Indian company law and political funding

Political Contributions by Companies in India: Section 182, Limits, Disclosure and Penalties

Updated: 9 October 2026

Corporate donations to political parties are regulated primarily by Section 182 of the Companies Act, 2013. The earlier Section 293A of the Companies Act, 1956 is of historical relevance; the Supreme Court's 2024 electoral bonds judgment materially changed the position following the Finance Act, 2017.

Important legal update: The Supreme Court struck down the 2017 removal of the 7.5% ceiling on corporate political contributions. Companies should apply the restored statutory limit and obtain transaction-specific advice on disclosure and compliance, particularly where the published consolidated statutory text has not yet incorporated the judgment.

1. Eligibility to make political contributions - Section 182(1)

Section 182(1) prohibits political contributions by a Government company and by a company that has been in existence for less than three financial years. Other companies may make contributions subject to the applicable ceiling, board approval, payment rules and disclosure obligations. The provision defines a political party by reference to registration under Section 29A of the Representation of the People Act, 1951.

2. Statutory limit and approval by the Board of Directors

Under the original Section 182(1) of the Companies Act, 2013, the aggregate contribution in a financial year could not exceed 7.5% of the average net profits of the three immediately preceding financial years. The Finance Act, 2017 removed this ceiling, but the Supreme Court declared that deletion unconstitutional in its judgment dated 15 February 2024. The ceiling must therefore be considered when determining permissible donations.

A political contribution must be authorised by a resolution passed at a meeting of the Board of Directors. A decision by an individual director without the required board resolution is insufficient. Companies should document the calculation of average net profits, the recipient, the approved amount and the mode of payment.

3. Indirect contributions - Section 182(2)

Political contributions are not confined to direct payments to a political party. Section 182(2) treats certain donations, subscriptions or payments to persons carrying on activities likely to affect public support for a political party as contributions for a political purpose where the company has the requisite knowledge.

Expenditure on advertisements in a souvenir, brochure, pamphlet or similar publication issued by or for the advantage of a political party can also qualify as a political contribution. Companies must assess the substance and purpose of transactions rather than their accounting labels alone.

4. Payment methods and financial-statement disclosures

Section 182(3A) specifies banking channels for political contributions, including account-payee cheque, account-payee bank draft or electronic clearing through a bank account. The former statutory reference to instruments issued under a notified scheme must be read in light of the Supreme Court's invalidation of the Electoral Bond Scheme.

Section 182(3), as amended in 2017, required disclosure of the aggregate political contribution in the profit and loss account without party-wise identification. The Supreme Court invalidated the amendment that removed recipient-specific disclosure. Companies should follow the legal position resulting from that judgment and applicable reporting requirements, including appropriate identification of recipient political parties.

5. Supreme Court ruling on electoral bonds - 15 February 2024

In Association for Democratic Reforms v. Union of India, the Constitution Bench held that the Electoral Bond Scheme and related provisions enabling anonymous political funding were unconstitutional. The Court also held that permitting unlimited corporate contributions through the 2017 deletion of the statutory ceiling was arbitrary and contrary to Article 14 of the Constitution.

The Court directed the State Bank of India to provide electoral bond purchase and redemption information to the Election Commission of India for public disclosure. The ruling is central to interpreting the current requirements of Section 182.

Read the Supreme Court judgment dated 15 February 2024.

6. Contravention and punishment - Section 182(4)

If a company makes a political contribution contrary to Section 182, the company may be punished with a fine up to five times the amount contributed. Every officer in default may face imprisonment up to six months and a fine up to five times the amount contributed, subject to the statutory requirements and applicable legal process.

These are the penalties specified by Section 182(4) of the Companies Act, 2013. The penalties under the former Section 293A(5) of the 1956 Act should not be used as the current rule.

7. Charitable contributions - Section 181

Section 181 permits the Board of Directors to contribute to bona fide charitable and other funds. Where aggregate contributions in a financial year exceed 5% of the company's average net profits for the three immediately preceding financial years, prior permission of the company in general meeting is required. A charitable contribution should not be mischaracterised to evade the restrictions on political donations.

8. Contributions to national defence - Section 183

Under Section 183, a company's Board or other authorised person or authority may contribute to the National Defence Fund or another Central Government-approved fund for national defence notwithstanding the restrictions referred to in that provision. The company must disclose the total amount contributed in its profit and loss account for the relevant financial year.

9. Historical law - Section 293A of the Companies Act, 1956

Section 293A of the Companies Act, 1956 formerly governed corporate political contributions. It prohibited donations by Government companies and companies existing for fewer than three financial years, required board authorisation, deemed specified indirect spending to be political contributions, and prescribed disclosure and penalties. Earlier versions imposed a ceiling of 5% of average net profits, later superseded by subsequent legislation.

Related provisions in the 1956 Act included Section 293(1)(e), governing certain charitable contributions, and Section 293B, governing contributions for national defence. Their modern counterparts are Sections 181 and 183 of the Companies Act, 2013. Historical transactions must be evaluated under the law applicable at the relevant time.

10. Tax treatment of corporate political donations

Section 80GGB of the Income-tax Act, 1961 provides for deduction of qualifying non-cash contributions by an Indian company to a political party or electoral trust, subject to applicable conditions. A tax deduction does not independently authorise a contribution prohibited by company law. Tax treatment should also be checked against the legislation applicable to the relevant assessment year.

Official legal references

This article provides general legal information. Judicial decisions, subsequent amendments and notifications should be checked before taking action.