Foreign Contribution (Regulation) Act, 2010 (“FCRA”)

Over the last few years, the Indian Government has been scrutinizing the flow of foreign funds to all charitable organizations in India. Recently, it was reported that the Ministry of Home Affairs cancelled the licenses of over 1,807 charitable organizations due to non-compliance with the reporting requirements stipulated under the Foreign Contribution (Regulation) Act, 2010 (“FCRA”).

FCRA

The Foreign Contribution (Regulation) Act, 2010, is intended to consolidate the law regulating 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 activities detrimental to the national interest and for matters connected therewith. The Act extends to the whole of India, to its citizens outside India and also to associate branches or subsidiaries outside India, of companies or body corporate, registered or incorporated in India.

 Foreign Contribution

FCRA applies to “Foreign Contributions” received from “Foreign Sources”. As defined in Section 2(1)(h) of FCRA, 2010, “foreign contribution” means the donation, delivery or transfer made by any foreign source ─

  • of any article;

Exemption: An article given to a person (includes Individual, HUF, Company, Association) as a gift for his personal use and the market value of such article in India, on the date of such gift is not exceeding Rs. 25,000/-.

  • of any currency, whether Indian or foreign;
  • of any security as defined in Section 2(h) of the Securities Contracts (Regulation) Act, 1956and includes any foreign security as defined in clause (o) of Section 2 of the Foreign Exchange Management Act, 1999.

 

Registration / Prior permission

The organizations having a definite cultural, economic, educational, religious or social programme are entitled to accept foreign contributions under the FCRA. Such contributions may be accepted only with the approval of the Government of India, through the Ministry of Home Affairs.

In order to be eligible to receive the foreign contributions, an organization may seek prior approval either each time the entity is to receive contributions or by obtaining a one-time long term registration, which is valid for a period of 5 years.

Eligibility for Prior PermissionAn organization with less than 3 years of existence is not eligible for registration. Such organization may apply for 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/projects. For this purpose, the association should meet following criteria:

Ø  Should be registered either under the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or under Section 8 (erstwhile Section 25) of the Companies Act, 2013;

Ø  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.

Ø  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:

·         The Chief Functionary of the recipient Indian organization should not be a part of the donor organization.

·         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.

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

·         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.

 

Eligibility for RegistrationØ  An association should be registered either under the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or under Section 8 (erstwhile Section 25) of the Companies Act, 2013;

Ø  An association normally be in existence for at least 3 years and has undertaken reasonable activity in its chosen field for the benefit of the society for which the foreign contribution is proposed to be utilized.

Ø  An association should have spent at least Rs.10,00,000/- over the last 3 years on its aims and objects, excluding administrative expenditure.

Ø  Statements of Income & Expenditure, duly audited by CA, for last 3 years are to be submitted to substantiate that it meets the financial parameter.

 

Conditions for grant of registration and prior permission

 

ü  The ‘person’ making an application for registration or grant of prior permission-

·         is not fictitious or benami;

·         has not been prosecuted or convicted for indulging in activities aimed at conversion through inducement or 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 this Act;

·         has not been prohibited from accepting foreign contribution;

ü  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.

ü  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.

ü  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.

ü  The acceptance of foreign contribution shall not lead to incitement of an offence and shall not endanger the life or physical safety of any person.

 

Prohibition on Acceptance of Foreign Contribution

 

The following are the persons prohibited from accepting foreign contribution:

Ø  Candidate for election;

Ø  Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper;

Ø  Judge, government servant or employee of any entity controlled or owned by the Government;

Ø  Member of any Legislature;

Ø  Political party or office bearers thereof;

Ø  Organisations of a political nature as may be specified;

Ø  Associations or companies engaged in the production or broadcast of audio news or audio visual news or current affairs programmes through any electronic mode or form or any other mode of mass communication;

Ø  Correspondent or columnist, cartoonist, editor, owner of the association or company referred to in (g) above.

The Act empowers the Central Government to specify organizations as organizations of political nature by publication in the Official Gazette. Foreign contribution can, however, be accepted by the above-mentioned persons in the following specific cases:

Ø  by way of salary, wages or other remuneration due to him or to any group of persons working under him, from any foreign source or by way of payment in the ordinary course of business transacted in India by such foreign source; or

Ø  by way of payment, in the course of international trade or commerce, or in the ordinary course of business transacted by him outside India; or

Ø  as an agent of a foreign source in relation to any transaction made by such foreign source with the Central Government or State Government; or

Ø  by way of a gift or presentation made to him as a member of any Indian delegation, provided that such gift or present was accepted in accordance with the rules made by the Central Government with regard to the acceptance or retention of such gift or presentation; or

Ø  from his relative; or

Ø  by way of remittance received, in the ordinary course of business through any official channel, post office, or any authorised person in foreign exchange under the Foreign Exchange Management Act, 1999; or

Ø  By way of any scholarship, stipend or any payments of like nature.

