Press Release: ADR releases a comprehensive report on 'Political Finance in India: Assessment and Recommendations' in collaboration with Electoral Regulation Research Network (ERRN), University of Melbourne

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Press Release

12^th March, 2026

Political Finance in India: Assessment and Recommendations

India's electoral democracy faces profound challenges from the pervasive influence of money, often termed "money power”, which undermines political equality, transparency, and fair competition. The report attempts to undertake an assessment of India’s political finance system, to understand its limitations and how it fares on parameters of electoral integrity, transparency, and equality. It traces how unregulated money, often from illegitimate or opaque sources has become central to Indian politics, creating an uneven playing field where wealth dictates political power. Despite decades of reform proposals, the nexus between money, crime, and politics persists due to weak legal enforcement, inadequate regulation, and complete lack of political will.

This report will fill the existing knowledge gap regarding a comprehensive assessment of India’s political finance regulatory framework using data and can prove useful for both scholarly research and larger public interest. At the same time, it is important to note that this study is limited to official disclosures by political parties and candidates which is only the tip of the iceberg and does not capture the complete scale of political financing which is outside the purview of official reporting.

The report was officially released at ADR's Stakeholder Discussion on Electoral and Political Reforms: Issues, Challenges and Recommendations on 10th March 2026 at Indian International Centre, New Delhi. The press release of the event can be accessed here.This report is published in joint collaboration with the University of Melbourne. It will be available on the websites of Electoral Regulation Research Network (ERRN) and ADR India. ERRN is a nation-wide research network hosted by Melbourne Law School at the University of Melbourne.

The detailed report including the regulatory framework, data and year-wise trends in political finance over the last two decades and campaign expenses during General Elections 2024 can be accessed on ADR India website here and on ERRN website here.

Executive Summary

The findings of the report were formulated by an in-depth literature review, analysis of official data in public domain, expert interviews and a validation meeting in New Delhi, all carried out between May 2024 and October 2025. It also covers some of the landmark judgements delivered by the Supreme Court and the High Courts that made an invaluable contribution towards reforming the political finance system in a major way. Based on the findings and the broader Indian context, concrete recommendations are provided at the end of the Report for consideration by policymakers, political parties, the Election Commission of India, civil society organizations and other stakeholders for regulatory reforms or systemic changes.

The Report pays particular attention to the main building blocks of political finance regulations, notably (a) monitoring and regulation of political parties; (b) private funding; (c) campaign expenditure; (d) reporting and disclosure requirements; (e) freebies and voter inducements; (f) search and seizure of illicit items; (g) paid news and political advertising; (h) oversight mechanism; (i) strengthening of the Election Commission and (j) sanctions. While the detailed recommendations are discussed in Chapter 7, some of the main findings and recommendations are highlighted below.

The report is structured in the following manner: Chapter 2 provides a brief overview of India’s electoral and political system. Chapter 3 focuses on the political finance legal framework. It provides a detailed snapshot of the existing laws, rules, guidelines, the system in place for political funding, election expenditure, other issues and challenges that need attention. It also covers the legal lacunae in the present system on political finance. Chapter 4 analyses the official data on political party funding from various sources permitted under law and provides detailed findings. Chapter 5 discusses campaign expenditure, its scale, spending patterns, key trends and how it has evolved with the introduction of digital media. It also highlights the issues, challenges of monitoring digital campaign expenditure. Chapter 6 focuses on key landmark judgments delivered by the Indian Court of Law and how these verdicts changed the course of political finance in India and chapter 7 concludes with recommendations for future reforms.

Key Findings

1. Regulatory Framework and Legal Gaps
The foundation of political funding in India is governed by the Representation of People Act (1951), Income Tax Act (1961), Companies Act (2013), and Foreign Contribution Regulation Act (2010). However, these laws fall short of ensuring a robust political finance framework. The report identifies seven key limitations: dominance of money and muscle power, lack of internal democracy within parties, absence of statutory backing to Election Commission of India (ECI) rules, inability of ECI to deregister defaulting parties, evasion of Right to Information (RTI) scrutiny, flouting of existing laws by contestants, and lack of political will to implement reforms. These systemic weaknesses enable financial opacity and unaccountable campaign financing.

2. Political Contributions and Corporate Donations
Individuals and companies can legally donate to political parties, with disclosure requirements for contributions above INR 20,000. However, party disclosures are routinely underreported, parties can hide donor identities through multiple small contributions or cash payments. Corporate funding, initially capped at 7.5 per cent of average profits under the Companies Act (2013), became virtually limitless after the Finance Act (2017), which also removed the requirement

to disclose beneficiary parties. This change enabled opacity in political funding and undermined citizens’ Right to Know, contrary to democratic principles of equality and transparency.

3. Electoral Bonds: Institutionalizing Opacity

The introduction of the Electoral Bonds Scheme (2017) marked a turning point in India’s political finance regime. Under this system, unlimited anonymous donations could be made through bank instruments, bypassing public scrutiny and disclosure requirements. The scheme enabled untraceable political financing from corporations, including loss-making or foreign controlled entities. The Supreme Court struck down the scheme in February 2024, deeming it unconstitutional for violating citizens’ “Right to Know,” but its legacy reflects severe damage to electoral transparency and equality.

4. Electoral Trusts and Unknown Income Sources
Electoral Trusts, established ostensibly to promote transparency, also suffer from weak oversight. They must donate 95 per cent of contributions annually, but there are no stringent penalties for non-compliance or disclosure failures. Political parties continue to report substantial proportions of income from “unknown sources,” including donations below INR 20,000 and sale of coupons. Such untraceable funds undermine accountability and perpetuate corruption. Enforcement of reporting obligations by the Election Commission of India (ECI) and Central Board of Direct Taxes (CBDT) remains negligible despite clear statutory powers such as withdrawal of tax exemption for non-compliant parties.

