Electoral Bond is a financial instrument for making donations to political parties. These are issued by Scheduled Commercial banks upon authorization from the Central Government to intending donors, but only against cheque and digital payments (it cannot be purchased by paying cash). These bonds shall be redeemable in the designated account of a registered political party within the prescribed time limit from the issuance of bonds.

The electoral bond was announced in the Union Budget 2017-18. Electoral Bond is an effort made to cleanse the system of political funding in India.

This reform is expected to bring about greater transparency and accountability in political funding while preventing future generations of black money.

What is an electoral bond?

“Electoral bond” means a bond issued in the nature of a promissory note which shall be a bearer banking instrument and shall not carry the name of the buyer or payee;

Bank means for the scheme

Authorized bank” means the State Bank of India authorized to issue and encash the bonds in the branches specified in Annexure I to this notification;

Issuing branch” means a designated branch of the authorized bank specified in Annexure I for issuing electoral bonds;

Meaning of person

Person” includes-

(i) an individual;

(ii) a Hindu undivided family;

(iii) a company;

(iv) a firm;

(v) an association of persons or a body of individuals, whether incorporated or not;

(vi) every artificial juridical person, not falling within any of the preceding sub-clauses; and

(vii) any agency, office, or branch owned or controlled by such person.

Eligibility for purchase and encashment of electoral bond.-

(1) The Bond under this Scheme may be purchased by a person, who is a citizen of India or incorporated or established in India.

(2) A person being an individual can buy bonds, either singly or jointly with other individuals.

(3) Only the political parties registered under section 29A of the Representation of the People Act, 1951 (43 of 1951) and secured not less than one percent of the votes polled in the last general election to the House of the People or the Legislative Assembly, as the case may be, shall be eligible to receive the bond.

(4) The bond shall be encashed by an eligible political party only through a bank account with the authorized bank.

Applicability of Know Your Customer Norms.-

(1) The extant instructions issued by the Reserve Bank of India regarding Know Your Customer norms of a bank’s customer shall apply for buyers of the bonds.

(2) The authorized bank may call for any additional Know Your Customer documents if it deems necessary.


The bonds shall be issued in the denomination of Rs. 1000, Rs. 10,000, Rs. 1, 00,000, Rs. 10,00,000 and Rs. 1,00,00,000.

The validity of Bond.-

(1) The bond shall be valid for fifteen days from the date of issue and no payment shall be made to any payee political party if the bond is deposited after the expiry of the validity period.

(2) The bond deposited by any political party to its account shall be credited on the same day.

 Procedure for making an application for the purchase of bonds.–

(1) Every buyer desirous of purchasing bonds can apply with a physical or through online application in the format specified in Annexure-II to this notification.

(2) Every application shall contain particulars as per the format in Annexure-II and shall be accompanied by the specified documents.

(3) On receipt of an application, the issuing branch shall issue the requisite bond, if all the requirements are fulfilled.

(4) The information furnished by the buyer shall be treated confidentially by the authorized bank and shall not be disclosed to any authority for any purposes, except when demanded by a competent court or upon registration of a criminal case by any law enforcement agency.

(5) A non-Know Your Customer compliant application or an application not meeting the requirements of the scheme shall be rejected.

(6) The bond shall be issued to the buyer on a non-refundable basis.

 Periodicity of issue of bonds.-

(1) The bonds under this Scheme shall be available for purchase by any person for a period of ten days each in the months of January, April, July and October as may be specified by the Central Government.

(2) An additional period of thirty days shall be specified by the Central Government in the year of general elections to the House of People.

What is the rate of interest?–

No interest shall be payable on the bond.

Issuing offices and commission payable.-

No commission, brokerage or any other charges for the issue of the bond shall be payable by the buyer against the purchase of the bond.

Payment options.-

(1) All payments for the issuance of the bond shall be accepted in Indian rupees, through demand draft or cheque or through Electronic Clearing System or direct debit to the buyer’s account.

(2) Where payment is made through cheque or demand draft, the same shall be drawn in favour of the issuing bank at the place of issue such bond.

Encashment of the bond.-

(1) The bond can be encashed only by an eligible political party by depositing the same in their designated bank account.

(2) The number of bonds not encashed within the validity period of fifteen days shall be deposited by the authorised

bank to the Prime Minister Relief Fund.

Tax treatment.–

The face value of the bonds shall be counted as income by way of voluntary contributions received by an eligible political party, for the purpose of exemption from Income-tax under section 13A of the Income-tax Act, 1961.

Trading of bonds.–

The bonds shall not be eligible for trading.

Electoral Bond Scheme 2018 under the Income Tax Act, 1961

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