All about Foreign Contribution Regulation Act (FCRA), 2010

Introduction

Foreign Contribution (Regulation) Act , 2010 is enacted by the Parliament to consolidate the law to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to national interest and for matters connected therewith or incidental thereto.

Applicability

As per section 1(2) of FCRA, 2010, the provisions of the act is applicable on the following:

• Extends to whole of India;
• Citizens of India outside India; and
• Associate Branches or subsidiaries, outside India, of companies or bodies corporate, registered or incorporated in India

Definition of “Foreign Contribution”

Now for the purpose of this act, the term “Foreign Contribution” is defined under section 2(1)(h) of the FCRA , 2010 which is as under :

“Foreign contribution” means the donation, delivery or transfer made by any foreign source, ─

(i) of any article, not being an article given to a person as a gift for his personal use, if the market value, in India, of such article, on the date of such gift is not more than such sum as may be specified from time to time by the Central Government by rules made by it in this behalf. (This sum has been specified as Rs. 25,000/- currently) ;

(ii) of any currency, whether Indian or foreign;

(iii) of any security as defined in clause (h) of section 2 of the securities Contracts (Regulation) Act, 1956 and includes any foreign security as defined in clause (o) of Section 2 of the Foreign Exchange Management Act, 1999.

Modes of Registration

Firstly, for the purpose of obtaining foreign contribution, there are two modes of obtaining foreign contribution according to the FCRA, 2010 which are as follows :

• Registration
• Prior Permission

Eligibility Criteria for Grant of Registration

The eligibility criteria for Grant of Registration are as follows:-

• Registered under either societies registration act, 1860 or the Indian Trust Act, 1882 or section 8 of the Companies Act, 2013 ;
• The entity should be in the existence for atleast 3 years. It should have undertaken reasonable activities for the benefit of society for which the foreign contribution is proposed to be utilised. For this purpose, it should have spent Rs. 10 Lakhs over the last 3 years on its aims and objectives, with an exception of administrative expenditure.
• The audited financial statements for the last 3 years duly certified by the Chartered Accountant

Eligibility Criteria for Grant of Prior Permission

Further, where the association is in its formative stages, then it would not be eligible for registration. In that case, the association is required to obtain prior permission before accepting specific amount from a specific         donor for carrying out specific activities or projects. For this purpose, the association should meet the following criteria:

(i)  Be registered under an existing statute like the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or section 25 of the Companies Act, 1956 etc;

(ii) 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

(iii) For Indian recipient organizations and foreign donor organizations having common members.

FCRA Prior Permission shall be granted to the Indian recipient organizations subject to its satisfying the following:

(i) The Chief Functionary of the recipient Indian organization should not be a part of the donor organization.

(ii) At least 51% of the office-bearers/ members of the Governing body of the Indian recipient organization should not be members/employees of the foreign donor organization.

(iii) In case of foreign donor organization being a single person/individual that person should not be the Chief Functionary of the recipient Indian organization.

(iv) In case of a single foreign donor, at least 51% office bearers/members of the governing body of the recipient organization should not be the family members and close relatives of the donor

Conditions to be met for the Grant of Registration and Prior Permission

In order to be eligible for the Grant of Registration and Prior Permission, the following conditions should be met:-

The ‘Person’ making the application for registration and Prior permission:-

• Is not fictitious or benami;
• Has not been prosecuted or convicted for indulging in activities aimed at conversion through inducement of force, either directly or indirectly, from one religious faith to another;
• Has not been prosecuted or convicted for creating communal tension or disharmony in any specified district or any other part of the country;
• Has not been found guilty of diversion or mis-utilisation of its funds;
• Is not engaged or likely to engage in propagation of sedition or advocate violent methods to achieve its ends;
• Is not likely to use the foreign contribution for personal gains or divert it for undesirable purposes;
• Has not contravened any of the provisions of the Act;
• Has not been prohibited from accepting foreign contributions;
• 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 is pending against him;
• 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;
• The acceptance of foreign contribution by the association/person is not likely to affect prejudicially –
  • The sovereignty and integrity of India;
  • The security, strategic, scientific or economic interest of the state;
  • The public interest;
  • Freedom or fairness of election to any Legislature;
  • Friendly relation with any foreign state;
  • Harmony between religious, racial, social, linguistic, regional groups, castes or communities;
  • The acceptance of foreign contribution –
  • Shall not lead to incitement of an offence;
  • Shall not endanger the life or physical safety of any person;

