Pavan Korada 
New Delhi: Over the past decade, India’s public exchequer has foregone a staggering Rs 11,812.98 crore in tax revenues due to exemptions claimed by donors to political parties, according to a study by Venkatesh Nayak, senior researcher at the Commonwealth Human Rights Initiative.
The findings, spanning 2015-2024, expose a dramatic shift in political funding: individual donors and Hindu Undivided Families (HUFs), a traditional Hindu family structure with shared finances, now dominate contributions, eclipsing corporate donations by a wide margin.
The report, titled ‘Revenue Impact of Donations to Political Parties: A Preliminary Study’, analyses data from the Union government’s Receipt Budget documents (annex 7 specifically), Election Commission filings and audits by the Association for Democratic Reforms (ADR), a non-partisan organisation that works on electoral and political reforms.
It arrives amid heightened scrutiny of political financing after the Supreme Court’s February 2024 verdict striking down electoral bonds, a controversial anonymous donation tool.
In FY 2022-23, individual donors claimed exemptions worth Rs 2,275.85 crore, dwarfing corporate claims (Rs 514.4 crore) and those by firms/associations (Rs 115.71 crore).
This trend is projected to intensify, with individuals expected to account for 78.3% of exemptions in FY 2023-24.
Between 2015-16 and 2023-24, individual/HUF exemptions skyrocketed by 3,446% (from Rs 66.1 crore to Rs 2,275.85 crore). Corporate claims, meanwhile, fluctuated wildly, peaking at Rs 1,159.91 crore in FY 2019-20 (a Lok Sabha election year) before plummeting post-electoral bond abolition.
Declared donations to political parties exploded from Rs 714 crore (43 parties) in 2015-16 to Rs 7,203 crore (27 parties) in 2023-24. Yet, only 41.76% of total donations (Rs 28,287 crore over nine years) were claimed as tax-exempt, leaving questions about the remaining 58%.
“The data suggests a paradox,” Nayak notes. “Despite 100% tax exemptions, a majority of donors – especially corporates – still don’t claim benefits. What incentives are driving them to donate without tax relief? The lack of transparency obscures answers.”
Corporate donations, once the backbone of political funding, have become erratic. Pre-2024, companies contributed heavily during election cycles: in FY 2018-19 (pre-Lok Sabha polls), corporates claimed Rs 801.58 crore in exemptions; in FY 2019-20 claims surged to Rs 1,159.91 crore.
However, post-2020, corporate claims nosedived, dropping to Rs 256 crore in FY 2020-21. Nayak links this to the now-defunct electoral bond system, which allowed anonymous donations: “Electoral bonds created a perverse incentive. Corporations could donate secretly, avoiding public scrutiny and tax breaks. With bonds scrapped, will corporations return to claiming exemptions? The 2023-24 projection (Rs 577.98 crore) suggests not yet.”
The report flags a critical unknown – the identity of individual donors fuelling this surge. While high-net-worth individuals likely dominate, Nayak questions whether middle-class donors are increasingly opening their wallets: “Are ordinary citizens donating more, or is this a concentration of wealth? Without granular data from the Income Tax Department, we can’t know. Political parties must disclose machine-readable donor details – this isn’t just about taxes, but democratic accountability.”
Notably, 25 political parties declared Rs 3,912 crore in donations for FY 2022-23, yet donors claimed exemptions for 74.27% of this amount – a sharp rise from 2015-16, when 88% of donations went unclaimed.
The study underscores systemic opacity. Critical documents like Annex 7 of the Receipt Budget – which details tax exemptions – were withheld during the 2024 interim budget, forcing researchers to rely on projections. Over 40 political parties failed to submit mandatory audit reports to the Election Commission, suggesting declared donations are “a gross underestimate”.
Nayak’s RTI requests for donor data were repeatedly denied by the Income Tax Department. “The government can generate this data ‘at the click of a button,’” he asserts. “Why the secrecy? Public interest demands transparency.”
The report concludes with urgent queries. Why do 58% of donors avoid tax exemptions? Who are the individuals/HUFs donating thousands of crores? Will corporate donations rebound post-electoral bonds?
“These trends demand a parliamentary debate,” Nayak argues. “Tax exemptions for political donations aren’t just accounting – they’re subsidies shaping our democracy.”