The Election Expenditure Limit:

The section 77 of RoPA 1951 mandates that every candidate at an election needs to keep a
separate and correct account of all poll expenditures between the date on which he was
nominated to date on which results are declared. Thus, legislation mandates for
maintenance of records, but there is no such statutorily defined limit on poll expenditures.
However, we have a ceiling on election expenses fixed by the Government of India.

As per the current norms, the maximum limit of election expenses per candidate is as
follows:

Lok Sabha Constituencies:

1. 70 Lakh for all States except Arunachal Pradesh, Goa and Sikkim.
2. 54 Lakh for Arunachal Pradesh, Goa and Sikkim = 54.00 Lakhs
3. 70 Lakh for NCT of Delhi
4. 54 Lakh for other Union Territories.

Assembly Constituencies:
1. 28 Lakh for bigger states and NCT of Delhi
2. 20 Lakh for smaller states and UTs.

These ceilings are fixed by the Union Government by order and NOT by election
commission. Election commission however recommends the same to the government. The
objective of these provisions is to encourage candidates to declare their poll expenses
truthfully in the interest of greater transparency.

Political Funding & Party Funding:

Political funding is often equated with party funding. But political funding not limited
to party funding because it may encompass election expenditure of candidates at
various tiers,ferderal,state and local.

Political Funding=party Funding + Election expenditure

Why political funding or party funding is necessary for political parties?

Parties need funds to project their political regime and ideas and politically represent
the people who follow them.(As per Supreme court).Because of this reason political
parties are registered with the Election commission of India are 100% exempted from
paying income as per Section 13 A of Income tax act of 1961 which says that,
Section 13A of the Income-tax Act, 1961 grants exemption from tax to political
parties in respect of,
(i) Income from house property;
(ii) Income from other sources;
(iii) Capital gains; and
(iv) Income by way of voluntary contributions received by the political parties
from any person.

The aforesaid categories of income would qualify for exemption without any
monetary or other limit and the income so exempted would not even be includible
in the total income of the political party for the purpose of assessment.

The tax exemption will be applicable only if the following conditions are fulfilled:

(i) The political party must keep and maintain such books and other documents as
would enable the Assessing Officer to properly deduce the income of the political
party from those accounts.

(ii) The political party must keep and maintain records in respect of each such
voluntary contribution which is in excess of 2,000 giving details of the amount
(recently amended)

(iii) The accounts of the political party must be audited by a Chartered Accountant.

(iv) A report under section 29C(3) of the Representation of People Act, 1951 has
to be submitted by the treasurer of such political party or any other person
authorised by the political party in this behalf for every financial year. If there is a
failure to submit the above report, no exemption under this section shall be
available for the political party for that financial year.

For the purposes of this section, ―political party means a political party registered
under section29A of the Representation of the People Act, 1951.

Problematic areas in part funding:

Income by way of voluntary contributions received by the political parties

from any person.

According to a recent resort to the Right to Information Act, the Association

for Democratic Reforms found that the total income of all political parties in India
from 2004-05 to 2014-15 was ₹11,367.34 crore, in which the share of the Congress
and the BJP was more than half. Till recently political parties were required to
disclose donations only for amounts higher than ₹20,000. From such known donors,
for the period mentioned above, political parties received ₹1,835.63 crore, i.e. 16%, of
their income, and another 15% they raised by way of membership, sale of coupons,
interest on deposits, etc. The rest, i.e. 69%, of the income of political parties came
from unknown sources, and this segment has been steadily on the rise during this
period. for some regional parties, more than three-fourths of income came from
unknown sources. While the income of national parties increased by 313% from
such sources during this period, that of regional parties increased by 652%.

Corporate Funding: corporate sector in India that contributes to political

party kitties has generally not favoured the disclosure of the name of the donor,
for obvious reasons. It is also one of the main cause of crony capitalism and use of
black money in elections.

How the influence of corporate sector in elections started?

post-Independence Licence Raj combined with a ban on corporate

donations meant that there were some corporations seeking regulatory favours
from the government and a paucity of electoral funds. By the time corporate
donations were legalised in 1985, it was too late. The system had grown used to
black money and there were neither tax incentives nor privacy laws to aid corporate
donations.

The system continued to incentivise evasiveness and false declarations.

For instance, a 2003 law that capped expenditure by candidates but allowed parties
and independent supporters to spend on their behalf meant that candidates were
under-reporting expenditure.

Money power in elections:

Unrealistic limit of election expenditure mandate . While the legal limit that
a Lok Sabha candidate can spend is ₹70 lakh, a victorious candidate on an average
does not spend less than ₹10 crore for the purpose.

One of the important considerations before political parties in selecting their

candidates today is whether they can foot the expenditure of their election.
Often other considerations, such as the background of the candidate or his or her
ideological commitment, become secondary.

How current regulatory environment perpetuate black money in elections?

The implications of the current regulatory environment include a dependence

on black money due to a lack of public funding, low financial accountability caused
by a lack of transparency and democracy within parties, and the transaction
costs of numerous small donations relative to a few large ones.
Recent measures:

1)Amendments in Finance Bill 2017:

Donations to political parties by companies:

Currently, a company may contribute up to 7.5% of the average of its net profits in
the last three financial years, to political parties. The company is required to disclose
the amount of contributions made to political parties in its profit and loss account,
along with the name of the political parties to which such contribution was made.

The amendments to the Finance Bill, 2017 propose to remove:

(i) the limit of 7.5% of net profit of the last three financial years, for contributions
that a company may make to political parties,
(ii) the requirement of a company to disclose the name of the political parties to
which a contribution has been made.

In addition, contributions to political parties will have to be made only through a

cheque, bank draft, electronic means, or any other scheme notified by the
government to make contributions to political parties.

2)Electoral Bonds:
Note that Finance Bill, 2017 contains provisions to introduce electoral bonds to make
contributions to political parties. Electoral bonds will be bonds issued by notified
banks, for an amount paid through cheque or electronic means.

Suggestions or Way out?

Bringing down election expenditure and ensuring that it provides an

opportunity to get the best public men and women to participate in the
institutional life of Indian democracy.

1) Holding simultaneous elections to the Lok Sabha as well as the State Assemblies.
2)State funding of elections.
3)Moving towards many smaller contributions as has been done successfully in a
number of countries, such as Canada, France, Germany and the Netherlands. Indirect
subsidies and individual offsetting tax credits for political contributions have helped
effect this shift.
4) citizen activism that keeps a close watch over campaigning.
5) political patronage itself needs to stopped. This calls for not merely a
decentralisation of power in more substantive ways, but also reordering the relation
between the legislature and executive.