The murky world of political party finance

The Election Commission of India should scrutinise political parties and political finance rather than legitimate voters

Updated - September 25, 2026 02:21 am IST

‘A well-known yet intriguing aspect of Indian politics — ugly and ubiquitous — now stands exposed’ | Photo Credit: Getty Images/iStockphoto

One of the enduring ironies of the Indian political system is that political parties, which are considered the principal stakeholders of electoral democracy, do not find a mention in the Constitution, except in the Tenth Schedule. They exist as “associations” in furtherance of the fundamental rights under Article 19. No effort has been made to define and straitjacket their legal character to conform to being a company, trust, society, firm or a not-for-profit company. Even so, they continue to enjoy the benefit of income-tax exemption in an unprecedented and unparalleled manner, sometimes becoming mysterious receptacles of inexplicable monies. Just as there are shell companies that fulfil unstated purposes, there are shell political parties that serve an insidious intent. And thereby hangs a tale.

The mystery of political funding

That tale was partially unravelled by a recent BBC investigation that revealed extraordinary donations received by six Registered Unrecognised Political Parties (RUPPs). A well-known yet intriguing aspect of Indian politics — ugly and ubiquitous — stands exposed. Political parties and their benefactors thrive in this system, even if it appears reprehensible, unlawful and disturbing.

Earlier, the Association for Democratic Reforms (ADR) released a report on July 18, 2025, which found a 223% rise in the declared income of RUPPs in FY2022-23. It noted that, of the 2,764 RUPPs, only 739 had submitted their financial records for the year to the Election Commission of India (ECI), the sole custodian, under the law, of the fate and fortunes of political parties.

Regional parties saw an 85% surge in number of donations above ₹20,000 in 2024-25: ADR

BJP spent more than half of its April-May election funds on Bengal polls

BJP got highest donations in 2024-25, over 10 times all other national parties combined: ADR report

In a press note, “Cleaning up the Electoral System” (August 9, 2025), the ECI said it had ‘delisted’ 334 RUPPs out of 2,854 “as part of a comprehensive and continuous strategy…to clean up the electoral system.” It would be interesting to see whether the six parties in question are part of the ECI’s “continuous strategy”.

On October 16, 1994, T.N. Seshan, then Chief Election Commissioner of India, issued an order under the Election Symbols (Reservation and Allotment) Order, 1968, in which he highlighted the “adhocism” and the “sorry state of affairs prevailing in almost all political parties in the country, whether recognised National or State parties or registered-unrecognised parties”. He observed, “I have yet to come across any party whose affairs are being run in accordance with the provisions of its constitution or rules and regulations.” Through the order, T.N. Seshan put all political parties on “notice” to set their house in order, declaring that the ECI would not remain a “mute spectator”. In subsequent guidelines prescribing the format for registration under Section 29A of the Representation of the People Act (RPA), 1951, the ECI stated in paragraph 3(xxiii) that a party seeking registration must declare in its constitution that it will contest elections within five years of registration and that, if it does not “contest elections continuously for six years”, it shall “be automatically taken off the list of recognised parties”.

BJP received ₹6,088 crore in donations in 2024-25, nearly 12 times more than the Congress

In 2023-24, BJP got ₹2,604 crore in donations, 9 times more than Congress

Electoral bonds data | 55 firms’ purchase exceeded 7.5% cap in 2022-24, lion’s share went to BJP

33 loss-making firms donated electoral bonds worth ₹582 crore, 75% went to BJP | Data

‘Taking off’ or ‘delisting’ does not mean deregistration, as the ECI is not generally empowered to deregister political parties. Similarly, even if RUPPs are ‘unrecognised’, they remain eligible to receive contributions under Section 29B of the RPA, while their tax treatment is governed by Section 13A of the Income-tax Act. “Recognition” is governed by Order 6 of the Election Symbols Order, which distinguishes between ‘recognized’ and ‘unrecognized’ political parties for the purpose of allotting symbols and lays down the criteria for their classification. T.N. Seshan amended the Symbols Order and introduced Order 16A, which empowers the ECI to “suspend or withdraw recognition of a recognised political party for its failure to observe MCC [Model Code of Conduct] or follow lawful directions and instructions of the Commission”. That provision sits, rather harmlessly, in the statute book, empowering an ECI that has generally been reluctant to strike.