Consider the following statements regarding Tax deductibility of electoral bonds for corporate entities:
1. The Income Tax Rules 1962 provide for the classification of electoral bonds as capital assets, and the Central Board of Direct Taxes issued a notification in 2018 allowing for the amortization of these bonds over a five-year period.
2. The Finance Act 2017 introduced amendments to the Income Tax Act 1961, enabling corporate entities to claim deductions for contributions made through electoral bonds.
3. The Representation of the People Act 1951 includes provisions for the Election Commission to audit corporate donations, and the 2017 amendment linked these audits to the quarterly filing of balance sheets by private limited companies.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 1 is incorrect. Statement 3 is incorrect.
Statement 2 is correct because the Finance Act 2017 amended the Income Tax Act, 1961, to allow corporate entities to deduct electoral bond contributions as business expenditure under Section 37. Statement 1 is incorrect as there is no provision for the amortization of electoral bonds over five years; they are treated as a deductible expense in the year of purchase. Statement 3 is incorrect because the Representation of the People Act, 1951, does not mandate the Election Commission to audit corporate donations, nor does it link them to quarterly balance sheet filings by private companies.
Consider the following statements regarding Judicial review of the 'Money Bill' classification for the Finance Act:
1. The Supreme Court's 2024 ruling on electoral bonds relied on the precedent set in the 2016 Aadhaar Act case, where the court affirmed the classification of the Aadhaar Act as a Money Bill due to its focus on consolidated fund expenditure.
2. The Finance Act, 2017, amended the Companies Act, 2013, to remove the cap on corporate political donations, a provision that was challenged in the Delhi High Court before being transferred to the Supreme Court for final adjudication.
3. The procedure for certifying a bill as a Money Bill is governed by Article 109 of the Constitution, which grants the Rajya Sabha the power to propose amendments to such bills if they involve matters of national security or electoral funding.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the 2024 Supreme Court ruling in the Electoral Bonds case did not rely on the Aadhaar judgment to affirm the Money Bill classification; rather, it emphasized that the Finance Act, 2017, was improperly certified as a Money Bill. Statement 2 is incorrect because the Finance Act, 2017, removed the cap on corporate donations through amendments to the Companies Act, but this was challenged directly in the Supreme Court, not the Delhi High Court. Statement 3 is incorrect because Article 110 defines Money Bills and Article 109 explicitly restricts the Rajya Sabha's powers, prohibiting it from amending or rejecting Money Bills, regardless of the subject matter.
Consider the following statements regarding Implications of bond data disclosure on the principle of free and fair elections:
1. The Supreme Court of India declared the Electoral Bonds Scheme unconstitutional on February 15, 2024, citing a violation of the fundamental right to information.
2. The Finance Act of 2017 introduced amendments to the Representation of the People Act, 1951, allowing political parties to receive contributions through electoral bonds without disclosing donor identities.
3. Under the Electoral Bonds Scheme notified in 2018, the State Bank of India was the only authorized financial institution to issue and encash these bearer instruments.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the Supreme Court in 'Association for Democratic Reforms v. Union of India' (Feb 2024) struck down the scheme for violating Article 19(1)(a) by denying voters the right to information about political funding. Statement 2 is correct because the Finance Act 2017 amended the RPA 1951, the Companies Act, and the Income Tax Act to facilitate anonymous corporate and individual funding via bonds. Statement 3 is correct as the 2018 notification designated the State Bank of India (SBI) as the sole authorized agency for the issuance and encashment of these interest-free bearer instruments.
Consider the following statements regarding Right to Information vs Right to Privacy of donors:
1. The Electoral Bonds Scheme was introduced through the Finance Act of 2016, which amended the Foreign Contribution Regulation Act to allow political parties to receive anonymous funding from foreign-incorporated entities.
2. The Supreme Court of India struck down the Electoral Bonds Scheme on February 15, 2024, citing a violation of the voters' right to information under Article 19(1)(a).
3. Under the Electoral Bonds Scheme notified in 2018, the identity of the donor remained confidential to the public, though the State Bank of India maintained records of the purchasers.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 3 is correct. Statement 1 is incorrect.
Statement 1 is incorrect because the Electoral Bonds Scheme was introduced via the Finance Act, 2017, which amended the Representation of the People Act, 1951, and the Companies Act, 2013, rather than the FCRA. Statement 2 is correct as the Supreme Court's landmark February 15, 2024, verdict declared the scheme unconstitutional for violating the voters' right to information under Article 19(1)(a). Statement 3 is correct because the scheme's design ensured donor anonymity from the public while the State Bank of India, as the authorized issuer, held the KYC details and purchase records of all donors.
Consider the following statements regarding Role of the State Bank of India as the sole authorized issuer:
1. The electoral bond framework established in 2018 involved the State Bank of India verifying the eligibility of political parties based on the criteria of securing at least five percent of the total votes polled in the most recent Lok Sabha elections.
2. The State Bank of India provided periodic reports to the Ministry of Finance regarding the total value of electoral bonds issued, and the bank was authorized to disclose the names of corporate donors to the public after the expiration of the bond validity period.
3. The Electoral Bond Scheme 2018 designated the State Bank of India as the authorized financial institution to issue and encash bonds through its 29 notified branches.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 3 is correct. Statement 1 is incorrect. Statement 2 is incorrect.
Statement 3 is correct because the 2018 Scheme explicitly designated the State Bank of India (SBI) as the sole authorized issuer, operating through 29 specified branches. Statement 1 is incorrect because the eligibility criterion for political parties was securing at least one percent of the votes polled in the last Lok Sabha or Legislative Assembly elections, not five percent. Statement 2 is incorrect because the scheme maintained donor anonymity, and SBI was legally prohibited from disclosing donor identities to the public, except when mandated by court orders.
Consider the following statements regarding Corporate donation limits under Section 182 of the Companies Act:
1. The Finance Act of 2017 removed the previous ceiling that limited corporate political donations to 7.5 percent of a company's average net profits from the preceding three financial years.
2. Under the provisions of Section 182, a company is permitted to contribute to a political party only if the board of directors passes a resolution at a meeting.
3. The Supreme Court of India in the 2024 Electoral Bonds judgment held that the removal of the profit-linked cap on corporate donations was violative of Article 14 of the Constitution.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct because the Finance Act 2017 amended Section 182 of the Companies Act, 2013, to remove the 7.5% profit-linked cap, allowing unlimited corporate donations. Statement 2 is correct as Section 182 mandates that any political contribution must be authorized by a board resolution passed at a meeting of the Board of Directors. Statement 3 is correct because the Supreme Court's 2024 judgment struck down the removal of this cap, ruling that allowing unlimited corporate funding for political parties is arbitrary and violates the principle of free and fair elections under Article 14.
Consider the following statements regarding Implications of bond data disclosure on the principle of free and fair elections:
1. The Supreme Court judgment in the Association for Democratic Reforms vs. Union of India case held that the anonymity provided by the scheme hindered the voters' ability to identify potential quid pro quo arrangements.
2. Data released by the Election Commission of India in March 2024 revealed that the Future Gaming and Hotel Services PR company was the largest purchaser of electoral bonds.
3. Section 29C of the Representation of the People Act, 1951, was amended to exempt political parties from reporting contributions received through electoral bonds to the Election Commission of India.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the Supreme Court's February 2024 verdict declared the scheme unconstitutional, noting that anonymous funding prevents voters from assessing potential quid pro quo arrangements between corporations and parties. Statement 2 is correct because ECI data confirmed that Future Gaming and Hotel Services PR was indeed the top purchaser, having bought bonds worth over ₹1,300 crore. Statement 3 is correct because the Finance Act 2017 amended Section 29C of the RPA, 1951, to explicitly exempt political parties from disclosing the identity of donors who contribute via electoral bonds, a provision the Supreme Court subsequently struck down.
Consider the following statements regarding Impact on the level playing field in multi-party democracy:
1. The Electoral Bonds Scheme was introduced through the Finance Act of 2017, which amended the Reserve Bank of India Act, 1934.
2. As per the 2018 notification, electoral bonds were issued in denominations of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh, and ₹1 crore.
