Report No. 255

(d) On electoral trusts

2.28.22. The IT Act has been amended to provide for tax relief on donations to the electoral trusts, setup for the sole purpose of making donations to political parties and as discussed above, the ECI regulates electoral trusts as well through its "Electoral Trust Companies" scheme notified on 10th December 2013. However, there is no disclosure provision under the RPA corresponding to the changes in the income tax laws.

Additionally, the only penalty prescribed non-submission of an annual report of contributions to the ECI as per the prescribed format (detailing the names and addresses of donors and donations given to parties), before the due date of filing of tax returns is that "adverse notice shall be taken" of the failure to comply with the instructions.110 Thus, a new Chapter IVB pertaining to the 'Regulation of Electoral Trusts' should be introduced, to provide for the regulation of electoral trusts with appropriate penal provisions for enforcement in case of default, along the lines of the proposed amendments above.

110. ECI, Guidelines for submission of contribution reports to electoral trusts, No. 56/Electoral Trust/2014/PPEMS, 6th June 2014, available at
<http://eci.nic.in/eci_main1/PolPar/ElectoralTrust_06062014.pdf>

2.28.23. A list of recommendations is given below: