Election funding refers to the flow and use of money in the political process. It includes contributions made by individuals, companies and other organisations to political parties or candidates, as well as expenditure incurred by political parties and candidates during election campaigns.

Election financing raises an important legal and constitutional question: while political parties and candidates require financial resources to participate effectively in elections, the regulation and disclosure of those funds are also relevant to electoral transparency and the voter’s ability to make an informed choice.

In India, political funding is governed by a framework involving the Representation of the People Act, 1951, the Companies Act, 2013, the Income-tax Act, 1961, and other applicable laws and regulations. The Election Commission of India (ECI) also performs important functions relating to disclosure and election expenditure. The Supreme Court of India has, through its decisions, examined the constitutional limits applicable to political financing.

A major development occurred in 2024, when the Supreme Court declared the Electoral Bond Scheme and certain related statutory amendments unconstitutional. The Court’s judgment addressed the relationship between political-funding confidentiality, citizens’ right to information and constitutional principles governing elections.

What Is Election Funding?

Election funding broadly refers to the money received and spent for political and electoral activities.

Such expenditure may include:

• Election advertising and publicity;
• Public meetings and rallies;
• Travel and campaign-related logistics;
• Digital and social-media communication;
• Campaign materials;
• Administrative expenses; and
• Other lawful election-related expenditure.

The regulation of election funding seeks to establish a framework for recording, reporting and monitoring political contributions and election expenditure.

The Election Commission currently maintains public resources relating to political-party contribution reports, annual audit reports, election expenditure statements and electoral-trust reports.

Issue Arising in Election Funding

The principal constitutional issue concerns the relationship between political funding and the voter’s right to information.

The central question may be stated as:

How should the law balance the legitimate financing of political activity with transparency regarding the sources of political contributions?

The issue became particularly significant in the context of the Electoral Bond Scheme, under which eligible political parties could receive contributions through electoral bonds without the identity of the donor being disclosed to the public in the manner applicable to ordinary contribution reporting.

The Supreme Court considered whether such non-disclosure was compatible with the constitutional right to information under Article 19(1)(a).

Applicable Legal Framework

Article 19(1)(a) of the Constitution of India

Article 19(1)(a) guarantees the fundamental right to freedom of speech and expression.

The Supreme Court has, in its jurisprudence, recognised a corresponding right to know concerning matters relevant to citizens’ participation in a democratic process.

In the electoral-funding context, this principle was considered by the Constitution Bench in the Electoral Bonds case.

Representation of the People Act, 1951

The Representation of the People Act, 1951 (RPA) contains provisions concerning political parties, contributions and election-related matters.

Section 29C deals with the reporting of certain contributions received by political parties. The Election Commission continues to publish contribution reports submitted by recognised political parties, including reports for recent financial years.

Companies Act, 2013

The Companies Act, 2013 contains provisions governing political contributions by companies.

Section 182 has historically imposed conditions on corporate political contributions. Amendments introduced through the Finance Act, 2017 altered the statutory framework concerning corporate contributions, including the earlier contribution limit and disclosure requirements.

These amendments subsequently became part of the constitutional challenge considered by the Supreme Court in the Electoral Bonds case.

Income-tax Act, 1961

The Income-tax Act, 1961 contains provisions concerning the taxation and treatment of political parties and certain political contributions.

Section 13A provides conditions relating to income of political parties for purposes of exemption under the Income-tax Act.

The tax framework therefore operates alongside the election and corporate laws governing political contributions.

Role of the Election Commission of India

The Election Commission of India (ECI) plays an important role in administering elections and monitoring compliance with applicable election laws and expenditure requirements.

Its functions include maintaining and publishing information relating to:

• Political-party contribution reports;
• Election expenditure statements;
• Annual audit reports of political parties;
• Electoral-trust contribution reports; and
• Other election-related disclosures.

The ECI’s current website provides dedicated resources for political-party contribution reports and electoral-bond-related disclosures.

The broader regulatory framework also involves other public authorities depending upon the nature of the transaction, including tax and banking authorities.

Electoral Bonds and Political Funding

One of the most significant developments in India’s political-financing framework was the introduction of the Electoral Bond Scheme.

The scheme permitted eligible political parties to receive contributions through electoral bonds issued through the authorised banking system.