3. The Supreme Court of India struck down the Electoral Bonds Scheme in February 2024, citing violations of the fundamental right to information.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the Finance Act, 2017 introduced the scheme by amending the RBI Act, 1934 and the Representation of the People Act, 1951. Statement 2 is correct because the 2018 notification officially authorized these specific denominations for the purchase of electoral bonds. Statement 3 is correct as the Supreme Court, in the Association for Democratic Reforms vs. Union of India case (February 2024), declared the scheme unconstitutional for violating the voters' right to information under Article 19(1)(a) of the Constitution.
Consider the following statements regarding Role of the State Bank of India as the sole authorized issuer:
1. The Reserve Bank of India Act 1934 was amended in 2017 to include provisions for the issuance of bearer instruments, which allowed the State Bank of India to operate the bond scheme under the oversight of the Election Commission.
2. The Finance Act 2017 introduced the Electoral Bond Scheme to promote transparency in political funding, and the State Bank of India maintained a public registry of donor identities accessible through the RTI portal.
3. The Supreme Court of India in its 2024 judgment observed that the State Bank of India acted as a nodal agency for political funding, noting that the bank had been issuing these instruments since the inception of the Representation of the People Act 1951.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
All three statements are incorrect because the Electoral Bond Scheme was notified under the Finance Act 2017, not the RBI Act 1934, and the scheme ensured donor anonymity rather than maintaining a public registry via RTI. Furthermore, the Supreme Court's 2024 judgment struck down the scheme as unconstitutional, and the State Bank of India issued these bonds under the 2018 Scheme, not the Representation of the People Act 1951. The RBI had initially expressed reservations regarding the scheme, noting that it could facilitate money laundering and undermine the integrity of the Indian currency.
Consider the following statements regarding Mechanism of the 15-day validity period for encashment:
1. The Finance Act of 2017 introduced the Electoral Bond Scheme with a 30-day validity period, which was subsequently reduced to 15 days following the 2019 amendments to the Banking Regulation Act.
2. Political parties registered under Section 29A of the Representation of the People Act, 1951, that secured at least one percent of the votes polled in the last general election were eligible to receive these bonds.
3. The State Bank of India recorded the date of issuance on the face of the bond, which served as the reference point for calculating the 15-day encashment deadline.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 3 is correct. Statement 1 is incorrect.
Statement 1 is incorrect because the Electoral Bond Scheme, notified in 2018, stipulated a 15-day validity period from its inception, not 30 days. Statement 2 is correct as eligibility was restricted to parties registered under Section 29A of the RPA, 1951, that secured at least 1% of votes in the most recent Lok Sabha or Legislative Assembly elections. Statement 3 is correct because the State Bank of India, as the sole authorized issuer, explicitly printed the date of issuance on the bond, which functioned as the mandatory starting point for the 15-day encashment window.
Consider the following statements regarding Definition of 'Political Party' under Section 29A of Representation of the People Act:
1. The Representation of the People Act, 1951, was amended in 1989 to introduce Section 29A, which empowers the President of India to grant recognition to political parties based on their national presence.
2. The Election Commission of India publishes the notice of the application for registration in two national daily newspapers and two local daily newspapers to invite objections from the public.
3. To be eligible for electoral bonds, a political party is registered under Section 29A and has secured at least one percent of the votes polled in the most recent General Election to the Lok Sabha or a State Legislative Assembly.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 3 is correct. Statement 1 is incorrect.
Statement 1 is incorrect because Section 29A was inserted into the Representation of the People Act, 1951, by the 1989 amendment to empower the Election Commission of India (ECI), not the President, to register political parties. Statement 2 is correct as the ECI mandates the publication of registration applications in two national and two local dailies to invite public objections within 30 days. Statement 3 is correct because, under the Electoral Bond Scheme guidelines, only parties registered under Section 29A that secured at least 1% of the votes in the last general election to the Lok Sabha or Legislative Assembly were eligible to receive such bonds.
Consider the following statements regarding Impact on the level playing field in multi-party democracy:
1. The Finance Act of 2017 removed the cap on corporate donations to political parties, which previously limited contributions to seven and a half percent of a company's average net profit over three years.
2. The Election Commission of India maintained a digital registry of all electoral bond purchasers, which provided for the periodic disclosure of donor identities to the public during the 2019 general elections.
3. The Representation of the People Act, 1951, was amended in 2017 to include provisions for electoral bonds, which allowed political parties to receive anonymous donations through the State Bank of India.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the Finance Act 2017 removed the 7.5% cap on corporate donations, but it did not remove the requirement that companies must be at least three years old to donate. Statement 2 is incorrect as the Electoral Bonds Scheme was designed specifically to ensure anonymity, meaning the ECI did not maintain a registry of purchasers and donor identities were not disclosed to the public. Statement 3 is incorrect because the amendments were made to the Reserve Bank of India Act, 1934, and the Income Tax Act, 1961, rather than the Representation of the People Act, 1951.
Consider the following statements regarding Eligibility criteria for political parties to encash bonds:
1. Political entities recognized as state parties by the Election Commission of India are eligible to receive funds through bonds provided they have maintained an active audit report for the previous three financial years.
2. The scheme permits encashment by parties registered with the Election Commission of India that have received at least two percent of the total valid votes in the preceding Rajya Sabha biennial elections.
3. A political party is eligible to encash electoral bonds only if it is registered under Section 29A of the Representation of the People Act, 1951.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 3 is correct. Statement 1 is incorrect. Statement 2 is incorrect.
Statement 3 is correct because the Electoral Bond Scheme, notified in 2018, mandates that only parties registered under Section 29A of the Representation of the People Act, 1951, are eligible. Statement 1 is incorrect because eligibility is based on securing at least one percent of votes polled in the last General Election to the Lok Sabha or the Legislative Assembly, not merely being a recognized state party with audit reports. Statement 2 is incorrect because the threshold of one percent of votes applies to the last General Election to the Lok Sabha or State Legislative Assembly, not the Rajya Sabha biennial elections.
Consider the following statements regarding Constitutional challenge regarding 'unfettered' corporate donations:
1. The Supreme Court judgment observed that the amendment to Section 182 of the Companies Act, 2013, enabled loss-making companies to contribute funds to political parties.
2. The Electoral Bonds Scheme allowed political parties to receive anonymous funding through instruments issued by the State Bank of India in denominations ranging from ₹1,000 to ₹1 crore.
3. The Association for Democratic Reforms (ADR) filed the primary writ petition in 2017 challenging the anonymity provided by the Electoral Bonds Scheme.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct because the Supreme Court's 2024 judgment noted that removing the cap on corporate donations and the requirement for profitability allowed even loss-making entities to influence politics through 'quid pro quo' arrangements. Statement 2 is correct as the scheme, notified in 2018, permitted the purchase of bearer-like bonds from the SBI in denominations of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh, and ₹1 crore, ensuring donor anonymity. Statement 3 is correct because the NGO Association for Democratic Reforms (ADR) and Common Cause were the primary petitioners who challenged the scheme in 2017, arguing it violated the citizens' right to information and promoted corruption.
Consider the following statements regarding Supreme Court ruling in Association for Democratic Reforms vs Union of India:
1. The Electoral Bonds Scheme was introduced through the Finance Act of 2017, which amended the Representation of the People Act of 1951 to include provisions for anonymous corporate donations.
2. The State Bank of India acted as the authorized issuer of electoral bonds, and the Supreme Court directed the bank to submit donor data to the Election Commission of India by March 6, 2024.
3. The Finance Act of 2017 removed the previous cap on corporate political donations, which was previously limited to 7.5 percent of a company's average net profits over the preceding three years.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the Finance Act 2017 amended the Reserve Bank of India Act, the Companies Act, and the Income Tax Act, not the Representation of the People Act. Statement 2 is incorrect because the Supreme Court directed the State Bank of India to submit donor data to the Election Commission of India by March 6, 2024, but the deadline for publication by the ECI was March 13, 2024, and the statement's premise regarding the issuer is correct but the overall context of the ruling invalidates the scheme entirely. Statement 3 is incorrect because the Finance Act 2017 did not merely remove the cap; it amended Section 182 of the Companies Act to remove the 7.5% limit of average net profits and also eliminated the requirement for companies to disclose the names of political parties to which they donated.
Consider the following statements regarding Public interest litigation (PIL) scope in electoral funding reforms:
1. The Supreme Court's 2024 verdict relied on the 2013 judgment in the Lily Thomas case, which pertains to the disqualification of convicted legislators, to invalidate the bond issuance process.
