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DAILY NEWS ANALYSIS

  • 19 May, 2021

  • 12 Min Read

Foreign Contribution Regulation Act

Foreign Contribution (Regulation) Act, 2010

  • The Foreign Contribution (Regulation) Act, 2010 and rules framed under it (the “FCRA” or “Act”) regulate the receipt and usage of foreign contribution by non-governmental organisations (“NGOs”) in India.
  • Since the Act is internal security legislation, despite being a law related to financial legislation, it falls into the purview of Home Ministry and not the Reserve Bank of India (RBI). It is implemented by the Ministry of Home Affairs, Government of India.

Objectives of FCRA

  • The intent of the Act is to prevent use of foreign contribution or foreign hospitality for any activity detrimental to the national interest.
  • It has a very wide scope and is applicable to a natural person, body corporate, all other types of Indian entities (whether incorporated or not) as well as NRIs and overseas branches/subsidiaries of Indian companies and other entities formed or registered in India.

Provisions of FCRA

  • The Act prohibits acceptance and use of foreign contribution or foreign hospitality by a certain specified category of persons such as a candidate for election, judge, journalist, columnist, newspaper publication, cartoonist and others.
  • Regulates the inflow to and usage of foreign contribution by NGOs by prescribing a mechanism to accept, use and report usage of the same.
  • It defines the term ‘foreign contribution’ to include currency, article other than gift for personal use and securities received from foreign source. While foreign hospitality refers to any offer from a foreign source to provide foreign travel, boarding, lodging, transportation or medical treatment cost.
  • The Act permits only NGOs having a definite cultural, economic, educational, religious or social programme to accept foreign contribution, that too after such NGOs either obtain a certificate of registration or prior permission under the Act.

Registration and prior approval under FCRA:

  • In order to be registered under the FCRA, an NGO must be in existence for at least three years and must have undertaken reasonable activity in its field for which the foreign contribution is proposed to be utilised.
  • Further, it must have spent at least INR 1,000,000 over three years preceding the date of its application on its activities.
  • The registration certificate is valid for a period of five years and must be thereafter renewed in the prescribed manner.
  • NGOs not eligible for registration can seek prior approval from FCRA for receiving foreign funding.
  • This permission is granted only for a specific amount of foreign funding from a specified foreign source for a specific purpose. It remains valid till receipt and full utilisation of such amount.

Conditions on the use of foreign funds:

  • All funds received by an NGO must be used only for the purpose for which they were received.
  • Such funds must not be used in speculative activities identified under the Act.
  • Except with the prior approval of the Authority, such funds must not be given or transferred to any entity not registered under the Act or having prior approval under the Act.
  • Every asset purchased with such fund must be in the name of the NGO and not its office bearers or members.
  • Every NGO registered or having prior approval under the Act must file an annual report with the Authority in the prescribed form. This report must be accompanied by an income and expenditure statement, receipt and payment account, and balance sheet for the relevant financial year. For financial years where no foreign contribution is received, a ‘NIL’ report must be furnished with the Authority.

Foreign Contribution (Regulation) Amendment Bill, 2020

  • The Bill bars public servants from receiving foreign contributions. Public servant includes any person who is in service or pay of the government, or remunerated by the government for the performance of any public duty.
  • The Bill prohibits the transfer of foreign contribution to any other person. The term ‘person’ under the Bill includes an individual, an association, or a registered company. The FCRA 2010 allows transfer of foreign contributions to persons registered to accept foreign contributions.
  • The Bill makes Aadhaar number mandatory for all office bearers, directors or key functionaries of a person receiving foreign contribution, as an identification document. In case of a foreigner, a copy of the passport or the Overseas Citizen of India card for identification is required.
  • The Bill states that foreign contribution must be received only in an account designated by the bank as FCRA account in such branches of the State Bank of India, New Delhi. No funds other than the foreign contribution should be received or deposited in this account. The person may open another FCRA account in any scheduled bank of their choice for keeping or utilising the received contribution.
  • The Bill allows the government to restrict usage of unutilised foreign contribution. This may be done if, based on an inquiry the government believes that such person has contravened provisions of the FCRA.
  • The Bill proposes that not more than 20% of the total foreign funds received could be defrayed for administrative expenses. In FCRA 2010 the limit was 50%.
  • The Bill allows the central government to permit a person to surrender their registration certificate.

Source: PIB


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