Rules and Regulations relating to fundings made to political parties in India

As per a study done by a CMS,a Delhi based think tank, it has been found that about half of the approximated spend of Rs 1.5 lakh crore on elections over the past 5 years in India has come from unaccounted sources. The bulk of this grey area (unaccounted sources) is from funding done by corporates. To add to anguish, the The clauses of the new Companies Act 2013 also brings in a very minuscule hope to bring in more transparency in corporate funding of political parties.
[icon name=”icon-question-sign”]What are the Regulations and governing laws in India for funding to Political Parties?
Regulations and their respective governing laws for funding Political Parties in India, are as follows:-

PUBLIC FUNDING

Regulation(s):

• No Direct Funding permitted
• Time apportioned to parties for campaigning on state-owned TV (viz. DD National, etc.) and radio networks (viz. All India Radio, etc.) proportional to their performance in yesteryears
• Free provision of electoral rolls and other prescribed materials

Governing Law(s):

• Representation of the People Act, 1951
• Conduct of Election Rules, 1961

INDIVIDUAL CONTRIBUTION(S)

Regulation(s):

• No restrictions on donations from individuals

Governing Law(s):

• Companies Act, 2013

CHECKS ON CONTRIBUTIONS

Regulation(s):

• Complete ban on foreign contributions
• Companies may donate up to 7.5% of the average net profits they made during past 3 years. The earlier Companies Act allowed companies to contribute for a political purpose to any person while the new Companies Act, 2013 is silent on contributions for a political purpose.
• Privately-held companies are now expected to reveal the amount contributed to a political party in their profit and loss statement. This was before limited to listed companies only.

Governing Law(s):

• Foreign Contribution (Regulation) Act, 1976
• Companies Act, 2013

RESTRICTIONS ON A CANDIDATE’S CAMPAIGN EXPENDITURE

Regulation(s):

• Poll expenditure upto Rs 70 Lakhs for each Lok Sabha constituency in bigger states like Maharashtra, Madhya Pradesh, Uttar Pradesh, West Bengal and Karnataka, etc.
• Poll expenditure upto Rs 54 Lakhs for each Lok Sabha constituency in smaller states like Goa, hilly and north eastern states, etc.
• Poll expenditure upto Rs 70 Lakhs in Delhi and uniform at Rs at Rs 54 lakh for all other UTs

Governing Law(s):

• Representation of the People’s Act, 1951

DISCLOSURE REQUIREMENTS

Regulation(s):

• Compulsory filing of Income Tax Returns by the Political parties
• Political Parties have to disclose details of donors who donated Rs 20,000 or more
• Privately-held companies have to disclose the amount contributed to a political party in their profit and loss statement.

Governing Law(s):

• Representation of the People Act, 1951
• Election Commission’s order on March 13, 2003
• Companies Act, 2013

CIVIL PENALTIES

Regulation(s):

• Sanctions include loss of seat, prohibition from contesting elections for a period up to 6 years

Governing Law(s):

• Representation of the People Act, 1951
• Foreign Contribution (Regulation) Act, 1976

CRIMINAL PENALTIES

Regulation(s):

• Imprisonment up to 5 years for taking foreign contribution(s)
• Any Company violating contribution limits may be fined up to five times the funding and officers of the company responsible may be imprisoned up to 6 months
• Albeit, the penalty for violation has been raised from 3 times the amount of funding to 5 times, the term for imprisonment of company officials in default has been cut down from 3 years to 6 months.

Governing Law(s):

• Representation of the People Act, 1951
• Indian Penal Code,1860
• Companies Act 2013
• Foreign Contribution Regulation Act, 1976

Month: Current Affairs - May, 2014