The stated policy objective included facilitating political contributions through banking channels rather than cash-based transactions. At the same time, the confidentiality associated with the scheme generated constitutional questions concerning transparency and the public’s access to information about political funding.

The Supreme Court ultimately examined these issues in Association for Democratic Reforms & Anr. v. Union of India & Ors.

Supreme Court’s 2024 Decision on Electoral Bonds

In Association for Democratic Reforms & Anr. v. Union of India & Ors., 2024, a Constitution Bench of the Supreme Court declared the Electoral Bond Scheme unconstitutional.

The Court held that non-disclosure of information concerning political funding violated citizens’ right to information under Article 19(1)(a). The judgment also addressed amendments made through the Finance Act, 2017 to the Representation of the People Act, the Companies Act and the Income-tax Act.

The Court further held that the amendments to the Companies Act permitting unlimited corporate political contributions were constitutionally invalid on the grounds identified in the judgment.

Following the judgment, the Supreme Court directed the State Bank of India (SBI) to provide relevant electoral-bond information, and the Election Commission subsequently published the information received from SBI and the Supreme Court Registry.

Transparency and the Right to Information

The Electoral Bonds judgment placed significant emphasis on the relationship between political funding and the citizen’s right to information.

The constitutional reasoning considered whether voters should have access to information concerning financial contributions made to political parties when that information may be relevant to their assessment of the political process.

The Court’s decision therefore addressed more than the mechanics of a particular funding instrument. It examined whether statutory mechanisms permitting non-disclosure were compatible with constitutional guarantees and the broader framework of electoral democracy.

Major Regulatory Authorities Involved in Election Funding

Election financing in India involves multiple institutions, each operating within its respective statutory or constitutional sphere.

The ECI currently publishes political-party contribution reports and other financial disclosures through its official platforms.

Key Legal Developments

The development of India’s election-financing framework can broadly be understood through the following stages:

Disclosure-Based Regulation

Political parties are subject to statutory reporting requirements concerning specified contributions and financial records.

Corporate Political Contributions

The Companies Act provides the statutory framework governing political contributions by companies, subject to the provisions applicable at the relevant time.

Introduction of Electoral Bonds

The Electoral Bond Scheme introduced a banking-based mechanism through which eligible political parties could receive political contributions while maintaining donor confidentiality within the scheme.

Constitutional Challenge

The scheme and related statutory amendments were challenged before the Supreme Court on grounds including the violation of citizens’ right to information.

Supreme Court Judgment of 2024

The Constitution Bench declared the Electoral Bond Scheme unconstitutional and also invalidated certain related statutory amendments.

Disclosure of Electoral-Bond Information

Following the Supreme Court’s directions, information concerning electoral-bond purchases and redemptions was provided to the Election Commission and made available through its disclosure portal.

Legal Significance of Election Funding Regulation

Election funding is not limited to the question of how much money political parties or candidates can receive.

It also involves questions concerning:

• The source of political contributions;
• Disclosure and reporting obligations;
• Corporate contributions;
• Election expenditure;
• Tax treatment of political parties;
• Financial transparency;
• The voter’s right to information; and
• Constitutional limits on political-financing mechanisms.

The legal framework therefore involves a combination of statutory regulation, financial reporting, institutional oversight and constitutional review.

Conclusion

Election funding is an important component of the functioning of India’s democratic and electoral system. Political parties and candidates require financial resources to conduct lawful political and electoral activities, while the legal framework also addresses transparency, disclosure and accountability.

The Supreme Court’s 2024 decision in Association for Democratic Reforms v. Union of India represents a significant constitutional development in this area. The judgment examined the relationship between confidentiality in political contributions and citizens’ right to information under Article 19(1)(a), and declared the Electoral Bond Scheme unconstitutional.

The continuing legal framework involves the Representation of the People Act, the Companies Act, the Income-tax Act and election-related regulations, together with the oversight and disclosure functions performed by the Election Commission of India.

The ECI continues to make political-party contribution reports, audit reports, expenditure statements and electoral-bond-related information publicly accessible through its official platforms.

Accordingly, the regulation of election funding remains closely connected with two important considerations: the lawful financing of political activity and transparency in the electoral process