Rule 289 of the Draft Income-tax Rules, 2026 prescribes the operational framework and compliance conditions for electoral trusts under Schedule VIII [Table: Sl. No. 2] of the Act. The rule permits electoral trusts to receive voluntary contributions only from Indian citizens, companies registered in India, and resident firms, Hindu undivided families, associations of persons, or bodies of individuals. Contributions must be received exclusively through account payee cheque, bank draft, or electronic transfer, and cash contributions are strictly prohibited. The trust must obtain and record the Permanent Account Number (PAN) of contributors, or passport number in the case of non-resident Indian citizens, and issue a receipt containing detailed contributor and transaction information. Electoral trusts are barred from accepting contributions from foreign entities, non-citizens, other electoral trusts, government companies, or foreign sources as defined under the Foreign Contribution (Regulation) Act, 2010. Funds collected must be distributed only to political parties registered under the Representation of the People Act, 1951. The rule also limits administrative expenses of the trust to 5% of total contributions, subject to a maximum of ₹5,00,000 in the first year and ₹3,00,000 in subsequent years. At least 95% of total contributions received during a tax year, including any surplus brought forward, must be distributed to eligible political parties before 31 March of that year. Electoral trusts are prohibited from using contributions for the benefit of members, contributors, relatives, or related entities. They must maintain detailed books of accounts, contributor and distribution records, conduct annual audits, and electronically submit the audit report in Form No. 181 along with lists of contributors and political parties receiving funds. Additionally, trusts must maintain meeting records and notify the authorities of any change in shareholders within thirty days.
Extract of Rule No. 289 of Draft Income-tax Rules, 2026
Rule 289
Rules for functioning of an electoral trust.
(1) An electoral trust referred to in Schedule VIII [Table: Sl. No. 2] shall function in accordance with the provisions of this rule.
(2) The electoral trust may receive voluntary contributions from—
(a) an individual who is a citizen of India;
(b) a company which is registered in India; and (c) a firm or Hindu undivided family or an Association of persons or a body of individuals, resident in India.
(3) The electoral trust shall accept contributions only by way of an account payee cheque drawn on a bank or account payee bank draft or by electronic transfer to its bank account and shall not accept any contribution in cash.
(4) The electoral trust shall not accept any contribution without the permanent account number of the contributor, who is a resident and the passport number in the case of a citizen of India, who is not a resident.
(5) A receipt indicating the following shall be issued by the trust immediately on receipt of any contribution, indicating the following: —
(a) name and address of the contributor;
(b) Permanent account number of the contributor or passport number in the case of a citizen who is not a resident;
(c) amount and mode of contribution including name and branch of the Bank and date of receipt of such contribution;
(d) name of the electoral trust;
(e) Permanent account number of the electoral trust;
(f) date and number of approval by the prescribed authority; and
(g) name and designation of the person issuing the receipt.
(6) The electoral trust shall not accept contributions—
(a) from an individual who is not a citizen of India or from any foreign entity whether incorporated or not;
(b) from any other electoral trust which has been registered as a company under section 8 of the Companies Act, 2013 and approved as an electoral trust under the Electoral Trusts Scheme, 2013;
(c) from a Government Company as defined in clause (45) of section 2 of the Companies Act, 2013(18 of 2013) and
(d) from a foreign source as defined in clause (j) of section 2 of the Foreign Contribution (Regulation) Act, 2010 (42 of 2010).
(7) A political party registered under section 29A of the Representation of the People Act, 1951 (43 of 1951) shall be an eligible political party and an electoral trust shall distribute funds only to the eligible political parties.
(8) (a) The electoral trust may, for the purposes of managing its affairs, spend up to five per cent of the total contributions received in a year subject to an aggregate limit of rupees five hundred thousand in the first year of incorporation and rupees three hundred thousand in subsequent years;
(b) the total contributions received in any tax year along with the surplus from any earlier tax year, if any, as reduced by the amount spent on managing its affairs, shall be the distributable contributions for the tax year;
(c) an electoral trust shall be required to distribute the distributable contributions for a tax year, referred to in clause (b), to the eligible political parties before the 31st day of March of the said tax year, subject to the condition that at least ninety-five per cent of the total contributions received during the tax year along with the surplus brought forward from earlier tax year, if any, are distributed.
(9) The trust shall obtain a receipt from the eligible political party indicating the name of the political party, its permanent account number, registration number, amount of fund received from the trust, date of the receipt and name and designation of person signing such receipt.
(10) The electoral trust shall not utilise any contributions for the direct or indirect benefit of the members or contributors, or for any of the following persons, namely: —
(a) the members (including members of its Executive Committee, Governing Committee or Board of Directors) of the electoral trust;
(b) any relative of such Members;
(c) where such member or contributor is a Hindu undivided family, a member of that Hindu undivided family;
(d) any person who has made a contribution to the trust;
(e) any person referred to in section 355(h) of the Act; and
(f) any concern in which any of the persons referred to in clauses (a), (b), (c), (d) and (e) has a substantial interest.
(11) (a) An electoral trust shall keep and maintain such books of account and other documents in respect of its receipts, distributions and expenditure as may enable the computation of its total income in accordance with the provisions of the Act; (b) The electoral trust shall also maintain a list of persons from whom contributions have been received and to whom the same have been distributed, containing the name, address and permanent account number of each such person along with the details of the amount and mode of its payment including the name and branch of the bank.
(12) Every electoral trust shall get its accounts audited by an accountant as defined in section 2(1) and furnish the audit report in Form No. 181 along with particulars forming part of its Annexure, to the Director General of Income Tax (Systems) on or before the due date specified for furnishing the return of income under section 263(1)(a)(iii).
(13) Form No. 181, shall be furnished electronically, —
(a) under digital signature, if the return of income is required to be furnished under digital signature;
(b) through electronic verification code in a case not covered under clause (a). (15) An electoral trust shall maintain a regular record of proceedings of all meetings and decisions taken therein.
(16) Every electoral trust shall furnish a certified copy of list of contributors and a list of political parties, to whom sums were distributed in the manner prescribed in sub-rule (8), to the Director General of Income Tax (Systems), every tax year along with the audit report as stipulated under sub-rule (12).
(17) Any change in the shareholders, subsequent to the approval granted under the Electoral Trusts Scheme, 2013 shall be intimated to the Board within thirty days of such change.
