Supreme Court to Review Anonymous Political Donations | 27 Nov 2025

Source: TH 

Why in News? 

The Supreme Court has decided to review a petition challenging the rule that allows political parties to receive anonymous cash donations below Rs 2000, which petitioners say creates a loophole for opaque, untraceable political funding. 

What Key Concern has been Highlighted in the Petition? 

• Total Ban on Cash Donations: It seeks to end cash donations even up to Rs 2000 allowed under Section 13A(d) of the Income Tax Act, 1961, which enables anonymous contributions, and demands full disclosure of donor details.  
• Violation of Fundamental Rights: The petition argues that Section 13A(d) violates Article 19(1)(a) by denying citizens their right to information, asserting that voters must know the sources of political funding to make informed choices. 
• Directions Sought on Form 24A: The petition seeks a mandamus directing the Election Commission of India (ECI) to scrutinise Form 24A contribution reports and require political parties to deposit contributions lacking address or PAN details.  
  • It also urges the ECI to suspend or withdraw party symbols under Paragraph 16A of the Election Symbol Order, 1968 by issuing notices to defaulting parties. 
• Further Proposed Reforms: It urges that political parties’ accounts be audited by independent auditors appointed by the ECI, and calls for stronger mechanisms to ensure timely submission of contribution and audit reports. 

What Rules Govern Political Donations in India? 

• Representation of People Act (RPA), 1951: Section 29B of the RPA, 1951 permits political parties to receive voluntary contributions from individuals and companies (excluding government companies and foreign sources). 
• Companies Act, 2013: Any company—except a government company or one that is less than three years old—can donate any amount, directly or indirectly, to a political party. However, it is capped at a maximum of 7.5% of their average annual net profit over 3 years. 
• Income Tax Act, 1961: Indian companies and individuals can claim tax deductions on donations made to political parties or electoral trusts under Sections 80GGB and 80GGC. 
• Foreign Contributions (Regulations) Act, 2010 (FCRA): Generally, foreign donations are prohibited. However, the definition of a foreign source was amended to exclude Indian companies with foreign investment (an Indian company with foreign shareholding beyond 50% is not treated as a foreign source). This allows companies (including foreign subsidiaries) to donate, provided they comply with FEMA sectoral caps. 
• Electoral Trusts Scheme, 2013: An Electoral Trust is set up by companies to collect donations from individuals and firms and distribute them to political parties.  
  • It can retain up to 5% of its funds (for administrative expenses), must distribute 95% to eligible parties (registered under section 29A of the RPA, 1951), and cannot accept cash donations. 

Why is Transparency in Political Funding Necessary? 

• Informed Political Choice: Citizens have a fundamental Right to Information on who funds political parties, implicitly protected under Article 19(1)(a), and affirmed in Union of India v. Association for Democratic Reforms (2002) that helps voters make informed choices. 
  • The Supreme Court in Association for Democratic Reforms v. Union of India (2024) struck down the Electoral Bond Scheme for violating voters’ Right to Information under Article 19(1)(a). 
• Supports Institutional Probity: Transparent funding helps dismantle the cycle of quid pro quo and strengthens institutional probity. By reducing opacity, it curbs routine policy distortions in areas such as resource allocation, taxation, and regulation.  
• Safeguard for National Sovereignty: Anonymous funding channels enable foreign interference, allowing hostile state or non-state actors to influence foreign policy, defence procurement, or internal security, threatening India’s strategic autonomy. 
• Preventing Market Distortions: Hidden corporate donations fuel crony capitalism, where political connections override market efficiency.  
  • This distorts resource allocation, suppresses innovation, hurts honest businesses, and undermines sustainable economic growth. 
• Upholds "Egalitarian Democracy": Without transparency, democracy risks becoming a plutocracy, where the wealthy buy political access and influence, undermining the egalitarian principles of the Constitution’s Preamble. 
• Meeting Global Standards: Many countries mandate transparent political funding, such as the United States, which has required disclosures since 1910.  

What Reforms Required for Transparent Political Funding in India? 

• Complete Ban of Anonymous Cash Donations: A crucial reform is to amend Section 13A(d) of the Income Tax Act, 1961, by removing cash donations up to Rs 2000 or replacing it with a lower threshold as a viable solution.  
  • Mandating all political contributions through digital modes would ensure a clear audit trail, eliminate cash, and provide digital access and literacy to avoid voter disenfranchisement. 
  • The 170th Law Commission Report recommended removing Explanation 1 of Section 77 RPA, which allowed friends or parties to spend freely, ensuring all candidate-related expenses count toward the expenditure limit. 
    • Deleting it would make all expenses count. 
• Strengthening Institutional Enforcement: Strengthen the ECI’s powers to de-register non-compliant parties, and appoint independent auditors, while ensuring RBI and SEBI enforce stricter oversight of corporate donations to prevent black money into political funding. 
  • Introducing a mechanism for whistleblower protection or addressing public grievances related to political donations could further strengthen enforcement. 
• Real-Time Transparency: All political parties should be required to publicly upload donor details (PAN, address, amount) on a single ECI portal in real time. This portal should be integrated with the Income Tax Department to automatically verify donations and flag discrepancies for investigation. 
• Systemic & Long-Term Reforms: Implement partial state funding for campaign expenses (e.g., public airtime, limited printing) to reduce dependence on private capital, as recommended by the Indrajit Gupta Committee (1998) and Law Commission (1999). Additionally, set a national election expenditure limit with strict monitoring to ensure fair spending. 
  • State funding reforms could be tied to further accountability measures, such as transparency in how these funds are spent by political parties 

Conclusion 

The Supreme Court’s review of political funding transparency highlights the need to eliminate anonymous cash donations, strengthen institutional oversight, and ensure real-time disclosure of contributions. Transparent funding safeguards democracy, curbs corruption, prevents policy capture, and aligns India with global best practices, enabling voters to make informed electoral choices.