2. The Supreme Court of India delivered its judgment in the Association for Democratic Reforms v. Union of India case on February 15, 2024, declaring the Electoral Bonds Scheme unconstitutional.
3. The Finance Act of 2016 introduced the Electoral Bonds Scheme to replace the existing system of cash donations, and the first tranche of bonds was issued in March 2017.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 1 is incorrect. Statement 3 is incorrect.
Statement 2 is correct as the Supreme Court struck down the Electoral Bonds Scheme on February 15, 2024, in the ADR v. Union of India case, citing violations of the right to information. Statement 1 is incorrect because the verdict relied on the 'right to information' under Article 19(1)(a) rather than the Lily Thomas case, which specifically addressed the disqualification of convicted lawmakers. Statement 3 is incorrect because the scheme was introduced via the Finance Act of 2017, not 2016, and the first tranche of bonds was issued in March 2018.
Consider the following statements regarding Transparency in the electoral trust vs electoral bond models:
1. The Electoral Bonds Scheme was introduced through the Finance Act, 2017, which amended the Representation of the People Act, 1951.
2. Electoral bonds were issued in denominations of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh, and ₹1 crore by the State Bank of India.
3. Under the Electoral Trusts Scheme of 2013, trusts are permitted to receive voluntary contributions from companies and individuals for distribution to political parties.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
All three statements are correct: The Electoral Bonds Scheme was indeed introduced via the Finance Act, 2017, amending the RPA, 1951, the RBI Act, and the Companies Act. The denominations of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh, and ₹1 crore were officially notified by the government for issuance through the State Bank of India. Finally, the Electoral Trusts Scheme, 2013, established a framework for corporate and individual contributions to be pooled and distributed to registered political parties, functioning as a distinct mechanism from the bond system.
Consider the following statements regarding Doctrine of proportionality in electoral funding:
1. The 2018 notification allowed political parties to receive funds through electoral bonds provided they secured at least 5% of the total votes polled in the most recent Lok Sabha or Legislative Assembly elections.
2. The proportionality test was first introduced in the 2018 Electoral Bonds case to evaluate financial transparency, and it replaced the previous 'rational nexus' test used by the judiciary for electoral law challenges.
3. The Supreme Court observed that the 2017 amendments to the Income Tax Act provided for tax exemptions on electoral bonds, and these provisions remain protected under the constitutional doctrine of legislative privilege.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the 2018 notification required parties to secure at least 1% of the votes polled in the last general election, not 5%. Statement 2 is incorrect as the 'doctrine of proportionality' is a long-standing constitutional test used to determine if state interference with fundamental rights is justified, and it was not newly introduced or intended to replace the 'rational nexus' test in this context. Statement 3 is incorrect because the Supreme Court struck down the electoral bonds scheme, ruling that the amendments to the Income Tax Act were unconstitutional and that legislative privilege does not shield laws that violate fundamental rights like the right to information.
Consider the following statements regarding Transparency in the electoral trust vs electoral bond models:
1. Political parties receiving funds through electoral bonds were required to file contribution reports with the Election Commission of India under Section 29C of the Representation of the People Act.
2. The Finance Act of 2017 introduced amendments to the Companies Act, 2013, which removed the cap on corporate donations and established the Electoral Trust as the primary vehicle for political funding.
3. Electoral trusts are registered under Section 25 of the Companies Act, 1956, and are governed by the guidelines issued by the Central Board of Direct Taxes.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 3 is correct. Statement 2 is incorrect.
Statement 1 is correct because political parties were mandated to report contributions received via electoral bonds to the ECI under Section 29C of the RPA, 1951. Statement 3 is correct as electoral trusts are non-profit entities registered under Section 25 of the Companies Act, 1956 (now Section 8 of the 2013 Act) and operate under CBDT guidelines. Statement 2 is incorrect because while the Finance Act, 2017 removed the 7.5% cap on corporate donations, it introduced Electoral Bonds as the primary funding vehicle, not Electoral Trusts, which have existed since the 2013 Electoral Trusts Scheme.
Consider the following statements regarding Constitutional challenge regarding 'unfettered' corporate donations:
1. The Supreme Court of India struck down the Electoral Bonds Scheme on February 15, 2024, citing a violation of the fundamental right to information under Article 19(1)(a).
2. Under the Finance Act 2017, the government removed the 7.5% cap on corporate donations to political parties, allowing companies to contribute any amount regardless of their profit margins.
3. The Supreme Court's 2024 verdict refers to the 2013 Companies Act framework, which allowed political donations only from companies that have been in operation for at least five years and maintain a positive net worth.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is incorrect.
Statement 1 is correct as the Supreme Court declared the Electoral Bonds Scheme unconstitutional in February 2024, ruling that the lack of transparency violates the voter's right to information under Article 19(1)(a). Statement 2 is correct because the Finance Act 2017 amended Section 182 of the Companies Act, 2013, to remove the previous 7.5% cap on corporate profits for political donations, thereby enabling unlimited funding. Statement 3 is incorrect because the 2013 Companies Act originally mandated that a company must be in existence for at least three years (not five) to make political contributions, and the 2017 amendment further removed this requirement entirely.
Consider the following statements regarding Legal validity of the Finance Act 2017 amendments:
1. The Finance Act 2017 removed the requirement for political parties to maintain a detailed record of donors contributing less than twenty thousand rupees, a threshold originally established by the 2003 amendment to the Representation of the People Act.
2. The Supreme Court bench led by Chief Justice D.Y. Chandrachud examined the anonymity of donors under the Finance Act 2017, citing the 2019 amendments to the Companies Act which introduced the requirement for quarterly disclosure of donations.
3. The Electoral Bonds Scheme notified in January 2018 allowed political parties to encash bonds within 15 days, and the scheme was governed by the Foreign Contribution Regulation Act 2010 to monitor overseas funding.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the Finance Act 2017 did not remove the threshold for reporting, but rather facilitated anonymous funding through bonds, while the Representation of the People Act already allowed non-disclosure for contributions under ₹20,000. Statement 2 is incorrect because the 2017 Finance Act actually removed the cap on corporate donations and the requirement for companies to disclose the names of political parties they donate to, rather than introducing quarterly disclosure. Statement 3 is incorrect because the Electoral Bonds Scheme was explicitly exempted from the Foreign Contribution Regulation Act (FCRA) 2010, which was a key point of contention regarding the influx of foreign funds into Indian politics.
Consider the following statements regarding Definition of 'Political Party' under Section 29A of Representation of the People Act:
1. The application for registration under Section 29A includes a copy of the memorandum or rules and regulations of the association, which should contain a specific provision regarding internal democracy.
2. Any association seeking registration under Section 29A is expected to submit an application to the Election Commission within a period of thirty days following the date of its formation.
3. Section 29A of the Representation of the People Act, 1951, provides the legal framework for the registration of associations and bodies of individual citizens as political parties with the Election Commission of India.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Section 29A of the Representation of the People Act, 1951, mandates that an association must submit its memorandum or rules, which must include a specific provision for internal democracy, to the Election Commission of India (ECI) for registration. The law further requires the application to be submitted within thirty days following the date of the association's formation, providing the formal legal framework for recognizing political parties. As all three statements accurately reflect the procedural and legal requirements stipulated under Section 29A, they are entirely correct.
Consider the following statements regarding Implications of bond data disclosure on the principle of free and fair elections:
1. The Finance Act of 2016 amended the Foreign Contribution Regulation Act to allow political parties to accept donations from foreign-sourced entities through the electoral bond window during national election cycles.
2. The 2018 Electoral Bonds Scheme notification was issued under the Reserve Bank of India Act, 1934, and provided for the issuance of bonds in denominations of one thousand to one crore rupees through regional rural banks.
3. Political parties were eligible to receive electoral bonds only if they were registered under Section 29A of the Representation of the People Act, 1951, and secured at least one percent of the votes polled in the most recent general election.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 3 is correct. Statement 1 is incorrect. Statement 2 is incorrect.
Statement 3 is correct as eligibility required registration under Section 29A of the RPA, 1951, and securing at least 1% of votes in the last election. Statement 1 is incorrect because the 2016 amendment to the FCRA actually redefined foreign companies to allow them to donate, but electoral bonds were governed by the Finance Act, 2017, not 2016. Statement 2 is incorrect because the scheme was notified under the Finance Act, 2017, and bonds were issued exclusively through authorized branches of the State Bank of India, not regional rural banks.
