FCRA Rules & Regulations for NGOs: Impact after 2020 Amendments
Compliance Register Business

FCRA Rules & Regulations for NGOs: Impact after 2020 Amendments

Basic Introduction: –

The Foreign Contribution (Regulation) Act, 2010 (“FCRA”) was enacted to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any for illicit purpose.

In view of the rampant misuse and misappropriation of the funds by certain NGOs receiving foreign funding, the Foreign Contribution (Regulation) Amendment Act, 2020, has been enacted with an aim to strengthen the compliance mechanism, and with the goal of implementing rigorous FCRA laws and enhancing transparency and accountability in the receipt and utilization of foreign contribution. Foreign Contribution Regulation (Amendment) Rules, 2020 were published on November 10, 2020, by the Ministry of Home Affairs. This Act applies to all associations, groups, and NGOs that need to receive foreign funds for the following five activities:

  • Social
  • Educational
  • Religious
  • Economic
  • Cultural

Under the FCRA, all such NGOs are required to register. The registration is initially valid for 5 years. It can also be renewed in the future if they comply with all the rules.

Foreign contribution:-

Foreign contribution means the donation, delivery or transfer made by any foreign source, of any of the following─

  • of any article, not being an article given to a person as a gift for his personal use.
  • of any currency, whether Indian or foreign
  • of any security as defined in Securities Contracts (Regulation) Act, 1956 and includes any foreign security as defined in Foreign Exchange Management Act, 1999.

Person who are eligible to accept foreign contribution:

Any “Person” can receive foreign contribution subject to the following conditions: –

 a) It must have a definite cultural, economic, educational, religious or social programme.

 b) It must obtain the FCRA registration/prior permission from the Central Government

 c) It must not be prohibited under Section 3 of FCRA, 2010

The following persons are not allowed to receive any Foreign contribution:

  1. A candidate for election;
  2. Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper;
  3. Public servant, Judge, government servant or employee of any Corporation or any other body controlled on owned by the Government;
  4. Member of any legislature;
  5. Political party or office bearer thereof;
  6. Organization of a political nature as may be specified by the Central Government.
  7. Association or company engaged in the production or broadcast of audio news or audio-visual news or current affairs programmes through any electronic mode,
  8. Individuals or associations who have been prohibited from receiving foreign contribution.

Condition of Foreign Contribution:

  • Foreign contribution can be received in rupees: Any donation, delivery, or transfer received from a ‘foreign source’ whether in rupees or in foreign currency is construed as ‘foreign contribution’ under FCRA, 2010. Such transactions including income and interest derived on foreign contribution even in rupees term are considered as foreign contribution.
  • Interest will be considered as a foreign contribution: The interest or any other income earned out of foreign contribution should be shown in the Annual Return (Form FC-4) during the year in which it is earned. Such interest or income would be considered as foreign contribution.
  • Earnings from foreign client: Foreign contribution excludes earnings from foreign client(s) by a person in lieu of goods sold or services rendered by it as this is a transaction of commercial nature in the normal course of business trade, etc within or outside India.
  • Donation given by Non-Resident Indians: Contributions made by a citizen of India living in another country (i.e., Non-Resident Indian), from his personal savings, through the normal banking channels, cannot be treated as foreign contribution. However, Donation from an Indian origin person who has acquired foreign citizenship is treated as foreign contribution. This will also apply to PIO / OCI cardholders, as they are foreigners.
  • Delegate/participation Fees paid by the foreign delegates/participants: “Delegate/participation Fees” paid by foreign delegates/participants for participation in a conference/seminar and which is utilized for the purpose of meeting the expenditure of hosting the conference/seminar is not treated as foreign contribution and as such no permission under FCRA is required by the recipient.

