Explained: What are electoral trusts and how are they funded?

Election Commission electoral trusts: Electoral trusts are one of the funding channels for political parties. They became a preferred source of political donation for companies in 2024-25 after the SC scrapped the electoral bonds scheme in February 2024

electoral trusts explained: Electoral trusts must submit reports on contributions to the Election Commission every year.

Electoral trusts 2024-25 data explained: With the scrapping of the electoral bonds scheme, companies have again turned to electoral trusts as a preferred source of political donations for companies in 2024-25.

In 2023-24, just five trusts reported contributions of a total of Rs 1,218.36 crore. Then, the Supreme Court scrapped the electoral bonds scheme in February 2024. In 2024-25, the number of electoral trusts reporting contributions increased to nine. And the cumulative contribution surged to Rs 3,811 crore.

Here’s how electoral trusts work.

First, what are electoral trusts

The electoral trust scheme was introduced by the UPA government in 2013. It preceded the electoral bonds scheme that was introduced by the NDA government in 2018.

Both schemes are meant to facilitate donations to political parties by corporations and individuals. But while the electoral bonds scheme sought to ensure donor anonymity, electoral trusts are required to report to the Election Commission contributions from individuals and companies, and their donations to parties every year.

Also Read | Year after bonds scrapped, BJP’s purse grows over 50% to Rs 6,088 crore

Who can form electoral trusts, who can donate

Under the scheme notified by the UPA-2 government on January 31, 2013, any company registered under the Companies Act can form an electoral trust.

Under Section 17CA of the Income Tax Act of 1961, any citizen of India, a company registered in India, or a firm or Hindu Undivided Family or association of persons living in India, can donate to an electoral trust.

How many electoral trusts does India have?

Story continues below this ad

The number of registered trusts has ranged from three in 2013 to 17 in 2021-22, but only a few of them actually make donations every financial year. While just five trusts reported contributions in 2023-24, the number increased to nine in 2024-25. Of these nine, three trusts — Prudent Electoral Trust, Progressive Electoral Trust and New Democratic Electoral Trust — accounted for 98 per cent of all contributions in 2024-25.

Prudent Electoral Trust, which was known as Satya Electoral Trust before 2017, was by far the biggest, receiving Rs 2,668.46 crore from multiple companies.

The Progressive Electoral Trust received Rs 915 crore in donations from Tata Group companies and donated Rs 914.97 crore to political parties. The New Democratic Electoral Trust received Rs 160 crore from Mahindra Group companies and donated the same amount.

How do these trusts function?

Electoral trusts must apply for renewal every three financial years. They must donate 95% of contributions received in a financial year to political parties registered under the Representation of the People Act, 1951. The contributors’ PAN (in case of a resident) or passport number (in case of an NRI) is required at the time of making contributions.

Story continues below this ad

The electoral trusts route is transparent on contributors and beneficiaries.

Trusts receive voluntary contributions from Indian citizens, domestic companies, firms, or Hindu Undivided Families (HUFs) via cheques, bank drafts, or electronic transfers. Donors must disclose their Permanent Account Number (PAN).

At least 95% of collected funds must be disbursed to registered political parties, with the remaining 5% administrative expenses. Trusts cannot use donations for members’ benefit.

Trusts must maintain audited accounts, disclosing donors, recipients, and disbursements to the CBDT and the Election Commission of India (ECI).