Consider the following statements regarding Judicial review of the 'Money Bill' classification for the Finance Act:
1. The Finance Act of 2017 introduced the Electoral Bonds Scheme under Section 31 of the Reserve Bank of India Act, which the Speaker of the Lok Sabha certified as a Money Bill based on the recommendations of the Public Accounts Committee.
2. The 2018 notification by the Ministry of Finance enabled the issuance of electoral bonds through authorized branches of the State Bank of India, following the approval of the Election Commission of India under the Representation of the People Act, 1951.
3. The Supreme Court of India in the 2024 judgment of Association for Democratic Reforms v. Union of India struck down the Electoral Bonds Scheme for violating the fundamental right to information under Article 19(1)(a).
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 3 is correct. Statement 1 is incorrect. Statement 2 is incorrect.
Statement 3 is correct as the Supreme Court's 2024 judgment in the Association for Democratic Reforms case declared the Electoral Bonds Scheme unconstitutional for violating the voters' right to information under Article 19(1)(a). Statement 1 is incorrect because the Speaker of the Lok Sabha certifies a bill as a Money Bill under Article 110, not based on the Public Accounts Committee's recommendations. Statement 2 is incorrect because the scheme was introduced through the Finance Act, 2017, and did not require the approval of the Election Commission of India, which had actually expressed strong reservations against the anonymity of the scheme.
Consider the following statements regarding Mechanism of the 15-day validity period for encashment:
1. If an Electoral Bond is deposited by an eligible political party after the expiry of the 15-day validity period, the proceeds are credited to the Prime Minister's National Relief Fund.
2. Under the 2018 notification, political parties maintained the option to extend the 15-day validity period by an additional week upon filing a formal request with the Election Commission of India.
3. The 15-day validity period for Electoral Bonds was introduced to prevent the long-term circulation of these financial instruments in the secondary market.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 3 is correct. Statement 2 is incorrect.
Statement 1 is correct because the Electoral Bond Scheme, 2018, explicitly mandates that bonds not encashed within the 15-day validity period must be deposited into the Prime Minister's National Relief Fund. Statement 3 is correct as the 15-day window was a deliberate regulatory design to ensure the instruments functioned as short-term donations rather than tradable currency in a secondary market. Statement 2 is incorrect because the 2018 notification provided no provision for extending the validity period, and the Election Commission of India held no authority to grant such extensions.
Consider the following statements regarding Impact on the level playing field in multi-party democracy:
1. Under the scheme, political parties were eligible to encash bonds only if they secured at least one percent of the votes polled in the most recent general election.
2. The Supreme Court judgment in the Association for Democratic Reforms case in 2024 upheld the anonymity of donors, while simultaneously directing the Election Commission to publish the encashment data of political parties.
3. The Reserve Bank of India issued a formal notification in January 2018, which established the guidelines for the issuance of bonds and authorized the oversight of donor anonymity by the Comptroller and Auditor General.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is correct as the Electoral Bond Scheme mandated that only political parties registered under Section 29A of the Representation of the People Act, 1951, and having secured at least 1% of votes in the last general election, were eligible to receive bonds. Statement 2 is incorrect because the Supreme Court's 2024 judgment struck down the scheme, declaring the anonymity of donors unconstitutional as it violated the citizens' right to information. Statement 3 is incorrect because the RBI had actually expressed strong reservations regarding the scheme's potential to facilitate money laundering and undermine the integrity of the currency, and the CAG had no role in overseeing donor anonymity.
Consider the following statements regarding Impact of removing the cap on corporate profit percentage for donations:
1. The Companies Act 1956 originally introduced the 7.5% profit cap, and the 2017 amendment shifted this limit to 10% of the total annual turnover of the corporation.
2. The Election Commission of India recommended the removal of the 7.5% cap in its 2015 report, citing the need to increase transparency in political funding through digital instruments.
3. The Finance Act 2017 amended Section 182 of the Companies Act 2013 to remove the 7.5% cap on corporate donations to political parties.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 3 is correct. Statement 1 is incorrect. Statement 2 is incorrect.
Statement 3 is correct because the Finance Act 2017 amended Section 182 of the Companies Act 2013 to remove the 7.5% cap on corporate donations, allowing companies to donate any amount. Statement 1 is incorrect because the original cap was 5% of average net profits under the Companies Act 2013, not 7.5% under the 1956 Act, and there was no amendment shifting it to 10% of annual turnover. Statement 2 is incorrect because the Election Commission of India actually opposed the removal of the cap, warning that it would facilitate the creation of shell companies for money laundering and opaque political funding.
Consider the following statements regarding Definition of 'Political Party' under Section 29A of Representation of the People Act:
1. The Supreme Court of India, in its February 2024 judgment, declared the Electoral Bonds Scheme unconstitutional and directed the Election Commission to disclose the details of bond encashment.
2. The Election Symbols (Reservation and Allotment) Order, 1968, serves as the primary legislation governing the registration of political parties under Section 29A and defines the criteria for state party status.
3. Under Section 29A(5), every political party applying for registration is expected to bear true faith and allegiance to the Constitution of India as by law established.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 3 is correct. Statement 2 is incorrect.
Statement 1 is correct as the Supreme Court's February 2024 verdict struck down the Electoral Bonds Scheme for violating the right to information and directed the disclosure of donor and encashment details. Statement 3 is correct because Section 29A(5) of the Representation of the People Act, 1951, mandates that parties must submit a memorandum pledging allegiance to the Constitution of India. Statement 2 is incorrect because the registration of political parties is governed by Section 29A of the Representation of the People Act, 1951, while the Election Symbols (Reservation and Allotment) Order, 1968, is a subordinate legislation issued by the Election Commission specifically for the recognition and allotment of symbols, not for the initial registration process.
Consider the following statements regarding Impact of removing the cap on corporate profit percentage for donations:
1. The 2017 amendment to the Representation of the People Act 1951 introduced the removal of the donation cap to align Indian corporate law with the recommendations of the Law Commission's 255th report.
2. Under the 2017 legislative framework, companies are permitted to donate to political parties provided they have been in operation for at least five years and have audited financial statements for each of those years.
3. The Finance Act 2017 introduced a provision requiring companies to disclose the names of political parties receiving donations in their annual profit and loss accounts to ensure shareholder oversight.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the 2017 amendment to the Companies Act, 2013, removed the 7.5% cap on corporate profits for political donations, which contradicted the Law Commission's 255th report that actually advocated for stricter regulations to prevent shell companies. Statement 2 is incorrect as the 2017 amendment removed the requirement that a company must be in existence for at least three years to make political donations, effectively allowing even loss-making or newly incorporated shell companies to donate. Statement 3 is incorrect because the Finance Act 2017 amended the Companies Act to remove the requirement for companies to disclose the names of political parties they donate to in their profit and loss accounts, thereby reducing transparency and shareholder oversight.
Consider the following statements regarding Corporate donation limits under Section 182 of the Companies Act:
1. Section 182 of the Companies Act, 2013, permitted Indian companies to contribute any amount of their profits to political parties.
2. The 2013 Companies Act provides for a mandatory cooling-off period of two financial years for newly incorporated companies before they become eligible to exercise political donation rights under Section 182.
3. The Election Commission of India maintains a centralized digital portal under Section 182 that tracks the cumulative donation limits for companies exceeding a turnover of five hundred crore rupees.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is correct because the Finance Act, 2017 amended Section 182 to remove the cap that previously limited corporate donations to 7.5% of a company's average net profits of the preceding three years. Statement 2 is incorrect because the Companies Act, 2013 requires a company to be in existence for at least three financial years to make political contributions, not two. Statement 3 is incorrect because Section 182 does not mandate the Election Commission to maintain a centralized digital portal for tracking cumulative donation limits, and no such statutory mechanism exists under the Act.
Consider the following statements regarding Right to Information vs Right to Privacy of donors:
1. The Finance Act of 2017 introduced amendments to the Representation of the People Act, 1951, and the Companies Act, 2013, to facilitate the issuance of electoral bonds.
