Guide
to Foreign Contribution (Regulation) Act, 2010(FCRA)
Legal Objective of the Act:
·
To regulate the
acceptance and utilisation of FC/donations or foreign hospitality by
certain individuals or associations or companies; and
·
To prohibit acceptance and utilisation of FC/donations
or foreign hospitality for any activities detrimental
to the national interest and matters connected thereto.
It Applies to whole
of India including(also applies to the following):
·
Citizens of India
outside India;
·
Foreign Branches and
Subsidiaries of ‘Body Corporates registered in India’.
·
However, not applies
to a company registered under Companies Act, 1956/2013 whose more than half of
nominal capital is held by foreign company or a foreign source.
Some Abbreviations
used in the Article:
·
FCRR: Foreign
Contribution (Regulation) Rules, 2011
·
FC- Foreign Contribution
·
MHA- Ministry of Home Affairs or MHA-
Central Government
·
Regt.- Registration
·
PP- Prior Permission
·
UAPA- Unlawful Activities (Prevention) Act
Meaning of some technical
words
Association:
"Association"
means an association of individuals and includes a society, whether
incorporated or not, having an office in Indiaby whatever name called.
Foreign Company(An
Example of aforeign Source):
·
Company incorporated
outside India;or
·
Company which is a subsidiary
of above, wherever located.
However,
if the control is situated in India,
then it shall be treated as if a body
corporate registered in India and hence the FCRA laws shall be applicable
to it(second Para of this Article).
Person:
"person"
includes- (i) an individual; (ii) a
Hindu undivided family; (iii) an association; (iv) a company registered under
section 25/Section8 of the Companies Act, 1956/2013
Relative:
Shall
be same as per section 2(77) of Companies Act, 2013
Foreign source:
As
per Section 2(1) (j) of FCRA, foreign
source(Basically a source outside India from where the contribution is
received) includes:-
(i)
The government of any foreign ‘country’ or ‘territory’ andits
agency(s);
(ii)
Any international agency(not being the United Nations
or any of its specialized agencies)
(iii)
a foreign company;
(iv) a corporation,
not being a foreign company, incorporated in a foreign country or territory;
(v)
a multi-national corporation as per clause (g)(iv);
(vi) a company
within the meaning of the Companies Act, 1956 or Companies Act, 2013 and more
than one-half of the nominal value of its share capital is held, either singly
or in the aggregate by any of the following;
·
the Government of a foreign country or territory;
·
the citizens of a foreign country or territory;
·
corporations incorporated in a foreign country or
territory;
·
trusts, societies or other associations of individuals
(whether incorporated or not), formed or registered in a foreign country or
territory;
·
Foreign company;
(vii) a trade union
in any foreign country or territory, whether or not registered in such foreign
country or territory;
(viii) a foreign trust
or a foreign foundation, by whatever name called, or such trust or foundation
mainly financed by a foreign country or territory;
(ix) a society, club
or other association or individuals formed or registered outside India;
(x)
a citizen of a foreign country
Foreign Contribution
(FC):
As
per Section 2(1)(h) of FCRA, "FC" means the donation, delivery or transfer made by any foreign source of any, ─
(i)
Article(not being an article given to a person for his personal use as a
gift having market value of not more than 25,000)(present specified
threshold);
(ii)
Currency(includes Indian or foreign);
(iii)
Security(per Section 2(h) of the SCRA, 1956
and includes any foreign security per Section 2(o) of the FEMA, 1999).
Explanation 1 –can be received
either directly or through one or more foreign source;
Explanation 2 ‒ includes, the ‘interest accrued’ on the FC deposited in any bank or
‘any other income and interest thereon’ derived from the FC;
Explanation 3 ‒ Fees (including fees charged by an educational institution in India
from foreign student) or cost in lieu of
goods or services in the ordinary course of his business, trade or commerce
shall not be treated as FC.
Infusion of foreign
share capital in a
company registered under section
25/Section 8 of the Companies Act, 1956/2013 is treated as FC.
Who can receive FC
legally?
Any
Person who is having a definite
cultural, economic, educational, religious or social programme(practically
all NGO’s having nationalist objects)can receive FCafter getting registered
under FCRA law or obtaining a prior permission from the Central Government. A PRIVATE LIMITED COMPANY too may seek
prior permission/registration for receiving foreign funds in case they wish to
do some charitable work.
