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Implication of raising ceiling on companies for donation to political parties (Relevant for GS Prelims and GS Mains Paper II)

1. Till now, companies could only contribute up to 7.5% of their average net profits in the past three financial years to political parties. They were required to disclose in their profit and loss accounts the amount of contributions and the names of political parties to which they were made. The ceiling has now been dropped, paving the way for a firm to deploy unlimited capital into political coffers irrespective of its own financial and operational health.

2. Companies would still have to reveal the extent of their financing of parties, but no longer have to name their preferred parties.

Impact of the decision: This would open up new opportunities in crony capitalism.
1. Pressure could be exerted on a company awaiting government clearances, or a loan restructuring from public or cooperative sector financiers.

2. Even a publicly listed company can set up subsidiaries just to fund parties. This removes any pretence of transparency in the process as the donor will not have to disclose who he paid; the recipient political party has no such obligation either.



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