Question 1

What is the legal framework for forming an Electoral Trust and who approves it?

Accepted Answer

An Electoral Trust must first be incorporated as a company under Section 8 of the Companies Act 2013 (not-for-profit company). After incorporation, the company applies to the Central Board of Direct Taxes for approval under the Electoral Trusts Scheme 2013 (notified vide SO 3086(E) dated 31 October 2013). The CBDT issues a certificate of approval, without which the entity cannot accept or distribute political contributions under this framework.

Question 2

Under which provision does an approved Electoral Trust claim income-tax exemption, and what is the 95% condition?

Accepted Answer

Section 13B of the Income-tax Act 1961 (applicable through AY 2026-27) grants full exemption on all income of an approved Electoral Trust, provided at least 95% of the aggregate donations received during the financial year are distributed to registered political parties under Section 29A of the Representation of the People Act 1951. If the 95% threshold is not met even by a single rupee, the entire income of the trust for that year becomes taxable and the CBDT may cancel the approval under clause 7 of the Scheme.

Question 3

What annual filing obligations apply to an Electoral Trust under the Income-tax Rules?

Accepted Answer

Rule 17CA of the Income-tax Rules 1962 requires every approved Electoral Trust to file Form No. 68 with the CBDT by 30 November of the assessment year. Form 68 must disclose: the name and PAN of each donor, the amount contributed, the name of each registered political party that received a distribution, and the amount distributed to each. Separately, the trust must file a return of income under Section 139(4C) of ITA 1961 (Section 263 of ITA 2025 for TY 2026-27 onwards).

Question 4

Can a foreign company or NRI contribute to an Electoral Trust?

Accepted Answer

No. Clause 3(f) of the Electoral Trusts Scheme 2013 bars the trust from accepting contributions from any foreign source as defined in Section 2(j) of the Foreign Contribution (Regulation) Act 2010. This covers foreign companies, foreign nationals, and Indian companies in which more than 50% of the share capital is held by foreign entities. Accepting a foreign contribution can result in cancellation of the CBDT approval and prosecution under FCRA 2010.

Question 5

Does an Electoral Trust need to register under the Companies Act 2013 before or after CBDT approval, and what is the compliance overlap?

Accepted Answer

Incorporation under Section 8 of the Companies Act 2013 must happen first — only an existing Section 8 company can apply for CBDT approval under the Electoral Trusts Scheme 2013. After approval, the trust runs dual compliance: annual filing with the Registrar of Companies (Form AOC-4 financial statements and Form MGT-7 annual return) and the tax-side obligations under Rule 17CA (Form 68) and Section 139(4C) / 263. The MCA filings and income-tax filings have different due dates and must be tracked separately.

Electoral Trust Registration

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