The latest data from the Association for Democratic Reforms shows a steep rise in donations and a clear gap between big and small parties.

ADR is a non-government organisation that tracks political funding, election spending and candidate details, and publishes reports on transparency in the system.

At the same time, questions about where this money comes from and how it is tracked continue to be raised.

What does the latest ADR report reveal?

According to the latest Association for Democratic Reforms report, political donations in FY 2024–25 stood at ₹6,648.56 crore.

• BJP received around ₹6,074 crore.
• Congress received around ₹517 crore.
• Other parties such as AAP and CPI(M) received much smaller amounts.

For Example: Out of every ₹100 donated, nearly ₹91 went to BJP. Congress received about ₹8 of every ₹100 in donations.

• Around 92 percent of total funding came from corporates.
• Only around 7 percent came from individual donors.

BSP declared that the party did not receive any donations above Rs 20,000 this year, as it has been declaring for the past 19 years.

Who can donate to political parties in India?

Political parties in India can receive donations from individuals, companies and electoral trusts.

• Any Indian citizen is allowed to donate money. There is no legal restriction on individual contributions.
• Companies are also permitted to donate and today they have become one of the biggest sources of political funding.
• Electoral trusts also play an important role. These trusts collect money from companies and then distribute it to political parties.
• In simple terms, political funding often does not flow directly. It moves through structured financial channels.

What does this mean for political funding in India?

Over the years, political funding has become increasingly dependent on corporate donations.

• Individual contributions still exist, but their share is much smaller compared to companies.
• This has changed the balance of political funding, where large corporate donors now play a central role in the system.

What are the rules for political donations?

Any donation above ₹20,000 must be disclosed to the Election Commission of India.

• Political parties are required to submit annual contribution reports showing such donations.
• Most contributions are expected to be made through banking channels so that they can be tracked.
• But there is a limitation. Donations below ₹20,000 do not require detailed disclosure. This creates a gap where small donations can remain outside full transparency.

How has the donation format changed in India?

Political funding in India has shifted from cash-based and informal donations to a more structured and banking-linked system.

• Earlier, most donations were unrecorded or loosely documented and came from individuals and local networks.
• Now, funding is largely routed through bank transfers, corporate donations and electoral trusts.
• Reporting rules have also become stricter, with disclosure required for donations above ₹20,000.
• Electoral Bonds scheme, used between 2018 and 2024, also became a major channel where donations were made through banks but donor identity was not publicly revealed.

Why did electoral bond system change happen?

This change happened mainly to reduce cash transactions and bring political funding into the formal banking system.

• The idea was to make political money more traceable and reduce unaccounted donations.
• At the same time, corporate participation in politics increased as the economy grew, which also changed funding patterns.
• Electoral bonds were introduced as a reform step to provide a legal and banked route for large donations, but the Supreme Court later struck them down in 2024 over transparency concerns.
• Stronger disclosure rules and regulatory pressure also pushed parties towards structured funding systems.

What happened after electoral bonds were scrapped?

After electoral bonds were scrapped in 2024, political funding moved back to declared channels.

• Donations are now mainly coming through corporate contributions, electoral trusts and individual bank transfers.
• The identity of donors is more visible in official disclosures compared to the electoral bond period.
• However, some small donations below ₹20,000 still remain outside detailed reporting, so full transparency is still not complete.

What are electoral trusts and how do they work?

Electoral trusts are organisations that act as intermediaries between companies and political parties.

• Instead of donating directly, companies give money to these trusts.
• The trusts then distribute funds to political parties.
• They are required to transfer at least 95 percent of the funds they receive and must disclose donor details.
• One of the most well known examples is Prudent Electoral Trust.
• What this means is that a large portion of political funding is now routed through a small number of trusts, which concentrates financial flows.

Are political donations taxable in India?

Political donations are tax free for political parties.

• Donors, including individuals and companies, can claim tax deductions under the Income Tax Act of 1961 if donations are made through non cash methods.
• This creates a system where donations are encouraged through tax incentives.
• Political parties receive funds without paying tax on donations.

How does India compare with other countries in political funding? Different countries follow very different systems of political funding.

• India allows corporate donations and does not have a strict upper limit. Transparency is moderate.
• The United Kingdom has stricter disclosure rules and tighter control over donors.
• France bans corporate donations entirely.
• The United States allows large scale political funding through political action groups but with strong reporting systems.
• Germany follows a mixed model of public and private funding with strong transparency norms.
• India sits somewhere in the middle but leans more towards corporate influence.