2. In the 2024 judgment, the Supreme Court directed the State Bank of India to disclose the details of electoral bonds purchased and redeemed between April 12, 2019, and February 15, 2024.
3. The Association for Democratic Reforms (ADR) and Common Cause were the primary petitioners who challenged the constitutional validity of the Electoral Bonds Scheme before the Supreme Court.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the Finance Act, 2017 amended the RPA, 1951, the Companies Act, 2013, and the Income Tax Act, 1961 to legalize anonymous political funding via electoral bonds. Statement 2 is correct because the Supreme Court's landmark February 2024 verdict struck down the scheme and mandated the SBI to disclose all purchase and redemption data from April 2019 to February 2024. Statement 3 is correct as the Association for Democratic Reforms (ADR) and Common Cause were the lead petitioners who successfully challenged the scheme on grounds of violating the citizens' Right to Information under Article 19(1)(a).
Consider the following statements regarding Corporate donation limits under Section 182 of the Companies Act:
1. The Finance Act of 2017 amended Section 182 to allow foreign-sourced funds to be routed through electoral trusts, provided the funds originate from a subsidiary registered under the Companies Act, 2013.
2. The Companies Act of 1956 introduced the initial 5 percent profit-based cap on political contributions, which was later increased to 10 percent by the 2013 legislative amendment.
3. Section 182 of the Companies Act allows government-owned enterprises to make political contributions provided the contribution is disclosed in the annual audit report filed with the Registrar of Companies.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the 2017 amendment removed the cap on corporate donations and the requirement to disclose beneficiary details, but it did not introduce a mechanism for foreign-sourced funds via electoral trusts. Statement 2 is incorrect because the Companies Act, 2013 originally capped contributions at 7.5% of average net profits of the preceding three years, not 10%, and the 2017 Finance Act subsequently removed this entire percentage-based ceiling. Statement 3 is incorrect because Section 182 explicitly prohibits government-owned companies from making any political contributions.
Consider the following statements regarding Judicial review of the 'Money Bill' classification for the Finance Act:
1. Article 110(1) of the Constitution defines a Money Bill as one containing provisions exclusively dealing with the imposition, abolition, remission, alteration, or regulation of any tax.
2. In the 2019 decision of Rojer Mathew v. South Indian Bank Ltd, the Supreme Court referred the question of the validity of the Finance Act, 2017, as a Money Bill to a larger seven-judge Constitution Bench.
3. The Electoral Bonds Scheme allowed political parties to receive anonymous donations through banking channels, and the 2017 Finance Act provided the legal framework for this by amending the Income Tax Act, 1961, through a Presidential Ordinance.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is incorrect.
Statement 1 is correct as Article 110(1) defines a Money Bill based on its exclusive content regarding taxes, expenditure, or borrowing. Statement 2 is correct because the Supreme Court in Rojer Mathew (2019) expressed concerns over the bypass of the Rajya Sabha and referred the Finance Act, 2017 challenge to a larger bench. Statement 3 is incorrect because the Finance Act, 2017 was passed as a Money Bill by Parliament, not through a Presidential Ordinance, and it amended the Representation of the People Act, 1951, and the Companies Act, 2013, in addition to the Income Tax Act, 1961, to introduce the scheme.
Consider the following statements regarding Public interest litigation (PIL) scope in electoral funding reforms:
1. Article 19(1)(a) of the Constitution, which guarantees the right to freedom of speech and expression, formed the primary basis for the Supreme Court's ruling regarding the voter's right to information about political funding.
2. The State Bank of India was the designated authorized bank for the issuance and encashment of electoral bonds under the notification issued by the Ministry of Finance on January 2, 2018.
3. Section 29C of the Representation of the People Act, 1951, was amended by the Finance Act, 2017, to exempt political parties from disclosing contributions received through electoral bonds.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct because the Supreme Court in the 2024 judgment held that the right to information regarding political funding is essential for informed voting under Article 19(1)(a). Statement 2 is correct as the 2018 Electoral Bond Scheme notification explicitly designated the State Bank of India as the sole authorized institution for the issuance and encashment of these bonds. Statement 3 is correct because the Finance Act, 2017, amended Section 29C of the Representation of the People Act, 1951, to exempt political parties from the mandatory requirement of reporting contributions received via electoral bonds to the Election Commission of India.
Consider the following statements regarding Anonymity clause under Section 31 of RBI Act:
1. Bearer bonds issued under the RBI Act are classified as negotiable instruments, and their transferability is governed by the provisions of the Negotiable Instruments Act, 1881, as amended in 2017.
2. The Finance Act of 2017 modified Section 29C of the Representation of the People Act, 1951, to include electoral bonds within the mandatory disclosure threshold for political parties.
3. Purchasers of electoral bonds are eligible for tax deductions under Section 80GGB of the Income Tax Act, 1961, provided the donation is made through the designated branches of the Reserve Bank of India.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because electoral bonds were issued under the Electoral Bond Scheme 2018, not the Negotiable Instruments Act, and were specifically designed to be non-negotiable instruments. Statement 2 is incorrect because the Finance Act 2017 actually amended the Representation of the People Act to exempt political parties from disclosing donations received via electoral bonds, thereby ensuring anonymity. Statement 3 is incorrect because electoral bonds were sold exclusively through authorized branches of the State Bank of India (SBI), not the Reserve Bank of India, and tax deductions were available to companies under Section 80GGB regardless of the specific bank branch, provided the entity was authorized.
Consider the following statements regarding Role of the Election Commission of India in monitoring bond-based funding:
1. Eligible political parties were those that secured at least one percent of the votes polled in the most recent general election to the Lok Sabha or a Legislative Assembly.
2. Political parties eligible to receive electoral bonds were those registered under Section 29A of the Representation of the People Act, 1951.
3. The Supreme Court of India delivered the final judgment striking down the Electoral Bond Scheme as unconstitutional on February 15, 2024.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the scheme mandated that only parties securing at least 1% of votes in the last general election were eligible to receive funding. Statement 2 is correct because the scheme was restricted to parties registered under Section 29A of the Representation of the People Act, 1951, that had also secured the requisite vote share. Statement 3 is correct as the Supreme Court, in its landmark judgment in the Association for Democratic Reforms vs. Union of India case, declared the Electoral Bond Scheme unconstitutional on February 15, 2024, citing violations of the Right to Information.
Consider the following statements regarding Role of the State Bank of India as the sole authorized issuer:
1. Under the 2018 notification, the State Bank of India processed bond applications during specific windows, and the bank shared the unique alphanumeric code of each bond with the Income Tax Department for verification purposes.
2. The Electoral Bond Scheme permitted the purchase of bonds in denominations ranging from one thousand to one crore rupees, with the State Bank of India transferring the proceeds to the Prime Minister's National Relief Fund if not claimed within fifteen days.
3. The State Bank of India functioned as the primary issuer of electoral bonds, and the scheme allowed political parties to receive funds from foreign-sourced entities provided the contributions were routed through the bank's designated foreign exchange branches.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the scheme ensured anonymity, and the SBI did not share unique alphanumeric codes with the Income Tax Department. Statement 2 is incorrect because unencashed bonds were transferred to the Prime Minister's Relief Fund only if they were not deposited by a political party within the 15-day validity period, not if they were 'not claimed' by the purchaser. Statement 3 is incorrect because the scheme explicitly prohibited foreign contributions, and the Foreign Contribution Regulation Act (FCRA) and Representation of the People Act barred political parties from accepting funds from foreign sources.
Consider the following statements regarding Role of the Election Commission of India in monitoring bond-based funding:
1. The Reserve Bank of India provided the regulatory framework for electoral bonds in 2018, which included the power to audit the donor records held by the State Bank of India.
2. Electoral bonds were available for purchase by any citizen of India or body incorporated in India for a period of ten days in the months of January, April, July, and October.
3. The Election Commission of India submitted data regarding electoral bond encashments to the Supreme Court in a sealed cover following the court's order in November 2023.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 3 is correct. Statement 1 is incorrect.
Statement 1 is incorrect because the Electoral Bond Scheme was notified by the Ministry of Finance, and the RBI had expressed significant reservations regarding the scheme's potential to undermine the currency and facilitate money laundering, rather than providing the regulatory framework. Statement 2 is correct as the 2018 scheme allowed purchase by Indian citizens or entities during specified ten-day windows in January, April, July, and October, with an additional 30-day window in election years. Statement 3 is correct because, following the Supreme Court's directives in the challenge against the scheme, the Election Commission of India submitted the data on bond encashments received from political parties to the court in a sealed cover.
