How should RUPPs be regulated?

Why in News?

A recent investigation has highlighted concerns over the functioning and financial transparency of Registered Unrecognised Political Parties (RUPPs). Six RUPPs based in Gujarat reportedly received around ₹1,700 crore in donations in 2023-24, exceeding the combined donations received by five nationally recognised parties other than the BJP.

The issue is significant because India has over 2800 RUPPs, while only a fraction actively contest elections.

What are Registered Unrecognised Political Parties?

• Under Section 29A of the Representation of the People Act (RPA), 1951, an association of Indian citizens can apply to the Election Commission for registration as a political party.
• A newly registered party generally remains an RUPP until it satisfies the conditions for recognition as a State or National Party under the Election Symbols (Reservation and Allotment) Order, 1968. “Unrecognised” does not mean illegal. It simply means that the party has not acquired the electoral support required for recognition.
• After satisfactory scrutiny of the documents submitted, the EC registered a political party as a RUPP. 

• The RUPPs enjoy the following benefits:
  • Tax exemption for donations received under Section 12 of the Income Tax Act, 2025.
  • Common symbol for contesting general elections to the Lok Sabha/State Assemblies. 
  • 20 star campaigners during the election campaign. 

• The RUPPs are required to maintain details of individual donors above twenty thousand rupees in a financial year and submit them to the poll body every year. As per section 29C of the Representation of the People Act, failure to furnish these details will result in losing income tax exemption.
• Under the Income Tax Act, 2025, the RUPPs are required to accept donations above two thousand rupees only through cheque or bank transfers.

Why are RUPPs becoming a concern?

1. Proliferation of non-serious political parties: 

• India has witnessed a sharp expansion in the number of registered parties, but registration does not necessarily translate into meaningful electoral activity.
• As per the ECI, till June 2025, more than 2,800 RUPPs existed, and it initiated proceedings against 345 parties that had not contested even a single election since 2019, and whose offices could not be physically located. The parties were given show-cause notices and an opportunity of hearing before final decisions. The ECI subsequently undertook delisting of 808 RUPPs for continually failing to meet essential conditions of registration.

2. Letter pad parties and regulatory arbitrage: 

• Some parties may exist primarily on paper, with minimal political activity but continued access to the institutional framework available to registered parties.
• Such entities can potentially be exploited for routing suspicious donations, tax evasion, generation or accommodation of fictitious expenditure, money laundering, layering of financial transactions, and creating artificial political expenditure trails.

Why do some RUPPs remain active despite poor compliance? 

• Weakness in the deregistration framework: 
  • In Indian National Congress (I) v. Institute of Social Welfare (2002), the Supreme Court held that the ECI does not possess a general power under Section 29A of the RPA to deregister a political party for subsequent violations.
  • The Court recognised only exceptional circumstances, such as registration having been obtained through fraud, a party ceasing to have allegiance to the Constitution, or the party being declared unlawful. The limited nature of the ECI’s deregistration power has therefore created a regulatory gap.

• Token electoral participation: Fielding a few candidates helps parties avoid action based on prolonged non-contestation, without establishing genuine organisational activity or financial integrity.
• Fragmented oversight: Registration, financial reporting, tax assessment and criminal investigation involve different authorities. Weak coordination can allow discrepancies between donations, tax claims and expenditure to remain undetected.
• Weak financial transparency: ADR found that 73.26% of RUPPs had neither audit nor contribution reports available online for FY 2022-23, limiting public scrutiny.

Constitutional and Democratic concerns: 

Regulating RUPPs involves a delicate balance. Excessive regulation may harm:

• Freedom of political association under Article 19(1)(c).
• Political pluralism.
• Representation of marginalised or emerging social groups.
• The ability of new political movements to challenge established parties.

A new party may have genuine political significance despite receiving very few votes initially. Therefore, electoral success alone cannot be the sole criterion for determining whether a party deserves legal existence.

Way Forward: 

• Provide explicit deregistration powers: Amend the RP Act to specify objective grounds, including prolonged inactivity and persistent serious non-compliance. The Law Commission’s 255th Report proposed deregistration for failure to contest parliamentary or State elections for ten consecutive years.
• Introduce proportionate sanctions: Establish a statutory progression from notice and an opportunity to rectify defaults to financial penalties, withdrawal of applicable benefits and deregistration for serious or repeated violations.
• Create a unified disclosure portal: Publish audited accounts, contribution reports, election expenditure and filing status in searchable, downloadable formats, with clear submission and publication dates.
• Strengthen independent auditing: Require disclosure of major vendors and related-party transactions, alongside scrutiny of unusually large receipts and expenditure. The Law Commission recommended audits by qualified accountants drawn from a CAG-maintained panel.
• Coordinate financial scrutiny: Enable lawful matching of party filings with bank records, donor tax claims and vendor information; investigate suspicious patterns rather than relying only on electoral performance.
• Improve internal accountability: Require updated office-bearer details, verifiable addresses, periodic organisational elections and transparent authorisation of expenditure.

The proliferation of RUPPs reflects both India’s democratic pluralism and a regulatory vulnerability. However, inadequate regulation may harm electoral integrity, equality among political actors, transparency in political finance, public trust, tax administration, and the fight against money laundering. 

Hence, the objective should be not to eliminate small parties, but to distinguish genuine small parties from non-functional or fraudulent entities.

Practice MCQ:

Q. With reference to Registered Unrecognised Political Parties (RUPPs) in India, consider the following statements:

1. Registration of a political party under Section 29A of the Representation of the People Act, 1951 automatically makes it a recognised State or National Party

2. The Election Commission of India has unrestricted power to deregister any political party that fails to contest elections.

3. Failure to furnish the contribution report prescribed under Section 29C can result in loss of income-tax relief to RUPPs. 

Which of the statements given above is/are correct?

(a) 1 and 2 only
(b) 3 only
(c) 1 and 3 only
(d) 2 and 3 only

Answer: (b) 3 only

Practice Mains Question:

Q. “Political pluralism requires easy entry into the electoral arena, but public privileges must be accompanied by public accountability.” In the context of Registered Unrecognised Political Parties (RUPPs), examine the need for regulatory reforms to ensure transparency while protecting freedom of political association.