The difference between election funding and electoral bonds

Election funding encompasses the various ways political parties raise money to function, particularly during campaigns. 

It can come from a diverse range of sources like individual contributions, donations from corporations or labor unions, and even public funding allocated by some governments.

Electoral bonds, introduced in India in 2018, were a specific method of election funding intended to address concerns about transparency in political donations. However, they functioned quite differently from traditional funding mechanisms:

Mechanism: Regular election funding can involve direct cash donations, cheques, or even online transactions. Electoral bonds, on the other hand, resembled a bearer bond - a financial instrument purchased from authorized banks by donors. These bonds could then be deposited by the political party, essentially functioning as a pre-paid donation.

Transparency vs. Anonymity: Traditional election funding regulations often require disclosure of donor information, depending on the amount donated and the specific country's laws. Electoral bonds were designed to be anonymous - the identity of the donor remained hidden from the political party receiving the funds. This lack of transparency was a major criticism of the scheme, with concerns that it could be exploited for undisclosed corporate influence or even money laundering.

In consequence, the Supreme Court of India recently struck down the electoral bond scheme. They argued that anonymity in political donations violated the right to information and could potentially undermine a fair electoral process.

To summarize, election funding is the broader concept encompassing all means parties raise money. Electoral bonds were a specific tool within that system, aiming to facilitate anonymous donations. However, their lack of transparency ultimately led to their demise.

What are the rules for purchasing or selling an Electoral Bond?

The concept of Electoral Bonds isn't used in the United States for financing elections. Electoral Bonds are a program specific to India designed to make political donations more transparent.

In the United States, campaign finance laws regulate political donations.

However, here's a breakdown of the rules for buying and selling Electoral Bonds in India:

Purchasing Electoral Bonds:

Who can buy? Only Indian citizens and entities incorporated/established in India can purchase Electoral Bonds. 

Individuals can buy them singly or jointly with others. 

Where to buy? Authorized branches of State Bank of India (SBI) sell Electoral Bonds during designated sale periods. 

The Ministry of Finance announces these periods.

Anonymous purchase: Electoral Bonds are bearer instruments, meaning they are purchased anonymously. No information about the buyer is recorded.

Selling Electoral Bonds (by definition not possible):

Electoral Bonds are not sold by anyone. They are purchased from SBI during designated sale windows.

Once you buy an Electoral Bond, you cannot sell it back.

Encashing Electoral Bonds:

Only eligible political parties can encash Electoral Bonds.

A political party must be registered under Section 29A of the Representation of the People Act, 1951.

The party must have secured at least 1% of the votes polled in the previous national or state legislative assembly election.

Encashment happens through a designated bank account with an authorized bank.