Political Contributions by Companies in India: Section 182 of the Companies Act, 2013
Political contributions by companies are presently governed principally by Section 182 of the Companies Act, 2013. The earlier Section 293A of the Companies Act, 1956 is no longer the operative provision. The law also has to be read in light of the Supreme Court judgment dated 15 February 2024 in Association for Democratic Reforms v. Union of India, which struck down the Electoral Bond Scheme and important 2017 amendments affecting corporate political contributions.
Section 182: Quick Summary
- Government companies are prohibited from making political contributions.
- A company in existence for less than three financial years is also prohibited.
- For an eligible company, aggregate political contributions in a financial year cannot exceed 7.5% of the average net profits of the three immediately preceding financial years.
- The contribution must be authorised by a resolution passed at a meeting of the Board of Directors.
- Indirect payments and certain advertising expenditure may also be treated as political contributions.
- Political-contribution disclosure requirements must be complied with in the company's profit and loss account.
- Contravention can expose the company and defaulting officers to the penalties prescribed in Section 182(4).
Who Can Make a Political Contribution?
Section 182 permits a company to make a contribution directly or indirectly to a political party, subject to the statutory conditions. However, this permission does not extend to a Government company or to a company that has been in existence for less than three financial years.
Maximum Limit of Political Contributions
The original Companies Act, 2013 imposed a ceiling of 7.5% of the company's average net profits during the three immediately preceding financial years. The Finance Act, 2017 deleted this cap. On 15 February 2024, the Supreme Court held that the deletion permitting unlimited corporate political contributions was arbitrary and violative of Article 14 of the Constitution. Consequently, the 7.5% ceiling is again material to compliance under Section 182.
Board Resolution Is Mandatory
No political contribution should be made by an eligible company unless the making of the contribution is authorised by a resolution passed at a meeting of the Board of Directors. The decision should therefore be formally considered and recorded in accordance with the Companies Act, the company's internal governance requirements and applicable accounting and disclosure obligations.
Indirect Contributions and Political Advertising
Section 182 also captures certain indirect forms of political support. A donation, subscription or payment made to a person may be treated as a political contribution where the company knows that the person carries on an activity reasonably likely to affect public support for a political party.
Similarly, expenditure incurred directly or indirectly on an advertisement in a souvenir, brochure, tract, pamphlet or similar publication may be deemed to be a political contribution where the publication is issued by or on behalf of a political party, or where it is published for the advantage of a political party.
Disclosure of Political Contributions
The Supreme Court in the Electoral Bonds judgment also struck down the 2017 amendment to Section 182(3) that had removed party-wise disclosure from the statutory framework. Companies should therefore ensure that their profit and loss account contains the disclosure required by the operative Section 182 framework, including particulars of the political contribution and the political party to which it was made.
Penalty for Contravention of Section 182
If a company makes a political contribution in contravention of Section 182, the company may be punished with a fine extending to five times the amount contributed. Every officer of the company who is in default may be punished with imprisonment for a term extending to six months and with a fine extending to five times the amount contributed.
Political Party for the Purpose of Section 182
For Section 182, "political party" means a political party registered under Section 29A of the Representation of the People Act, 1951.
Contribution to Bona Fide and Charitable Funds: Section 181
Political contributions should be distinguished from contributions to bona fide charitable and other funds. Under Section 181 of the Companies Act, 2013, the Board may make contributions to such funds. However, prior permission of the company in general meeting is required where the aggregate contribution in a financial year exceeds 5% of the average net profits for the three immediately preceding financial years.
Contribution to the National Defence Fund: Section 183
Under Section 183 of the Companies Act, 2013, the Board of Directors, a person or authority exercising the powers of the Board, or the company in general meeting may contribute such amount as it thinks fit to the National Defence Fund or any other fund approved by the Central Government for the purpose of national defence. The company must disclose in its profit and loss account the total amount contributed to such fund during the relevant financial year.
Section 293A of the Companies Act, 1956: Historical Position
Section 293A of the Companies Act, 1956 formerly regulated political contributions by companies and imposed, among other requirements, a lower ceiling of 5% of average net profits and different penalties. For current transactions and compliance, companies should rely on the Companies Act, 2013 and the law as clarified by the Supreme Court rather than the repealed 1956 provision.
Compliance Checklist for Companies
| Compliance point | Current requirement |
|---|---|
| Eligible company | Not a Government company and in existence for at least three financial years. |
| Contribution ceiling | Aggregate contribution not above 7.5% of average net profits of the three immediately preceding financial years. |
| Approval | Board resolution passed at a meeting of the Board of Directors. |
| Indirect support | Review donations, subscriptions, payments and qualifying political advertising because they can be deemed political contributions. |
| Accounts and disclosure | Make the disclosures required by the operative Section 182 framework in the profit and loss account. |
| Penalty exposure | Company: fine up to five times the contribution; defaulting officer: imprisonment up to six months plus fine up to five times the contribution. |
Official Legal Resources
Note: This page is intended for general legal information. Corporate political contributions can also engage election law, accounting, tax and governance requirements. Companies should verify the latest statutory text, rules and binding judicial decisions before acting.