17th Tranche of Electoral Bond: What An Investor Should Know?

If you are an investor looking for something new to invest in, the government has introduced a bond for you. The government approved the issuing of the 17th tranche of electoral bonds on Tuesday, ahead of Assembly elections in five states. The bonds will be available for purchase from July 1 to 10.

An electoral bond is a promissory note that can be purchased from specified State Bank of India branches by any Indian person or company formed in India. Electoral Bonds can be purchased by an Indian citizen or a company founded or created in India.

As part of efforts to introduce openness to political fundraising, Electoral Bonds have been promoted as an alternative to cash donations to political parties.

Individuals can buy Electoral Bonds on their own or with other people. The bonds are similar to banknotes in that they are non-interest bearing and receivable to the bearer on demand. Individuals or parties will be able to buy these bonds digitally or with a cheque.

In the XVII Phase of the sale, State Bank of India (SBI) has been authorised to issue and encash Electoral Bonds through its 29 Authorized Branches from July 1, 2021 to July 10, 2021.

Who is qualified for Electoral Bond?

Only Political Parties that have been registered under Section 29A of the Representation of the People Act, 1951 and have received at least 1% of the votes in the most recent General Election to the House of People or the State Legislative Assembly are eligible to receive Electoral Bonds. Only a qualifying Political Party's bank account with the Authorized Bank will be used to redeem the Electoral Bonds.

What is the best way to utilize electoral bonds?

The Electoral Bonds are good for fifteen calendar days from the date of issue, and if the Electoral Bond is deposited after the validity period has expired, no payment will be made to the payee Political Party. An eligible Political Party's Electoral Bond must be credited on the same day it is placed in its account.

It's really easy to use electoral bonds. Bonds in denominations of Rs 1,000, Rs 10,000, Rs 100,000, and Rs 1 crore would be issued (the range of a bond is between Rs 1,000 to Rs 1 crore). Some SBI branches will have them. A donor with a KYC-compliant account can buy the bonds and then donate them to whichever party or individual they want. The bonds can now be encashed via the party's verified account by the receiver.

Tax on electoral bonds

The donations would be tax-deductible, according to then-finance minister Arun Jaitley. As a result, if the political party files returns, the donor will receive a deduction and the beneficiary, or the political party, would receive a tax exemption.