Consider the following statements regarding Doctrine of proportionality in electoral funding:
1. Under the proportionality test, the court determined that the government failed to demonstrate that the scheme was the least restrictive measure to achieve the objective of curbing illicit political funding.
2. The Electoral Bonds Scheme, notified by the Ministry of Finance on January 2, 2018, allowed anonymous contributions to political parties through bearer instruments issued by the State Bank of India.
3. The Finance Act of 2017 introduced amendments to the Representation of the People Act, 1951, and the Companies Act, 2013, which facilitated the implementation of the electoral bond mechanism.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
All three statements are correct: the Supreme Court struck down the Electoral Bonds Scheme in 2024 by applying the doctrine of proportionality, ruling that the government failed to prove the scheme was the least restrictive means to curb black money. The scheme was officially notified by the Ministry of Finance on January 2, 2018, enabling anonymous political donations via State Bank of India bearer bonds. Furthermore, the Finance Act of 2017 provided the necessary legislative backing by amending the Representation of the People Act, 1951, the Companies Act, 2013, and the Income Tax Act, 1961, to legalize this funding mechanism.
Consider the following statements regarding Foreign Contribution Regulation Act (FCRA) implications for bond funding:
1. The 2018 amendment to the Foreign Contribution Regulation Act allowed foreign companies with subsidiaries in India to donate to political parties through electoral bonds.
2. The Supreme Court of India in the Association for Democratic Reforms v. Union of India case struck down the Electoral Bonds Scheme on February 15, 2024.
3. State Bank of India was the only authorized financial institution designated to issue and encash electoral bonds during the tenure of the scheme.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct because the Finance Act 2016 and 2018 amended the FCRA to allow subsidiaries of foreign companies to donate to political parties, effectively bypassing previous restrictions on foreign funding. Statement 2 is correct as the Supreme Court, in the Association for Democratic Reforms v. Union of India (2024) judgment, declared the Electoral Bonds Scheme unconstitutional for violating the right to information. Statement 3 is correct because the 2018 Electoral Bond Scheme notification explicitly designated the State Bank of India (SBI) as the sole authorized bank for the issuance and encashment of these bonds.
Consider the following statements regarding Legal validity of the Finance Act 2017 amendments:
1. Under the provisions of the Finance Act 2017, the State Bank of India acted as the authorized agency for bond issuance, and the scheme allowed for the purchase of bonds in denominations ranging from one thousand to one crore rupees through digital payment channels only.
2. The Finance Act 2017 introduced amendments to the Representation of the People Act 1951, which removed the cap on the maximum amount a corporation could donate to a political party.
3. The constitutional challenge to the Electoral Bonds Scheme focused on the violation of Article 19(1)(a), and the court noted that the 2017 amendments to the Companies Act 2013 were introduced through the legislative route of a Money Bill.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 1 is incorrect. Statement 3 is incorrect.
Statement 2 is correct because the Finance Act 2017 amended Section 182 of the Companies Act, removing the 7.5% profit-based cap on corporate donations and the requirement for companies to disclose political contributions in their profit and loss accounts. Statement 1 is incorrect because, while SBI was the authorized issuer, the scheme permitted the purchase of bonds through 'account payee' cheques or demand drafts in addition to digital payments. Statement 3 is incorrect because, although the Supreme Court struck down the scheme for violating Article 19(1)(a), it explicitly declared the passage of the 2017 amendments as a Money Bill to be a matter of judicial review that remains pending, rather than a settled finding of the final judgment.
Consider the following statements regarding Legal validity of the Finance Act 2017 amendments:
1. The Supreme Court of India delivered its judgment in the Association for Democratic Reforms v. Union of India case on February 15, 2024, declaring the Electoral Bonds Scheme unconstitutional.
2. Section 13A of the Income Tax Act 1961 was modified by the Finance Act 2017 to include electoral bonds as a form of tax-exempt income, which the Election Commission of India had previously recommended in its 2014 annual report.
3. The Finance Act 2017 amended the Reserve Bank of India Act 1934 to permit the issuance of bearer instruments, and the first tranche of electoral bonds was released by the State Bank of India in March 2017.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is correct as the Supreme Court struck down the Electoral Bonds Scheme on February 15, 2024, citing violations of the Right to Information. Statement 2 is incorrect because the Election Commission of India had actually expressed strong reservations and cautioned the government against the amendments, rather than recommending them. Statement 3 is incorrect because, although the RBI Act was amended, the first tranche of electoral bonds was issued in March 2018, not 2017.
Consider the following statements regarding Mechanism of the 15-day validity period for encashment:
1. The Reserve Bank of India monitored the 15-day validity period through a centralized digital ledger, and any bond remaining unencashed after this duration reverted to the Consolidated Fund of India.
2. The Electoral Bond Scheme notification issued by the Ministry of Finance in January 2018 established a validity period of 15 calendar days for each bond from the date of issuance.
3. Authorized branches of the State Bank of India were designated as the sole entities permitted to issue and encash these bonds within the specified 15-day window.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 3 is correct. Statement 1 is incorrect.
Statement 2 and 3 are correct as the 2018 notification mandated a 15-day validity period and designated the State Bank of India (SBI) as the sole authorized issuer and encashment agency. Statement 1 is incorrect because unencashed bonds did not revert to the Consolidated Fund of India; instead, the value of such expired bonds was transferred to the Prime Minister's Relief Fund, and the RBI did not maintain a centralized digital ledger for individual bond tracking.
Consider the following statements regarding Doctrine of proportionality in electoral funding:
1. The Supreme Court of India struck down the Electoral Bonds Scheme on February 15, 2024, citing a violation of the fundamental right to information under Article 19(1)(a).
2. The Election Commission of India introduced the Electoral Bonds Scheme in 2017 to monitor large cash donations, and the scheme utilized the Reserve Bank of India as the primary issuing authority for all transactions.
3. In the Association for Democratic Reforms v. Union of India judgment, the bench applied the doctrine of proportionality to assess whether the state's interest in curbing black money outweighed the voter's right to transparency.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 3 is correct. Statement 2 is incorrect.
Statement 1 is correct as the Supreme Court declared the Electoral Bonds Scheme unconstitutional on February 15, 2024, for violating the right to information under Article 19(1)(a). Statement 3 is correct because the Court applied the doctrine of proportionality, ruling that the government's objective of curbing black money did not justify the complete lack of transparency in political funding. Statement 2 is incorrect because the scheme was introduced by the Union Government through the Finance Act, 2017, and the State Bank of India (SBI), not the Reserve Bank of India, was designated as the sole authorized bank for issuing these bonds.
Consider the following statements regarding Eligibility criteria for political parties to encash bonds:
1. To qualify for encashment, a political party needs to have secured at least one percent of the votes polled in the most recent General Election to the House of the People or the Legislative Assembly of the State.
2. The eligibility criteria for encashing bonds include a provision for parties that have held at least one parliamentary seat in the last two consecutive terms of the Lok Sabha.
3. Under the notification dated January 2, 2018, parties are eligible to receive electoral bonds if they have filed their income tax returns for the last five years and possess a valid PAN card issued by the Income Tax Department.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is correct because, under the Electoral Bond Scheme (2018), only parties registered under Section 29A of the Representation of the People Act, 1951, and having secured at least 1% of votes in the last general election to the Lok Sabha or Legislative Assembly are eligible. Statement 2 is incorrect as the scheme does not mandate any requirement regarding the holding of parliamentary seats in consecutive terms. Statement 3 is incorrect because the eligibility criteria only require parties to be registered under the RPA, 1951, and to have secured at least 1% of the votes; there is no specific condition requiring the filing of income tax returns for the last five years to encash these bonds.
Consider the following statements regarding Foreign Contribution Regulation Act (FCRA) implications for bond funding:
1. The 2016 amendment to the Foreign Contribution Regulation Act expanded the definition of foreign source to include entities where the nominal share capital held by foreign individuals exceeds 50 percent, thereby restricting their participation in the electoral bond process.
2. Section 29C of the Representation of the People Act, 1951, was amended to exempt political parties from reporting contributions received through electoral bonds.
