescribed or through electoral bond”.
Schedule VIII defines electoral bond as “a bond referred to in the explanation to sub-section (3) of section 31 of the Reserve Bank of India Act, 1934”.