Procedure for Registration

Application for grant of registration / prior permission is to be submitted online in form FC – 3 at the website www.fcraonline.nic.in. Along with the required information in the Form FC – 3, the following documents need to be uploaded along with:-

For the purpose of Registration

• Jpg file of the signature of the Chief Functionary;
• Self-certified copy of registration certificate / trust deed etc. of Association;
• Self-certified copy of relevant pages of Memorandum of Association / Article of Association showing aim and objectives of Association;
• Activity report indicating details of activities during the last 3 years;
• Copies of relevant audited statements of Accounts for the last 3 years (Assets and Liabilties, Receipts and Payment, Income and Expenditure) clearly reflecting expenditure incurred on aims and objects of the Association and on administrative expenditure;

Prior Permission

• Jpg file of the signature of the Chief Functionary;
• Self-certified copy of registration certificate / trust deed etc. of Association;
• Duly signed Commitment letter from Donor;
• If functioning as editor, owner, printer or publisher of a publication registered under the Press and Registration of Books Act, 1867, a certificate from the Registrar of Newspapers for India that the publication is not a newspaper in terms of section 1(1) of the said act;

Fees for Registration / Prior Permission

For Registration, a fee of Rs. 2,000/- is required to be paid online and for Prior Permission, a fee of Rs. 1,000/- is required to be paid online.

Maintenance of Records and Utilization of Funds

• All the Foreign contribution shall be received in an exclusive single FC account of a Bank (also called designated FC account), as mentioned in the order of registration or prior permission granted.
• The Bank account shall be separately maintained by the Association.
• One or more ‘Utilization Accounts’ in one or more banks may be opened by the Association for ‘utilising’ the foreign contribution after it has been received in the designated FCRA bank account.
• No fund other than the foreign contribution shall be received in the Designated FC account.
• While opening any of the Utilization accounts, an intimation is to be given within 15 days of opening of such account in form FC – 6.
• In case of Investment by the Association, a separate register for Investment should be maintained under sub-rule 3. Every such register for investments shall be submitted for audit.
• The cash expenses and withdrawal limit is Rs. 2,000/-

Filing of Annual Return

The Annual Return for the Financial Year should be file online within 9 months from the end of the Financial Year i.e. 31^st December of each year. In case of prior permission, the annual return should be filed online yearly depicting the receipt and utilization of the foreign contribution during the year. In case of no transaction during the year, a NIL return should be submitted.

Cancellation of Registration

The Central Government may cancel the Registration certificate after carrying out an inquiry on the following grounds:-

• An incorrect / false statement in the application for the grant of registration or renewal by the holder of certificate;
• Any violation of the terms and conditions of the certificate or renewal thereof by the holder of certificate;
• In the opinion of the Central Government, it is necessary to do so in the public interest;
• Violation of any of the provisions of this act or rules by the holder of certificate;
• If the holder of certificate has not been engaged in any reasonable activity in its chosen field for the benefit of the society for 2 consecutive years or has become defunct.

In the event of the cancellation of the Registration certificate, the holder of the certificate shall not be eligible for registration or prior permission for a period of 3 years.

Suspension of Registration certificate

Whenever the Central Government is satisfied that pending consideration of the question of cancelling the certificate on any of the grounds mentioned above, it may suspend the certificate for a period not exceeding 180 days.

Cautions in the Utilization of Funds

There are certain prohibitions in the utilization of funds which are as follows:-

• The foreign contribution shall not be utilised for the investment in mutual funds or speculative transactions.
• The capital assets purchased with the help of foreign contributions should not be acquired in the name of the office bearers of the Association.
• An association cannot transfer the foreign contribution from one utilization account to another.
• No domestic receipt should be deposited in the designated FC bank account.
• The purpose for which the foreign contribution has been taken should be reflected in the Books of Accounts. The Association must not deviate from the purpose for which the foreign contribution has been received.
• Cash payments should be discouraged.
• The funds cannot be transferred from the Association to the unregistered organizations without the prior approval of the FCRA department.
• Avoid utilizing foreign contribution for the administrative purpose.
• Do not accept foreign contribution without obtaining FCRA certificate or during suspension of FCRA certificate or cancellation of foreign contribution.
• Do not accept foreign contribution in the undisclosed bank account.
• Care should be taken to file the Annual return regularly.
• Do not act in the contravention of any provision of FCRA, 2010.