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Business News/ Money / Personal Finance/  Electoral bonds scrapped: What about status of benefits assured to taxpayers?
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Electoral bonds scrapped: What about status of benefits assured to taxpayers?

Electoral bonds issued by individuals or entities were eligible for tax exemptions under Section 80GG and Section 80GGB of the Income Tax Act, 1961

Introduced in 2017, Electoral Bonds allowed individuals and corporate entities to donate unlimited sums of money to political parties anonymously through financial instruments. (Pixabay)Premium
Introduced in 2017, Electoral Bonds allowed individuals and corporate entities to donate unlimited sums of money to political parties anonymously through financial instruments. (Pixabay)

In a significant ruling on February 15, the Supreme Court scrapped the Electoral Bonds scheme. A five-judge bench comprising Chief Justice of India, DY Chandrachud, Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, and Manoj Misra delivered a unanimous verdict.

Electoral bonds

Introduced in 2017, Electoral Bonds allowed individuals and corporate entities to donate unlimited sums of money to political parties anonymously through financial instruments. 

Electoral bonds and income tax exemption

Electoral bonds issued by individuals or entities were eligible for tax exemptions under Section 80GG and Section 80GGB of the Income Tax Act, 1961. Following the Supreme Court's ruling, a question arises regarding whether firms and individuals can still avail of income tax benefits 

“Political parties could accept donations through these bonds as per the provisions of Section 13A of the Income Tax Act. Following the judgment and the Supreme Court's directive to the State Bank of India (SBI) to cease issuing electoral bonds, there is uncertainty regarding whether firms and individuals can still avail tax benefits for donations made during the fiscal year FY 23-24," said Abhishek Soni CEO and Co-founder Tax2win

“However, an official has clarified that firms, individuals, and others who have made donations to political parties through electoral bonds in FY24 would still be able to claim the benefits of a 100% tax deduction when filing their returns before July 31, 2024," added Soni.

Mumbai-based tax and investment expert Balwant Jain welcomes the SC decision on the electoral bonds. “The taxpayers can claim the benefit of tax exemption under the IT Act but only for the bonds that have been encashed by the beneficiary political parties," said Jain.

The apex court instructed the State Bank of India (SBI) to cease issuance immediately. Additionally, the bank was required to provide the Election Commission (EC) with the names of bond purchasers, purchase dates, and donation amounts by March 6.

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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ABOUT THE AUTHOR
Sangeeta Ojha
A business media enthusiast. Writes on personal finance, business and banking.
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Published: 23 Feb 2024, 02:49 PM IST
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