New Delhi, Feb 1 (PTI): In order to cleanse the political funding system and check black money, Finance Minister Arun Jaitley today proposed to restrict cash donations to political parties from individuals to Rs 2,000 and introduced an 'electoral bonds' scheme.

The electoral bonds, which will be issued by notified banks, can be redeemed by recognised political parties within a prescribed time limit. "In accordance with the suggestion made by the Election Commission, the maximum amount of cash donation that a political party can receive will be Rs 2,000 from one person. Political parties will be entitled to receive donations by cheque or digital mode from their donors," Jaitley said in his Union Budget for 2017-18.

Besides, the Budget proposed an amendment to the Reserve Bank of India Act to enable the issuance of electoral bonds in accordance with a scheme that the government would frame in this regard. "Under the scheme, a donor could purchase bonds from authorised banks against cheque and digital payments only. They shall be redeemable only in the designated account of a registered political party. These bonds will be redeemable within the prescribed time limit from issuance of bond," Jaitley said.

Also, political parties have to file returns. Political parties would know who has given the money and they will disclose in returns how much bonds they have got.

"Bonds will be bought through cheque and bonds will be encashed with banks. It will be clean money and ... transparent, as the buyer is known," Jaitley said.

Shardul Amarchand Mangaldas Partner Amit Singhania said the Budget proposes to provide that the income of political parties will be exempt only if no donation more than Rs 2000 is received in cash and the political party files an income tax return.

"This is a welcome step in ensuring transparency in political party funding as it curbs not only the cash donation but also mandates compulsory filing of tax returns," Singhania said.