Report No. 255

On Electoral Trusts

12. A new Part IVB should be inserted to the RPA dealing with the "Regulation of Electoral Trusts", and detailing provisions pertaining to their entitlement to accept contributions, disclosure obligations, and penal provisions so that the RPA can be amended in line with the changes already made to the IT Act and the ECI guidelines. The new part IVB, section 29I reads as:

Part IVB

Regulation of Electoral Trusts.

29I. Electoral Trusts entitled to accept contribution.- (1) Subject to the provision of the Companies Act, 2013 and the Income Tax Act, 1961, an Electoral Trust approved by the Central Board of Direct Taxes under the Electoral Trusts Scheme, 2013 may accept any amount of contribution voluntarily offered to it by any person or company other than a Government Company:

Provided that no Electoral Trust shall be eligible to accept any contribution from any foreign source defined under clause (e) of section (2) of Foreign Contribution (Regulation) Act, 1976.

Provided further that all words and phrases used in this Part, shall have the same meaning as assigned to them in section 29B.

2. Maintenance, audit, publication of accounts by electoral trust.- (a) Each Electoral Trust shall maintain accounts clearly and fully disclosing all the amounts received by it and clearly and fully disclosing the expenditure incurred by it. The account shall be maintained according to the financial year. Within six months of the close of each financial year, each Electoral Trust shall submit its accounts, duly audited by a qualified and practicing chartered accountant from panel of Chartered Accountants, selected by the Comptroller and Auditor General to the Election Commission.

(b) The Election Commission shall make publicly available, on its website, the audited accounts submitted by all electoral trusts under sub-section (1).

(c) The Election Commission shall also keep these accounts on file for three years after their submission and shall make them available for public inspection on the payment of a prescribed fee.

3. Declaration of contribution received by the Electoral Trust.- (a) The treasurer of an Electoral Trust or any other person authorised by the trust in this behalf shall, in each financial year, prepare a report in respect of the following, namely.-

(i) the contribution received by such electoral trust from any person in that financial year, with name, address, PAN of such persons.

Provided that the Electoral Trust or any other person authorised by the Trust in this behalf shall not receive any donation in cash and without the name, address and PAN (if any);

(ii) the contribution to political parties from electoral trusts in that financial year with date amount, mode of payment and name of political party.

Provided that the electoral trusts shall not make any contribution to political parties in cash other than by bank account transfer.

(b) The report under this sub-section 2shall be in such form as may be prescribed.

(c) The report for a financial year under sub-section (1) shall be submitted by the treasurer of an Electoral Trust or any other person authorised by the Trust within six months of the close of each financial year to the Election Commission.

4. Disclosure of contribution reports submitted by Electoral Trusts by Election Commissio.- (a) The Election Commission shall make publicly available, on its website, the contribution reports, submitted by all Electoral Trusts under sub-sections (2) and (3) of this section.

(b) The Election Commission shall also keep these reports on file for three years after their submission and shall make them available for public inspection on the payment of a prescribed fee.

5. Penalty.- (1) Where the Electoral Trust fails to submit a report in the prescribed form within the time specified under sub-sections (2) or (3) of this section then, notwithstanding anything contained in the Income-tax Act, 1961 (43 of 1961), such Electoral Trust:

(a) shall not be entitled to any tax relief for such financial year under the Income-tax Act, 1961; and

(b) shall be liable to a penalty of twenty five thousand rupees for each day of non-compliance and so long as the non-compliance continues.

Provided that If such default continues beyond the period of ninety days, the Election Commission may ban the electoral trust from receiving any donations in future, after giving a reasonable opportunity.

(2) If the Election Commission finds on verification, undertaken whether suo motu or on information received, that the statement of accounts filed under this section is false in any particular, the Election Commission shall impose a fine up to a maximum of fifty lakh rupees on such Electoral trust.

(3) If the Electoral Trust has received funds from an impermissible donor, it shall be liable to penalty that is five times the amount so accepted by the Trust.

Explanation.- For the purpose of this section, "impermissible donor" refers to:

(a) a government company, as defined in section 29B;

(b) a company that does not comply with the requirements of sub-section (1) section 182 of the Companies Act, 2013; or

(c) any foreign source defined under clause (e) of section 2 of the Foreign Contribution (Regulation) Act, 1976."