FOREIGN CONTRIBUTION REGULATIONS ACT, 2010

Vimal Kishore FCAvimalkishore@gmail.com

Background

• FCRA legislation background is of late 60s – early 70s

• Act was legislated during Emergency

• Main objective is to ensure that the foreign funds are not used to subvert, influence national agenda

• Terrorism activities are the current trigger for tightening of the legislation

• Ministry of Home Affairs is the Administrative Ministry

• FCRA does not cover foreign monies received through commercial transactions

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Background

• FCRA Legislation basically regulates foreign contribution by following a three pronged strategy by:

- prohibiting certain persons in sensitive positions (legislature, political parties, govt. servants, judges, persons from media) from accepting foreign contributions/hospitality

- by monitoring organisations that wish to receive such funds / benefits - through requiring them to obtain prior permission / registration

- by monitoring subsequent receipt of funds and their usage (by asking persons receiving such funds to submit necessary information)

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Legislative Sources

• FCRA 2010- Bill was tabled in Rajya Sabha in 2006 and passed in Rajya Sabha on

19th August 2010- Introduced in Lok Sabha on 27th Aug 2010 and passed

the same day.- President assent received on 27th September 2010- It was published in the Gazette on the same day.- Made effective wef 1-5-2011

• Rules - Draft rules placed on MHA website and comments invited by 31st

March 2011- Final Rules published on 29 April. Effective 1-5-2011

Important Definitions• Foreign Contribution (S.2(h))

– Donation, delivery or transfer made by a foreign source or from a person who has rec’d it from a foreign source of an article (not being gift for personal use below specified value, i.e Rs 25,000/-), any currency or security

– Includes interest / income earned from such foreign contribution

Exceptions (S.4)

– Salary, Remuneration, Scholarship, Stipend, etc.– Payment in the course of trade or commerce– Fees, in ordinary course of business (incl. educational

institutions)– From relatives (however if more than Rs 1 lakh in a financial

year rec’d than intimate within 30 days in form FC 1)

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Important Definitions

• Foreign Source (S.2(j))– Foreign govt. or its agency– Any international agency (exceptions UN, World Bank

or any other notified by the Govt.)– Foreign corporations, foreign companies, foreign

trade union, foreign non-profit agencies, foreign citizens

– Indian company with more than 50% shareholding held by persons mentioned above

• Foreign Hospitality (S.2(i))– Any offer, not being a purely casual one, made in cash

or kind for providing travel to / free boarding, etc. in any foreign country or medical treatment

Basics for receiving foreign contribution

• An organisation having a definite cultural, social, educational, religious or economic program is eligible to receive foreign contribution by either:

Obtaining Prior Permission (S 11(2))Registration (S 11(1))

Prior Permission

• To be done online – Form FC4• A new prior permission application cannot be moved

within 6 months for the same project• Documents to be attached

– Notorised Copy of Trust Deed / Memorandum – Activities over last 3 years – 3 Years duly audited annual accounts– Latest Commitment letter from the donor– Details of the project to be funded, such as outlays,

detailed budget, etc. – DD / Pay Order of Rs 1000/-– Details of violations / convictions, if any

Registration• Prior Permission is only for a specific project / commitment

• An organisation expecting recurring foreign contributions can seek Registration which is general in nature and any FC can be deposited without recourse to the Ministry

• For Registration,- Eligibility criteria – Existence for three years– Minimum of Rs 10 lakh spending during this period.

(No legislative provision /rules but based on practices at the Ministry)

• Form FC 3 to be filed online, Fees Rs 2000/-.

• Hard copy duly signed to be submitted within 30 days (otherwise application would be deemed to be ceased – Rule 1b & 2b)

• .

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Registration• 2nd application cannot be moved within 6 months from the date of

cessation.

• Separate bank account for receipt of FC.

• New Bank accounts for utilisation of FC may be opened. Intimate the same within 15 days of opening of the account.

• Pending applications at the time of enactment of New Act will be valid under New Act provided Fees is submitted

• Certificate from the DM or Secretary of the Government confirming the existence and bona fides of the organisation; not mandatory but expedites disposal

• Any other document that the applicant wants to submit - 12AA/80G certificates etc.

Renewal of Registration

• All registrations valid for 5 years

• In respect of organisations registered on the date of enactment of FCRA 2010, the first renewal will fall due after five years from 1-5-11

• File renewal application online (FC-5)

• Fees Rs 500/- by DD/Bankers draft

• Object of renewal to re-visit cases to weed out any blacklisted, proceeded NGOs

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Renewal of Registration

• Application to be moved 6 months prior to expiry

• In case of NPOs implementing multi-year project to apply 12 months in advance.

• Delay may be condoned but not later than 4 months after the registration expires. (R. 12 (8))

• If renewal not applied than registration ceases after the expiry period and new application has to be moved as if its a new registration under Rule 9.

Registration – Problem Areas

• Changing of Form Nos. will cause mistakes, headaches for people required to comply. This could have been easily avoided.

• Need to apply for renewal every 5 years. It is rather bothersome and is inconsistent with Govt.’s line of thinking.

• Hard copy of applications to be submitted within 30 days. If not submitted than application lapses. Next application cannot be moved for another 6 months.

Registration – Problem Areas

• Power to cancel the Registration certificate (S. 14)

• No new application can be moved for 3 years once blacklisted

• Power to suspend Registration certificates (S.13) upto a maximum of 180 days

• Assets to vest with the Govt wherever registration cancelled or a registered/ permitted person ceases becomes defunct.

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Miscellaneous Provisions under FCRA 2010 regime• Organisations to accept foreign contribution through

one account only but can open multiple accounts to utilise FC subject to the condition that the account will be used only for depositing FC from the notified account and its ultimate ultilisation (Proviso to section 17(1))

• Central Government has the powers to enter the premises of the person granted prior permission/registration and audit the accounts in case compliances not made in specified time

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Miscellaneous Provisions under FCRA 2010 regime

• All banks to report within 30 days of receipt of FC in case the same is received in an account other than for which prior permission/registration has been granted

• Restriction on utilisation towards Administrative Expenses – maximum 50% can be used towards Administrative Expenses

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Miscellaneous Provisions under FCRA 2010 regime

• Transfer of FC received to other organisations has been permitted under regulated conditions

• Only FCRA registered organisations are eligible to receive FC from the Principal organisation after the transferor applies in form FC 10

• Limited transfer of upto 10% of total FC permitted to be transferred to Non FCRA organisation provided the application is countersigned by DM

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Thank you