5. Election Expenditure and Freebies
While candidates face spending caps, there is no ceiling on party expenditure. This loophole allows massive off-book spending under the guise of generalcampaigning, travel, and advertising. There is also a mismatch between reported and actual expenditure, fueling quid pro quo arrangements with donors. The proliferation of freebies and inducements such as cash, liquor, narcotics etc further distorts voter choice. In the 2024 elections alone, the ECI seized illicitinducements worth INR 88,890 million between March 1 to May 18, 2024, highlighting the magnitude of the problem.

6. Governance, Enforcement, and Reform Needs
Despite numerous transparency guidelines issued by the ECI, including those under Article 324 of the Constitution, the absence of statutory enforcement and penalties renders them ineffective. The lack of accountability mechanisms for political parties, unlike other public institutions, undermines citizens’ rights to information and fair representation.

Main Recommendations

1. Monitoring and Regulation of Political Parties and Candidates

Enact a comprehensive political parties’ law to regulate finances, internal democracy, and leadership accountability.
Empower the Election Commission of India (ECI) to de-recognize or deregister parties that fail to comply with financial disclosure or court directives.
Bring political parties under the ambit of the RTI Act and define bribery and freebies as corrupt practices under the RP Act, 1951.

2. Private Donations

Impose donation limits and require full disclosure of donors and parent companies behind electoral trusts.
Ban anonymous and cash donations, mandating digital transactions for all political contributions.
Require independent audits of party accounts, verified by the CAG, with reports made public.

3. Public Funding

Adopt objective and transparent criteria for the allocation of public funds to political parties.
Continue indirect in-kind subsidies until broader transparency and accountability reforms are in place.
Introduce vote- or seat-based funding, including incentives for women and underrepresented groups.

4. Campaign Expenditure

Set enforceable expenditure limits for parties and candidates to prevent financial dominance and corruption.
Extend the reporting period for election expenses to begin from the notification of elections.
Develop and enforce specific rules for online and third-party campaign spending.

5. Reporting and Disclosure

Mandate complete, standardized financial disclosures and reject incomplete submissions.
Create a public online database for real-time disclosure of income, expenditure, and sanctions.
Require periodic expenditure reporting by parties before and during elections

6. Freebies and Voter Inducements

Impose a total ban on freebies (such as illicit items) used to entice voters during elections.
Classify such inducements as corrupt practices under Section 123 of the RP Act.
De-register or disqualify parties and candidates found guilty of distributing freebies

7. Search and Seizure of Illicit Items

Ensure public disclosure of all election-related seizures, including names of involved candidates or parties.
Mandate state-wise reporting of seizure cases and follow-up actions to the ECI.
Establish a dedicated ECI investigation/prosecution wing for election-related seizures.

8. Paid News and Political Advertising

Legally define paid news and categorize it as a corrupt practice under the RP Act.
Broaden Section 126 to cover digital and online paid content and advertisements.
Introduce penalties and disqualification provisions for publication or broadcast of paid news.

9. Oversight and Monitoring

Ensure independent, politically neutral oversight bodies free from government influence.
Strengthen ECI’s capacity to monitor online and third-party campaign finance.
Foster collaboration with digital platforms for transparency in political advertising.

10. Strengthening the Election Commission of India

Align the appointment process of Election Commissioners with the Supreme Court’s 2023 directive.
Legally empower the ECI to countermand elections in cases of money power abuse.
Enhance capacity building and stakeholder dialogue for effective electoral management.

11. Sanctions and Enforcement

Impose monetary penalties and loss of tax exemptions for non-compliance or falsified disclosures.
Authorize the ECI to withdraw financial privileges of defaulting parties.
Maintain a public database of sanctions and penalties to ensure accountability.

Author Quotes

Disclaimer

ADR is the copyright holder of the report. The official disclosures by political parties and candidates are based on the information available on the Election Commission’s website. ADR does not add or subtract any information unless the EC changes the data. The data can be accessed from the website of the ECI, and other sources mentioned in the introduction chapter and bibliography. In particular, no unverified information from any other source is used. While all effort has been made to ensure that the information is in keeping with what is mentioned in the statements submitted by the political parties, candidates and other sources, in case of discrepancy between information in this report and that given in their statements, the information reported by the original references should be treated as correct.

Association for Democratic Reforms (ADR), National Election Watch (NEW) and their volunteers are not responsible or liable for any direct, indirect special, or consequential damages, claims, demands, losses of any kind whatsoever, made, claimed, incurred or suffered by any party arising under or relating to the usage of data provided by ADR through this report. It is to be noted that ADR undertakes great care and adopts utmost due diligence in analyzing and dissemination of the audit, contribution and Elections Expenditure reports of the political parties; affidavits and expenditure statements of candidates submitted with the Election Commission of India and respective state CEOs. Such information is only aimed at highlighting the increased misuse of money in our electoral and political process so as to facilitate a system of transparency, accountability and good governance and to enable voters to form an informed choice. Therefore, it is expected that anyone using this report shall undertake due care and utmost precaution while using the data provided by ADR. ADR is not responsible for any mishandling, discrepancy, inability to understand, misinterpretation or manipulation, distortion of the data in such a way so as to benefit or target a particular political party or politician or candidate.

This report is based on data available at the time of writing and has been updated till December 2025. Although the authors have taken due care to use the most
current data available at the time of finalization of the report, however, given the evolving nature of the data sources, updates or revisions to the underlying datasets may occur between finalization and public release.

Contact Details

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Prof Trilochan Sastry

IIM Bangalore (Retd.)

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