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In this episode, which is twenty-fourth in the podcast series launched by ADR, we look at the total income and expenditure incurred, all over India, by the National Parties during FY 2019-20, as declared by the parties in their audit reports available on the ECI website. Of the total 8 National Parties, six parties submitted their audit reports on time, as per the extended deadline of 30th June 2021, while BJP delayed its submission by 21 days; the audit report of National People’s Party is not available in the public domain at the time of recording of this episode. Every year several registered political parties default and delay the submission of their annual reports to ECI beyond the prescribed due date. These include National, Regional and Unrecognised parties. Except for sending reminder letters, it is not clear whether any action is taken against such parties by ECI or if there is any withdrawal of tax exemption by the CBDT of such parties.

Opening remarks (00:08)

Political parties have multiple sources of funding and thus accountability and transparency should be an important aspect of their functioning. It is essential to have comprehensive and transparent accounting methods and systems which should reveal the true financial position of the parties. To this end, the Election Commission of India (ECI) has made it mandatory for all registered political parties to submit details of their audited reports to the Commission for a given financial year.

 [Pause]

Welcome back to another episode of ADR Speaks! My name is Shelly Mahajan and I am a Senior Program Associate at ADR.


Introduction (00:46)

In this episode, which is twenty-fourth in the podcast series launched by ADR, we look at the total income and expenditure incurred, all over India, by the National Parties during FY 2019-20, as declared by the parties in their audit reports available on the ECI website. Of the total 8 National Parties, six parties submitted their audit reports on time, as per the extended deadline of 30th June 2021, while BJP delayed its submission by 21 days; the audit report of National People’s Party is not available in the public domain at the time of recording of this episode.


Background (01:26)

According to the Finance Act, 2017, Section 13A of the IT Act was amended to state that tax exemption will be given to registered political parties “Provided also that such political party furnishes a return of income for the previous year in accordance with the provisions of sub-section (4B) of section 139 on or before the due date under that section.” Thus, any party which does not submit its IT returns on or before the due date, their income should not be tax-exempted and it is recommended that defaulting parties should be derecognized.

However, ADR’s latest analysis has found that the audit reports of 1 National Party and 11 Regional Parties for FY 2019-20 are unavailable on the website of the ECI, at the time of recording of this episode. These include political parties like National People’s Party (NPEP), Maharashtra Navnirman Sena (MNS), Jammu & Kashmir National Panthers Party (JKNPP), Rashtriya Lok Samta Party (RLSP), Bodoland People’s Front (BPF), Hill State People’s Democratic Party (HSPDP), Jammu & Kashmir National Conference (JKNC), People’s Democratic Front (PDF), People’s Party of Arunachal (PPA), Revolutionary Socialist Party (RSP), United Democratic Party (UDP), Janta Congress Chhattisgarh (JCC (J)).

This is in violation of the aforesaid rule.

 

 

Key findings (02:50)

ADR analysed the annual audit reports of National parties whose statements were available on the ECI website for the FY 2019-20. The following are the findings:

  1. During FY 2019-20, the total income declared by 7 National Political Parties was Rs 4758.206 cr while the total expenditure incurred by these parties amounts to Rs 3072.917 cr. Three parties spent more than income declared, namely INC, NCP & BSP.

 

  1. The top 5 parties with highest total declared income include BJP, INC, CPM, AITC & NCP. BJP has shown the highest income amongst the National Parties, an income of Rs 3623.28 cr. This forms 76.15% of the total income of 7 National Parties during FY

2019-20. INC declared the second highest income of Rs 682.21 cr which forms 14.34% of the total income of the 7 National Parties.

 

  1. Between FY 2018-19 and 2019-20, the income of BJP increased by 50.34%, INC’s income decreased by 25.69% and the highest percentage increase in income was declared by NCP of 68.77%. Between FY 2018-19 and 2019-20, the income of AITC, BSP and CPI decreased.

