Foreign Contribution Regulation Act

Email: fcra.consultant@ozg.in

As you may be aware, the Government of India has amended the Foreign Contribution Regulation Act in last year. The Foreign Contribution (Regulation) Act, 2010 has come into effect from May 1, 2011 

Here are few salient from the new FCRA act:

“Association” means an association of individuals, whether incorporated or not, having an office in India and includes a society, whether registered under the Societies Registration Act, 1860, or not, and any other organisation, by whatever name called; 

The definition of “person” includes an individual, association and company registered under section 25.

1.     Registration under FCRA will require renewal every 5 years! However, the Act has provided relief to all the existing NGOs for the first 5 years from the date of enactment. In other words, all existing NGOs will be required to renew their registration at the end of the period of 5 years from the date of enactment of FCRA 2010. According to Section 16 of the proposed Act, all NGOs should apply for renewal of the certificate within 6 months prior to the expiry of the 5 years period.

2.   Sweeping powers have been given to the authorities for rejecting applications for prior permission or registration. Take for example, under Section 12, "the applicant should not have been prosecuted or convicted for indulging in activities aimed at conversion or creating communal tension". Inclusion of the term 'prosecuted' is of tremendous concern since it implies that even if there is a false or frivolous legal proceeding going on registration could be denied.

3.     FCRA Registration may be cancelled for various reasons including lack of activity for a period of 2 years. Currently NGOs have been enjoying the benefit of keeping their registered status alive by simply filing 'Nil' returns despite not receiving or utilizing foreign funds for many years.

4.  Also, any organization whose FCRA certificate has been cancelled / revoked shall not be eligible for registration or prior permission for a period of 3 years from the date of cancellation.

5.   Any organisation of a political nature and any association or company engaged in the production and broadcast of audio or audiovisual news or current affairs programme have been placed in the category prohibited to accept foreign contribution. (process defined to declare an organisation as political in nature)

6.     Once you have received foreign exchange you can not transfer to other person unless that person is authorised to receive foreign contribution.

7.  Only 50% of the contribution received can be used for administrative expenses, beyond which you will have to seek prior approval from the Central Government. (administrative expenses defined)

8.     No other funds can be deposited to FC account, all banks have to report all FC remitted. Have to maintain separate of accounts and records, exclusively, for the foreign contribution received and utilised.

9.     New provisions with regard to inspection of records.

10.  No organisation can use FC in any speculative activities. Organisations that do shareholder resolution campaigns have to be careful of this clause.

11. New online process of registration defined.

12. In case you receive  FC over one crore INR or equivalent – summery of data on receipts and utilisation of FC pertaining to the year of receipt as well as for one year thereafter to be placed in public domain. The Central Government shall also display or upload the summary data of such persons on its website for information of the general public.

13. In case the certificate of registration is suspended, up to twenty-five per cent of the unutilised amount may be spent, with the prior approval of the Central Government, for the declared aims and objects for which the foreign contribution was received.

14. The remaining seventy-five per cent of the unutilised foreign contribution shall be utilised only after revocation of suspension of the certificate of registration.

15.The amount of foreign contribution lying unutilised in the exclusive foreign contribution bank account of a person whose certificate of registration has been cancelled shall vest with the banking authority concerned till the Central Government issues further directions in the matter.

16. Financial report duly certified by a chartered accountant, in the prescribed Form, accompanied by an income and expenditure statement, receipt and payment account, and balance sheet for every financial year beginning on the 1st day of April within nine months of the closure of the financial year. All returns shall also be accompanied by a copy of a statement of account from the bank where the exclusive foreign contribution account is maintained by the person, duly certified by an officer of such bank.

17.  The statement of account from bank shall be preserved by the person for a period of six years.

18. ‘NIL’ report shall be furnished even if no foreign contribution is received during a financial year.