Section 3(1) of
FCRA, following Persons cannot accept FC:
(a)
candidate for election;
(b)
correspondent, columnist, cartoonist, editor, owner,
printer or publisher of a registered newspaper;
(c)
Judge, government servant or employee of any
Corporation or any other body controlled on owned by the Government;
(d)
Member of any legislature;
(e)
Political party or office bearer thereof;
(f)
Organization of a political nature(section 5(1) of the
Act)
(g)
Association or company engaged in the production or broadcast of audio news or audio visual
news or current affairs programme as per Section 2(i)(r) of the Information
Technology Act, 2000 and their owners.
(h)
prohibitedIndividuals or Associations.
Section 3(2): Acceptance
or Delivery of FC:
A person ‘resident in India’ or ‘citizen of India’ shall not accept/deliver
any FC to any person directly or indirectly, which in a way ultimately leads to delivery to a Political Party or Person
mentioned in Section 3(1).
Section 4: The
following can be accepted by anyone(even by the persons prohibited in section
3), however subject to section 10:
·
Relative(Definition
below)
·
Business receipt from
official channel or as per FEMA,1999
·
Scholarships
·
Wages for employees
working under him
·
As an agent of foreign
of source for transactions with MHA/SG
Section 10,
Prohibitory Order:
·
Deals with passing of prohibitory order by MHA to not pay, deliver or transfer any article,
security or currency unlawfully kept or controlled.
·
Sub Section 2, 3, 4, 5 of section 7 of UAPA, 1967 shall apply.
Visit MHA Website: https://fcraonline.nic.in/home/index.aspx
·
List of UN specialized agencies;
·
List of banned Organisations;
·
Status of registration/PP, however, renewal status not
available;
·
The procedures and online submission of forms for Registration/PP,
change in name, address, designated FC account.
·
List of definite cultural, economic, educational,
religious or social programme.
·
The ministry answers all queries of NGOs through
emails.
Rule 6 of FCRR, FC
from relatives:
Any
person receiving FC in excess of one lakh rupees or equivalent thereto in a
financial year from any of his relatives
shall inform the Central Government in Form
FC-1 within thirty days from the date of receipt of such contribution.
Contributions by
Non-Resident Indians (NRIs), Foreign Citizens:
·
Contributions made by a citizen of India living in
another country (i.e., Non-Resident Indian, Indian passport holder), from his
personal savings, through the normal banking channels, is not treated as FC.
·
Contribution from an Individual of Indian Origin who has acquired foreign citizenship (PIO Card Holders)
is treated as FC.
Delegation Fees:
“Delegate/participation
Fees” for participation in a conference/seminar and which is utilized for the
purpose of meeting the expenditure of hosting the conference/seminar is not treated as FC.
Investment of FC:
·
A separate register of investments and that must be
audited.
·
It can be in a debt-based secure investment
·
It can be in fixed deposits in any bank or Government
approved financial institution.
·
It cannot be in Speculative investments/activities.
Rule 4 of FCRR, Meaning
of Speculative activities/investments:
·
Element of risk of appreciation or depreciation, linked
to marked forces, including investment in mutual funds or in shares;
·
Scheme that promises high returns like investment in
chits or land or similar assets not directly linked to the declared aims and
objectives of theassociation.
FC Utilization and
Foreign Currency(FC) Account:
·
As per the objectives of association.
·
Not for Speculative Business;
·
Should not incur FC for administrative expenses for
more than 50%, except with prior approval of MHA.(Please refer rule 5 of FCRR
for details)
·
Exclusive FC Account, No fund other than FC can be
deposited. Further, this A/c number would be mentioned in the letter granting
registration or prior permission to the association.
·
One or more accounts in one or more banks may be opened
for utilizing the FC and intimation required for every account to MHA within 15
days of opening.
·
All accounts will be on the online platform of public
finance management service (PFMS) of controller general of accounts, ministry
of finance.
Section 7, Transfer
of FC to another registered person:
A
person who is registered or obtained PP can transfer FC only if he also
registered or obtained PP provided that the recipient has not been
proceeded against under any of the provisions of the Act. (The transferor takes
a written declaration from transferee that no proceeding is pending)
Section 7, Procedure
for transferring FC to any unregistered persons:
Make
an application (FC-10) supported with a declaration to the Central Government.
·
The amount proposed to be transferred during the
financial year is less than ten per cent of the total value of the FC received during
the financial year and will transfer only after approval;
·
Can be transferred only after approval of MHA.
·
Both the transferor and the recipient shall be
responsible for ensuring proper utilisation of the FC so transferred and reflected
in the annual returns in Form FC-4 of both.