 

  1. National Parties that received highest income from donations/contributions include BJP – Rs 3427.775 cr, INC – Rs 469.386 cr, AITC – Rs 108.548 cr, CPM – Rs 93.017 cr, NCP – Rs 83.3625 cr and CPI – Rs 3.024 cr.

 

  1. The maximum expenditure for BJP has been towards Election/General Propaganda, INC, NCP, AITC and BSP spent the maximum on Election Expenditure, Rs 864.035 cr, Rs 84.126 cr, Rs 74.65 cr and Rs 51.756 cr, respectively.

 

  1. 4 National parties namely BJP, INC, AITC and NCP collected 62.92% (Rs 2993.826 cr) of the total income of all National parties from donations through Electoral Bonds in FY 2019-20. BJP received donations through Electoral Bonds worth Rs 2555.0001 cr, INC received Rs 317.861 cr, AITC received Rs 100.4646 cr and NCP received Rs 20.50 cr.

 

  1. Total income of political parties from unknown sources (income specified in the IT Returns whose sources are unknown) for FY 2019-20 is Rs 3377.41 cr, which is 70.98% of the total income of the parties. 88.643 % came from Electoral Bonds.

 

  1. Given the anonymity provided to donors by the scheme, it is seen that Electoral Bonds have emerged as the most popular mode of donations to National Political parties for FY 2019-20. More than 62% of the total income of seven National Parties came from Donations through Electoral Bonds (Rs 2993.826 cr), wherein identity of the donor is not disclosed to the public. Of the Regional parties that have submitted their audit reports, 14 Regional Parties have declared receiving donations through Electoral Bonds worth Rs 447.498 cr.

 

  1. It is to be noted that JMM party has declared the name of the donor who donated Rs 1 crore through electoral bonds in its contribution report for FY 2019-20. This raises the question as to whether political parties are aware of the donor’s identity who made contributions via electoral bonds, as can be seen in this case. It appears that though on papers, parties may deny knowledge of the donor’s identity but behind closed doors most parties will generally be aware due to quid pro quo/other affiliations. Moreover, the government-in-power will be privy to this information first-hand as the SBI and RBI work closely with it. It is only the general public which is kept in the dark regarding such donations.

 

  1. Income from sale of coupons declared by INC, NCP & CPM formed 5.747% (Rs 194.095 cr) of income from unknown sources. Coupons are one of the ways devised by the political parties for collecting donations and hence are printed by the party itself. There is no cap or limit as to how many coupons can be printed or the total quantum (that is the total amount/worth of coupons). The only source of information regarding the coupon system is the party itself and no one else. Coupon system does not come under the scope of Election Commission of India and they have no control over it.

 

Key take-away and Conclusion (08:32)

Every year several registered political parties default and delay the submission of their annual reports to ECI beyond the prescribed due date. These include National, Regional and Unrecognised parties. Except for sending reminder letters, it is not clear whether any action is taken against such parties by ECI or if there is any withdrawal of tax exemption by the CBDT of such parties. It is crucial that ECI maintains/regularly updates the status of submission of annual reports by all registered political parties on its website for the information of the public along with the status of the action taken against defaulting parties. Additionally, parties which are repeat defaulters must be served show-cause notices as to why they should not be delisted by the ECI. Serious concerns have been raised by civil society as well as constitutional authorities such as EC and RBI that anonymous donations through Electoral Bonds will encourage money laundering and lead to increased use of black money for political funding through shell companies. Therefore, Electoral Bonds Scheme, 2018 should be entirely scrapped. Most importantly, all political parties must provide all information regarding their finances under the Right to Information Act. This will only strengthen political parties, elections and democracy.

 

[Pause]

Well, that’s all for today’s episode. I hope you all found this useful and interesting. If you like our work, make sure you subscribe to the podcast on our website: adrindia.org and don’t forget to write to us at [email protected] with your feedback. We will be back with another amazing episode. Please stay tuned and thank you for listening. 

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