3. The Foreign Contribution Regulation Act (FCRA), 2010, prohibits political parties from accepting contributions from foreign sources as defined under Section 2(1)(j).
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 3 is correct. Statement 1 is incorrect.
Statement 2 is correct as the Finance Act, 2017 amended Section 29C of the Representation of the People Act, 1951, to exempt political parties from disclosing contributions received via electoral bonds. Statement 3 is correct because the FCRA, 2010, strictly prohibits political parties and candidates from accepting foreign contributions to prevent foreign interference in domestic politics. Statement 1 is incorrect because the 2016 amendment to the FCRA actually redefined 'foreign source' to allow foreign-funded companies to donate to political parties if their shareholding was within the limits prescribed under the FEMA regulations, effectively loosening, rather than restricting, the criteria for foreign-origin entities.
Consider the following statements regarding Foreign Contribution Regulation Act (FCRA) implications for bond funding:
1. Under the Foreign Contribution Regulation Act, 2010, the Ministry of Home Affairs maintains a digital registry of all electoral bond purchasers, and this data is shared with the Election Commission of India on a quarterly basis.
2. The Finance Act of 2017 introduced amendments to the Reserve Bank of India Act, 1934, which permitted the issuance of electoral bonds and established the Election Commission as the primary regulatory body for bond audits.
3. The Electoral Bonds Scheme was notified by the Ministry of Finance on January 2, 2018, under the provisions of the Finance Act, 2017.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 3 is correct. Statement 1 is incorrect. Statement 2 is incorrect.
Statement 3 is correct as the Electoral Bonds Scheme was indeed notified by the Ministry of Finance on January 2, 2018, via the Finance Act, 2017. Statement 1 is incorrect because the FCRA does not mandate a digital registry of bond purchasers for the Election Commission, and electoral bonds were specifically designed to maintain donor anonymity. Statement 2 is incorrect because, while the Finance Act 2017 amended the RBI Act, the Election Commission was never designated as the primary regulatory body for bond audits; rather, the scheme operated with minimal oversight and lacked a dedicated audit mechanism for the ECI.
Consider the following statements regarding Anonymity clause under Section 31 of RBI Act:
1. The Electoral Bond Scheme was notified by the Ministry of Finance on January 2, 2018, under the authority granted by the Finance Act of 2017.
2. Section 31(3) of the Reserve Bank of India Act, 1934, provides the legal basis for the central government to authorize any scheduled bank to issue bearer bonds.
3. The electoral bond framework allows political parties to encash bonds only through a verified bank account, a procedure overseen by the Comptroller and Auditor General of India.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is incorrect.
Statement 1 is correct as the Electoral Bond Scheme was indeed notified on January 2, 2018, via the Finance Act, 2017. Statement 2 is correct because Section 31(3) of the RBI Act was inserted by the Finance Act, 2017, to specifically empower the Central Government to authorize a scheduled bank to issue such bonds. Statement 3 is incorrect because, while political parties must encash bonds through a verified bank account, the procedure is overseen by the Election Commission of India, not the Comptroller and Auditor General of India.
Consider the following statements regarding Supreme Court ruling in Association for Democratic Reforms vs Union of India:
1. The Supreme Court judgment referenced the 2013 judgment in the PUCL vs Union of India case, which established the 'None of the Above' option for voters in electronic voting machines.
2. Under the Electoral Bonds Scheme, political parties were permitted to receive funding through bonds if they secured at least one percent of the votes polled in the most recent Lok Sabha or Legislative Assembly elections.
3. The electoral bonds were issued in denominations ranging from one thousand to one crore rupees, and the scheme allowed for the purchase of bonds by any citizen of India or body incorporated in the country.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the SC ruling in the Electoral Bonds case (2024) primarily relied on the 'Right to Information' established in the 1975 Raj Narain case, not the 2013 PUCL judgment. Statement 2 is incorrect because the eligibility criteria required a party to be registered under Section 29A of the Representation of the People Act, 1951, and to have secured at least one percent of the votes polled in the most recent Lok Sabha or Legislative Assembly elections, but the scheme itself was struck down for violating the constitutional right to information. Statement 3 is incorrect because, while the denominations were accurate, the scheme allowed not only citizens but also any 'body incorporated in India' (including foreign-owned companies) to purchase bonds, which was a key point of contention regarding transparency.
Consider the following statements regarding Role of the Election Commission of India in monitoring bond-based funding:
1. State Bank of India remained the only authorized financial institution for the issuance and encashment of electoral bonds throughout the scheme's operation.
2. The Electoral Bond Scheme was notified by the Ministry of Finance on January 2, 2018, under the provisions of the Finance Act 2017.
3. The Election Commission of India maintains a public database of individual bond purchasers under the guidelines established by the 2017 Finance Act amendments to the Income Tax Act.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is incorrect.
Statement 1 is correct as the State Bank of India was the sole authorized bank for issuing and encashing electoral bonds. Statement 2 is correct because the scheme was notified by the Ministry of Finance on January 2, 2018, following the legislative changes introduced via the Finance Act, 2017. Statement 3 is incorrect because the scheme ensured donor anonymity; the Election Commission of India did not maintain a public database of individual bond purchasers, and the Supreme Court eventually struck down the scheme in 2024 for violating the right to information.
Consider the following statements regarding Eligibility criteria for political parties to encash bonds:
1. Registered political parties are entitled to encash electoral bonds if they have submitted their contribution reports to the Election Commission of India within the timeline prescribed by the 2017 Finance Act.
2. The guidelines allow political parties to encash bonds if they have received at least three percent of the total votes cast in the last municipal corporation elections held in any metropolitan city with a population exceeding one million.
3. The framework for electoral bonds encompasses parties that have been granted the status of a national party by the Election Commission of India based on their performance in the 2014 General Elections.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Under the Electoral Bonds Scheme, only political parties registered under Section 29A of the Representation of the People Act, 1951, that secured at least one percent of the votes polled in the most recent General Election to the Lok Sabha or a Legislative Assembly are eligible to receive funding. Statement 1 is incorrect because eligibility is based on vote share, not the submission of contribution reports. Statement 2 is incorrect as the threshold is based on state or national assembly elections, not municipal polls. Statement 3 is incorrect because the eligibility criteria do not restrict participation to parties recognized based on the 2014 General Elections, but rather apply to any party meeting the one percent vote share threshold in the most recent relevant election.
Consider the following statements regarding Constitutional challenge regarding 'unfettered' corporate donations:
1. Section 29C of the Representation of the People Act, 1951, encompasses the disclosure of contributions received by political parties, and the 2017 amendment incorporated a provision for the periodic audit of bond-issuing banks by the Comptroller and Auditor General.
2. The Finance Act 2017 introduced the Electoral Bonds Scheme as an amendment to the Representation of the People Act, 1951, which established a maximum donation limit of 10% of a company's net average profit over the preceding three years.
3. The Election Commission of India submitted a report to the Supreme Court in 2019 suggesting that the anonymity of Electoral Bonds serves to protect donor privacy, provided that the total donation amount remains under the ₹20,000 threshold for cash contributions.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the 2017 amendment to the RPA, 1951, actually exempted political parties from disclosing contributions received via electoral bonds, rather than mandating bank audits by the CAG. Statement 2 is incorrect because the Finance Act 2017 amended the Companies Act, 2013, to remove the 7.5% cap on corporate donations, effectively allowing unlimited contributions regardless of net profits. Statement 3 is incorrect because the Election Commission of India consistently opposed the anonymity of electoral bonds in its submissions to the Supreme Court, arguing that it compromises transparency and the public's right to information.
Consider the following statements regarding Right to Information vs Right to Privacy of donors:
1. The Reserve Bank of India raised concerns regarding the scheme in 2017, and the government subsequently incorporated these suggestions into the final notification issued by the Ministry of Law and Justice.
2. The Supreme Court judgment in February 2024 relied on the 2017 Puttaswamy verdict to establish that the right to political privacy of corporate donors outweighs the public interest in electoral transparency.
