The Indian political system allows parties to exist without a clear constitutional definition, treating them as mere "associations" under Article 19. This legal vacuum has enabled many parties, especially RUPPs, to receive huge, often opaque, donations while enjoying income‑tax exemptions.
Key Developments
- BBC investigation (2025) exposed extraordinary donations to six RUPPs, highlighting the lack of transparency.
- ADR report (18 July 2025) showed a 223 % rise in declared income of RUPPs for FY 2022‑23; only 739 of 2,764 RUPPs filed financial returns.
- ECI’s "Cleaning up the Electoral System" note (9 August 2025) announced the delisting of 334 RUPPs out of 2,854, aiming to prune inactive parties.
- T.N. Seshan’s 1994 order warned of “adhocism” in party affairs and mandated contesting elections within five years of registration.
- Electoral‑bond scheme (2018‑2024) created a veil over donor identities; the Supreme Court struck it down in 2024, yet many RUPPs still received large sums.
Important Facts
- Twenty‑two parties held ₹18,742.31 crore for the 2024 general election, with ₹7,416.31 crore raised after the election was announced.
- Post‑election, parties retained ₹14,848.46 crore after spending ₹3,861.57 crore on campaigns.
- From 2015‑16 to 2023‑24, declared donations rose from ₹714 crore to ₹7,203 crore, but only 41.76 % of total donations over nine years were claimed as tax‑exempt.
- Individual donors and Hindu Undivided Families (HUFs) now dominate political contributions, eclipsing corporate donors.
- The exchequer lost an estimated ₹11,813 crore in tax revenue due to exemptions for political donations.
Exam Relevance
Understanding the funding architecture of political parties is crucial for RPA provisions, especially Sections 29A, 29B and the income‑tax Section 13A. The role of the ECI in delisting parties, auditing accounts, and enforcing the Model Code of Conduct (MCC) is a frequent UPSC topic. The Supreme Court’s intervention on electoral bonds illustrates the judiciary’s check on executive actions, a classic example for GS1 (Constitutional Law) and GS4 (Ethics).
Way Forward
- Empower the CAG or its nominee to audit all party accounts annually.
- Introduce a statutory limit on election‑related expenditure; link tax exemption to compliance with this limit.
- Automate deregistration of any RUPP that fails to contest elections within the stipulated five‑year window.
- Create a centralized digital portal for parties to upload standardized financial statements, ensuring real‑time public access.
- Strengthen judicial oversight by directing the Supreme Court to order a court‑monitored probe into electoral‑bond transactions and the flow of funds to “shell” parties.
Only by tightening legal definitions, enforcing transparent accounting, and curbing unchecked donations can India safeguard the integrity of its electoral democracy.