Foreign source:

Under the FCRA, foreign contribution is acceptable from the following sources:

  1. the Government of any foreign country or territory and any agency of such Government;
  2. any international agency, not being the United Nations or any of its specialized agencies, the World Bank, International Monetary Fund or such other agency as the Central Government may, by notification, specify in this behalf;
  3. A foreign company;
  4. A corporation, not being a foreign company, incorporated in a foreign country or territory;
  5. A multi-national corporation;
  6. A trade union in any foreign country or territory, whether or not registered in such foreign country or territory;
  7. A foreign trust or a foreign foundation, by whatever name called, or such trust or foundation mainly financed by a foreign country or territory;
  8. A society, club or other association or individuals formed or registered outside India;
  9. A citizen of a foreign country.
  10. A company within the meaning of the Companies Act, 2013, and more than 50% of the nominal value of its share capital is held, either singly or in the aggregate, by one or more of the following, namely: –
  • the Government of a foreign country or territory;
  • the citizens of a foreign country or territory;
  • corporations incorporated in a foreign country or territory;
  • trusts, societies or other associations of individuals (whether incorporated or not), formed or registered in a foreign country or territory;
  • Foreign company;

Restriction on transfer of funds to other organisations:

Section 7 of FCRA, 2010 states that no person who,

  • is registered and granted a certificate or has obtained prior permission under this Act; and
  • receives any foreign contribution,

shall transfer such foreign contribution to any other person.

Procedure for transferring foreign contribution to an unregistered person: A person who has been granted a certificate of registration or prior permission under section 11 and intends to transfer part of the foreign contribution received by him to a person who has not been granted a certificate of registration or prior permission under the Act, may transfer such foreign contribution to an extent not exceeding 10% of the total value and for this purpose, make an application to the Central Government in Form FC-10.

Foreign Hospitality: Foreign hospitality means any offer, not being a purely casual one, made in cash or kind by a foreign source for providing a person with the cost of travel to any foreign country or territory or with free board, lodging, transport or medical treatment.

The following categories of persons shall not accept any foreign hospitality except with prior permission of the Central Government:

(a) members of a Legislature

(b) office bearers of political parties

(c) Judges

(d) Government servants

(e) Employees of any corporation or any other body owned or controlled by the Government;

However, it shall not be necessary to obtain any such permission for an emergency medical help needed on account of sudden illness contracted during a visit outside India, but, where such foreign hospitality has been received, but the person receiving such hospitality shall give, within 30 days from the date of receipt of such hospitality an intimation to the Central Government as to the receipt of such hospitality.

Registration:-

For grant of registration under FCRA, 2010, the association should:

  • be registered under the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or the Companies Act, 2013, etc;
  • Any organization seeking registration under the FCRA must have existed for at least 3 years and invested at least Rs 15 lakh on its core activities for public welfare during the previous 3 years, excluding administrative expenditure.

The conditions for granting certificate of registration:

  1. The person making an application for registration or grant of prior permission is not fictitious or benami;
  2. the person making an application for registration has undertaken reasonable activity in its chosen field for the benefit of the society for which the foreign contribution is proposed to be utilized;
  3. the person making an application for giving prior permission has prepared a reasonable project for the benefit of the society for which the foreign contribution is proposed to be utilized;
  4. in case the person being an individual, such individual has neither been convicted under any law for the time being in force nor any prosecution for any offence pending against him;
  5. in case the person being other than an individual, any of its directors or office bearers has neither been convicted under any law for the time being in force nor any prosecution for any offence is pending against him;
  6. the acceptance of foreign contribution by the person is not likely to affect prejudicially—
  • the sovereignty and integrity of India; or
  • the security, strategic, scientific or economic interest of the State; or
  • the public interest; or
  • freedom or fairness of election to any Legislature; or
  • friendly relation with any foreign State; or
  • harmony between religious, racial, social, linguistic, regional groups, castes or communities;
  1. the acceptance of foreign contribution, —
  • shall not lead to incitement of an offense;
  • shall not endanger the life or physical safety of any person.

It may be noted that the certificate granted shall be valid for a period of 5 years and prior permission shall be valid for the specific purpose or specific amount of foreign contribution proposed to be received, as the case may be.

Eligibility criteria for grant of prior permission:

An organization in the formative stage is not eligible for a certificate of registration. Such an organization may apply for a grant of prior permission under FCRA, 2010. Prior permission is granted for receipt of a specific amount from a specific donor for carrying out specific activities. For this purpose, the association should:

  • be registered (under the Societies Registration Act, 1860 or Indian Trusts Act 1882 or section 8 of Companies Act, 2013 etc.);
  • submit a specific commitment letter from the donor indicating the amount of foreign contribution and the purpose for which it is proposed to be given; and
  • submit copy of a reasonable project for the benefit of the society for which the foreign contribution is proposed to be utilized.
  • should meet all the conditions for the grant of registration.

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