Amidst uncertainty following the Supreme Court’s declaration of electoral bonds as unconstitutional, taxpayers contributing through these bonds in FY24 can still avail themselves of 100% tax deduction benefits. An official statement clarified that individuals, firms, and other entities making donations to political parties via electoral bonds can claim tax deductions until July 31, 2024, despite the court ruling.
Significance of Clarification
The clarification comes as a relief for many taxpayers who were uncertain about their tax implications after the apex court’s verdict on electoral bonds. The decision ensures consistency in tax treatment for contributions made through this channel during the fiscal year.
Electoral Bonds Usage Statistics
According to the Association of Democratic Reforms (ADR), a total of 28,030 electoral bonds worth Rs 16,518 crore have been sold between March 2018 and January 2024. The BJP leads in contributions with Rs 6,566 crore, followed by the Congress with Rs 1,123 crore and the Trinamool Congress with Rs 1,092 crore.
Legal Perspective on Tax Deductions
Legal experts like Rubal Bansal Maini from Luthra and Luthra emphasize that until any amendments are made in the Income Tax Act, taxpayers can continue to claim 100% deductions on donations made to registered political parties.
Supreme Court’s Verdict and Directives
While the Supreme Court recently invalidated the electoral bonds scheme citing violations of fundamental rights, it also directed the State Bank of India, the designated bank for issuing electoral bonds, to furnish purchase details to the Election Commission of India (ECI) by March 6. The ECI, in turn, is mandated to disclose these details on its official website by March 13, ensuring transparency in electoral funding.
In conclusion, the continuation of tax relief for electoral bonds in FY24 provides clarity to taxpayers amidst legal developments, while the Supreme Court’s directives aim to enhance transparency in political funding.