Eligibility
criteria and other documents required for grant of registration Online:
Association
should:
·
be registered(under the Societies Registration
Act, 1860 or the Indian Trusts Act, 1882 or section 25 of the Companies Act,
1956 etc)
·
Existence for at
least three years and required to Submit Activity Report of the undertaken activity
in its chosen field. (Spent at least
Rs.10,00,000/- over the last three years on its activities, excluding
administrative expenditure).
·
Submit Audited Statement of Accounts, duly audited by Chartered Accountant, for
last three years.
·
Fees of Rs.2,000/- and form(FC-3).
Eligibility
criteria and documents required for grant of prior permission- Online:
An Organisation in
formative stage is not eligible for registration. Such Organisation may apply for
grant of prior permission under FCRA.
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:
·
be registered under the Societies Registration
Act, 1860 or the Indian Trusts Act, 1882 or section 25 of the Companies Act,
1956 etc;
·
Submit a specific
commitment letter from the donor indicating the amount of FC and the purpose; and
·
Submit copy of a reasonable
project for the benefit of the society for which the FC is proposed to be utilized.
·
Fees of Rs.1,000/- and form(FC-3).
Payment
of fees and all the documents mentioned above must made/uploaded online within
thirty days of the submission of the on-line application with the DSC of chief functionary, else need to
be reapplied.
FCRA
division of the home ministry issues digitally signed registration
certificates, prior permission sanctions, etc, to applicants through
e-mails.
Submission
of verification certificate from the
District Collector or Deputy Commissioner or District Magistrate is not
mandatory. However, assists in speedy
clearance if the amount of FC for which prior permission is being sought is less than Rs.50 lakh.
There
is no need for prior permission from the FCRA authorities for change of
name, aims & objects, registered address, change of bank/account or
change in governing body members. A mere intimation through the FCRA website
will suffice.
Amount
for which prior permission was granted may be received in Installments.
However, the aggregate amount should not exceed the specified amount of prior
permission.
Information on Website:
·
Information with regard to foreign funding received
and utilised on their website or FCRA website every three months.
·
The annual returns must be placed quarterly
on the website or the FCRA website maintained by the home ministry.
Rule 16 of FCRR,
Reporting by Banks:
·
Bank will have to report of FCRA department within 48 hours of any transactions in
respect of receipt and utilization of
any FC for both registered/PP persons and also for persons who were
required to obtain registration/PP.
·
Further, the bank should not allow any withdrawal or transfer or utilisation of the FC
amount till such time the
Association produces documentary
evidence from MHA permitting it to do so.
·
It is not
necessary for the bank to report such FC that is returned to the donor(for want of registration or prior permission)
without crediting in the account of the recipient.
·
Reporting by Banks is also applicable to transfer of funds from one FCRA registered
Association to another.
·
Further, the banks shall be required provide online access to the MHA and Intelligence
Bureau (IB) for monitoring the utilisation of accounts of FCRA-registered
associations.
Sec.12 (4),
Conditions of granting registration/PP:
The
following shall be the conditions for the grant of registration and prior
permission:
1. The 'person' making an application:
o
is not
fictitious or benami;
o
has not been
prosecuted or convicted for conversion,
from one religious faith to another;
o
has not been prosecuted or convicted for creating communal tension;
o
has not been found guilty of mis-utilisation of its funds;
o
is not engaged or likely to engage in sedition or violent methods to achieve
its ends;
o
is not likely to use the FC for personal gains or divert it for undesirable purposes;
o
has not
contravened any of the provisions of this
Act;
o
has not been prohibited
from accepting FC;
o
The person being an individual, has neither been
convicted under any law nor any
prosecution is pending against him.
o
The person being other than an individual, any of its directors or office bearers has neither
been convicted under any law nor any prosecution is pending against him.
2.
The acceptance of FC:
o
Shall not lead to incitement of an offence;
o
Shall not endanger
the life or physical safety of any person.
Exempted Statutory
Bodies:
All statutory bodies
constituted or established by or under a Central Act or State Act required to have their accounts
compulsorily audited by the Comptroller & Auditor General of India are exempted from all the provisions of
FCRA.
Change in the body
of the Executive Committee by fifty Percent:
If
change causes replacement of 50% or more of such Members of the Executive
Committee/Governing Council of the association, intimation is to be given to
MHA within thirty days of such change. Further, the association should not
accept any FC except with prior permission till the permission to replace the
office bearer(s) has been granted by MHA.