 

Separate Bank Account for receiving Foreign ContributionEvery person who has been granted a certificate or given prior permission shall receive foreign contribution in a single account only through such one of the branches of a bank as he may specify in his application for grant of certificate. Such person can open one or more accounts in one or more banks for utilising the foreign contribution received by him.

 

Validity of Certificate/Prior permissionThe certificate granted shall be valid for a period of five years and the prior permission shall be valid for the specific purpose or specific amount of foreign contribution proposed to be received, as the case may be.

 

Renewal of CertificateThe application for renewal of registration Certificate may be made before 6 months from the expiry of their existing registration.

 

 

 

 

Procedure for making Application for Registration/Prior Permission/Renewal of Registration

 

An application for grant of Registration / Prior Permission/ Renewal of Registration by a person shall be made to the Central Government online.

 

Documents Required For Registration

 

  • Form FC-3A alongwith following documents
  • Certified copy of Registration Certificate of Association
  • Certified copy of Memorandum of Association/Trust Deed
  • Activity Report for the Last 3 Years
  • Audited Statement of accounts for the last three years
  • JPG/JPEG format file of Chief Functionary signature
  • JPG/JPEG format file of Seal of the Association
  • Affidavit of each key functionary

 

Documents Required For Prior Permission

  • Form FC-3B alongwith following documents
  • Certified copy of Registration Certificate of Association
  • Certified copy of Memorandum of Association/Trust Deed
  • Commitment Letter from the donor organization and agreement
  • Project Report for which FC will be received
  • JPG/JPEG format file of Chief Functionary signature
  • JPG/JPEG format file of Seal of the Association
  • Affidavit of each key functionary

 

Documents Required For Renewal of Registration

  • Form FC-3C alongwith following documents
  • Certified copy of Registration Certificate of Association
  • Certified copy of Memorandum of Association/Trust Deed
  • FCRA Registration Certificate of association issued by MHA.
  • JPG/JPEG format file of Chief Functionary signature
  • JPG/JPEG format file of Seal of the Association

 

 

 

Annual Reporting requirements

One of the most important reporting requirements that are often overlooked by organizations is the Submission of Annual Returns. Every organization is required to submit the annual returns to the Central Government within 9 months from the closure of the relevant financial year. This return has to include the details of the contributions received, source and manner in which it was received, purpose for which it was received and the manner of usage of the contributions.

Procedure for submission of Annual Return is as follows:

Documents Required For Annual Return

  • Form FC-4 alongwith following documents

 

  • Duly signed and seal Charted Accountant Certificate(with C.A registration number)
  • Declaration Certificate of Chief Functionary
  • Audited Statement of Accounts(It should contain Payment Account, Income and Expenditure Statement, and Balance Sheet)
  • Statement of Account from Bank duly certified by officer of such bank.
  • JPG/JPEG format file of Chief Functionary signature
  • JPG/JPEG format file of Seal of the Association

 

 

 

Various e-forms required to be filled under FCRA, 2010

 

FORMSPARTICULARS
FC-1Intimation of receipt of foreign contribution by way of gift/as Articles/ Securities/ by candidate for Election.
FC-2Application for seeking prior permission of the Central Government to accept foreign hospitality
FC-3AApplication for FCRA Registration
FC-3BApplication for FCRA Prior Permission
FC-3CApplication for Renewal of FCRA Registration
FC-4Intimation – Annual Returns
FC-5Application for seeking permission for transfer of foreign contribution to other un-registered persons.
FC-6AIntimation – Change of name and/ or address within the State of the Association
FC-6CIntimation – Change of designated bank/ branch/ bank account number of designated FC receipt-cum-utilisation bank account
FC-6DIntimation – Opening of additional FC-utilisation Bank Account for the purpose of utilisation of foreign contribution
FC-6E·         Intimation – Change in original Key members of the association

·         Updation of email Id in the FC- receipt cum utilisation and utilisation bank account details

·         Intimation of Quarterly Receipt of Foreign Contribution by Associations.

·         Filling of Annual returns of assets and liablities under Lokpal and Lokayukts Act, 2013 by individual of Association.