3. Political parties receiving electoral bonds were permitted to retain the funds in their designated accounts for a maximum period of 30 days, after which the unencashed bonds were transferred to the Prime Minister's National Relief Fund.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the government ignored the RBI's explicit warnings regarding the potential for money laundering and the undermining of the RBI Act. Statement 2 is incorrect as the Supreme Court in the 2024 Association for Democratic Reforms case struck down the scheme, ruling that the public's right to information regarding political funding outweighs the donors' right to privacy. Statement 3 is incorrect because electoral bonds had a validity period of only 15 days, and unencashed bonds were not transferred to the PMNRF but were instead forfeited and deposited into the Consolidated Fund of India.
Consider the following statements regarding Tax deductibility of electoral bonds for corporate entities:
1. Corporate entities were permitted to deduct the value of electoral bonds purchased as business expenditure under the provisions of the Income Tax Act before the scheme was struck down.
2. The Finance Act 2017 removed the requirement for companies to disclose the names of political parties to which they contributed in their profit and loss accounts.
3. The Supreme Court of India in the Association for Democratic Reforms vs. Union of India judgment dated February 15, 2024, declared the Electoral Bond Scheme unconstitutional.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct because Section 37 of the Income Tax Act allowed companies to claim electoral bond purchases as business expenditure, effectively reducing their taxable income. Statement 2 is correct as the Finance Act 2017 amended Section 182 of the Companies Act, removing the cap on corporate donations and the requirement to disclose specific beneficiary details in profit and loss accounts. Statement 3 is correct because the Supreme Court's landmark February 2024 judgment struck down the scheme as unconstitutional, citing violations of the Right to Information and the potential for quid pro quo arrangements.
Consider the following statements regarding Public interest litigation (PIL) scope in electoral funding reforms:
1. The Reserve Bank of India raised objections to the Electoral Bonds Scheme in 2017, suggesting that the scheme be implemented through the issuance of digital currency tokens rather than physical bearer instruments.
2. Under the provisions of the Foreign Contribution Regulation Act, 2010, political parties were permitted to accept electoral bonds from foreign-sourced entities provided the transaction occurred through the State Bank of India.
3. The Election Commission of India submitted a sealed cover report to the Supreme Court in 2019, highlighting concerns that the anonymity provided by electoral bonds could facilitate the influx of foreign corporate funding.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 3 is correct. Statement 1 is incorrect. Statement 2 is incorrect.
Statement 3 is correct as the Election Commission of India (ECI) expressed concerns to the Supreme Court in 2019 regarding the lack of transparency and the potential for foreign corporate influence via anonymous electoral bonds. Statement 1 is incorrect because while the RBI did raise objections in 2017, it specifically suggested that electoral bonds should be issued in scrip form by the RBI itself rather than as bearer bonds, not digital currency tokens. Statement 2 is incorrect because the Finance Act 2016 and 2018 amended the FCRA to allow foreign funding, but the Supreme Court's 2024 judgment ultimately struck down the electoral bond scheme, noting that the amendment allowed foreign-sourced funds into Indian politics, which was contrary to the original intent of the FCRA.
Consider the following statements regarding Tax deductibility of electoral bonds for corporate entities:
1. Section 13A of the Income Tax Act 1961 provides tax exemption to political parties on income derived from voluntary contributions, provided they maintain a record of donors contributing above twenty thousand rupees.
2. Under Section 182 of the Companies Act 2013, the cap on corporate political contributions was removed, allowing companies to donate amounts exceeding 7.5 percent of their average net profits.
3. The Electoral Bond Scheme 2018 permitted the issuance of bonds in denominations ranging from one thousand rupees to one crore rupees through authorized branches of the State Bank of India.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as Section 13A mandates that political parties must maintain records of contributions exceeding ₹20,000 to claim tax exemption. Statement 2 is correct because the Finance Act 2017 amended Section 182 of the Companies Act to remove the 7.5% profit cap on corporate donations and eliminated the requirement to disclose the name of the beneficiary political party in the profit and loss account. Statement 3 is correct as the 2018 Scheme authorized the State Bank of India to issue electoral bonds in denominations of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh, and ₹1 crore.
Consider the following statements regarding Supreme Court ruling in Association for Democratic Reforms vs Union of India:
1. The five-judge Constitution Bench, led by Chief Justice D.Y. Chandrachud, held that the scheme violated the fundamental right to information under Article 19(1)(a) of the Constitution.
2. The Election Commission of India maintained a digital repository of all electoral bond transactions, and the Supreme Court ruling ordered the public disclosure of these records starting from the scheme's inception in 2018.
3. The Supreme Court delivered its verdict in the Association for Democratic Reforms vs Union of India case on February 15, 2024, declaring the Electoral Bonds Scheme unconstitutional.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 3 is correct. Statement 2 is incorrect.
Statements 1 and 3 are correct as the Supreme Court’s five-judge bench, led by CJI D.Y. Chandrachud, unanimously struck down the scheme on February 15, 2024, citing a violation of the voters' right to information under Article 19(1)(a). Statement 2 is incorrect because the Election Commission of India did not maintain a digital repository of transactions; rather, the Court ordered the State Bank of India (SBI) to disclose the purchase and redemption details of the bonds to the ECI for public dissemination.
Consider the following statements regarding Anonymity clause under Section 31 of RBI Act:
1. The 2017 Finance Act introduced amendments to the Representation of the People Act, 1951, which established the State Bank of India as the primary regulator for bond issuance.
2. Under the 2018 notification, the Election Commission of India maintains a digital ledger of bond purchasers to ensure compliance with the Foreign Contribution Regulation Act, 2010.
3. The Supreme Court judgment in the Association for Democratic Reforms case in 2024 struck down the 2017 amendments to the Companies Act, 2013, regarding the cap on corporate donations.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the Finance Act 2017 amended the RBI Act, 1934, to authorize the issuance of electoral bonds, not the Representation of the People Act, 1951. Statement 2 is incorrect as the scheme specifically guaranteed anonymity, meaning no digital ledger of purchasers was maintained by the Election Commission of India. Statement 3 is incorrect because the Supreme Court in the 2024 ADR judgment struck down the amendment to Section 182 of the Companies Act that removed the 7.5% cap on corporate donations, but it did not strike down the entire Companies Act; furthermore, the court declared the entire Electoral Bond Scheme unconstitutional, not just the donation cap.
Consider the following statements regarding Impact of removing the cap on corporate profit percentage for donations:
1. The Supreme Court of India in the Association for Democratic Reforms vs. Union of India (2024) judgment declared the removal of the corporate donation cap unconstitutional.
2. Prior to the 2017 amendment, companies were restricted from donating more than 7.5% of their average net profits of the preceding three financial years.
3. Section 182 of the Companies Act 2013, as amended in 2017, allowed loss-making companies to contribute to political parties through electoral bonds.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
The Supreme Court's 2024 judgment struck down the amendment to Section 182 of the Companies Act, which had removed the 7.5% profit cap, ruling that it incentivized 'quid pro quo' arrangements and violated the principle of free and fair elections. Prior to the 2017 amendment, companies were indeed limited to donating 7.5% of their average net profits from the previous three years, ensuring that only profitable entities could contribute. Furthermore, the 2017 amendment allowed loss-making companies to donate, effectively enabling 'shell companies' to funnel untraceable funds into the political system, a provision that was subsequently declared unconstitutional by the Court.
Consider the following statements regarding Transparency in the electoral trust vs electoral bond models:
1. The Electoral Trusts Scheme of 2013 allows for the issuance of bonds through authorized branches of the Reserve Bank of India, which then facilitates the transfer of funds to registered political entities.
2. The Supreme Court of India, in the Association for Democratic Reforms v. Union of India case in 2024, declared the Electoral Bonds Scheme unconstitutional.
3. Section 29C of the Representation of the People Act provides for the disclosure of donor identities for all contributions exceeding ₹20,000, including those received through the anonymous electoral bond mechanism.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 1 is incorrect. Statement 3 is incorrect.
Statement 2 is correct as the Supreme Court in February 2024 struck down the Electoral Bonds Scheme for violating the fundamental right to information under Article 19(1)(a). Statement 1 is incorrect because Electoral Trusts are non-profit entities governed by the 2013 scheme that collect voluntary contributions and distribute them to political parties, whereas Electoral Bonds were issued exclusively by the State Bank of India, not the RBI. Statement 3 is incorrect because the 2017 amendments to the Representation of the People Act explicitly exempted contributions made via electoral bonds from the mandatory disclosure requirements under Section 29C, thereby ensuring donor anonymity.