Separate Sets of
Accounts, Annual Return & Annual Declaration:
·
Separate sets of accounts to be audited by CA.
·
The association shall have to submit the mandatory online
return within 9 months i.e. 31st
December for every financial year in FC-4 form for receipt and
utilization of the FC on a yearly basis, till the amount of FC is fully utilized.
If no transaction takes place during a year, no need for returns, etc. (Please refer to Sections 17, 18 and 19 of
FCRA and Rule 17 of FCRR).
·
The interest or
any other income earned out of deposit of FC should be shown as second/subsequent FC receipt in the
annual return during the year in which it is earned.
·
Annual affirmation at the time of filling return(and at the time of
regt./PP/renewal) that FC receipt will not likely to “prejudicially
affect”,
o
Security, strategic, scientific or economic interest of
the country;
o
Sovereignty and integrity of India, public interest,
freedom or fairness of elections, friendly relations with a foreign state and
harmony between religious, social or linguistic groups.
Offences and Penalties:
Section 33:
|
Obtains
Registration or PP on basis of fraud or concealment
|
Imprisonment
upto Six Months or/and fine
|
Section 34:
|
Contravention of prohibitory order
served upon a
person undersection 10(Prohibitory Order: by MHA prohibitingdelivery,
transfer of any article, security, currency kept by a person illegally i.e.
in contravention of Act)
|
Imprisonment upto three years or/and fine plus fine as per courts order upto
the value of article or currency involved.
|
Section 35:
|
Assist or Accepts FC in contravention of any
provision of Act and rules/orders
|
Imprisonment
upto five years or/and fine
|
Section 36:
|
Article/Currency not available for
confiscation as
per court order
|
Fine
upto five times of the value of article, etc or Rs.1000 whichever is more
|
Section 37:
|
Offences
where no separate punishment has
been provided
|
Imprisonment
upto a year or/and fine
|
Section 38:
|
Convicted
of any offence under section 35 or
section 37 relating to acceptance or utilizationof FCis again convicted
|
Shall not accept any FC for a period of five years from
the date of the subsequent conviction.
|
Section 39: Offences
by companies:
|
Offence
by a company, association, firm, etc.
Every person responsible for the
conduct of business, except who proves that it was committed without his
knowledge or tried prevention
|
Shall be guilty of offence and
punished accordingly.
|
No court shall take
cognizance of any offence, except with the previous sanction of the Central Government.
Compounding of
Offences:
·
The offences for which only imprisonment is awarded are
not capable for compounding.
·
Further the second/subsequent offence can be compounded
only if committed after a period of three years from the date of compounding of
first.
·
The categories of offences can be compounded under
section 41 of FCRA and the quantum of penalty for compounding are as under:
Acceptance
of cheque or draft towards FC by a 'person' without registration or prior
permission of the Central Government…
|
Acceptance of cheque or draft
without registration or PP
|
Rs. 10,000/- or 2 percent
whichever is higher
|
|
Depositing the same in a Bank notwithstanding non-utilisation
|
Rs. 25,000/- or 3 percent , whichever
is higher
|
|
Utilisation notwithstanding ‘its use as per objectives of association and
proper records are kept’
|
Rs. 1,00,000/- or 5 per cent
whichever is higher.
|
|
Acceptance of FC in kind notwithstanding ‘that nothing adverse was
reported’
|
Rs. 10,000/- or 2 per cent,
whichever is higher.
|
In
the event of failure to pay the penalty,
for whatever reason, necessary action for prosecution
of the person shall be initiated.
The Central Bureau of
Investigation or
the investigating agencies of the State Governments for cause of
action which arises in their respective
States are the designated agencies for investigating and prosecuting.
Cancellation of
Certificate of Registration or Prior Permission:
As
per Section 14, The Central Government may cancel the certificate after giving
reasonable opportunityof being heard if—
·
Incorrect or false statement
for the grant of
registration/PP or renewal or
·
Violated any of the terms of the certificate;
or
·
In the public
interest; or
·
Has violated
any of the provisions of this Act or rules or order; or
·
Not engaged in any reasonable activity for two consecutive years or has become
defunct.
Once
cancelled, not be eligible for registration/PP for next 3 years.
Suspension:
·
As per Section 13, the MHA may suspend certificate for
the same grounds as given for
cancellation pending consideration of questions of cancellation for upto 180 days.
·
Every person whose certificate has been suspended shall
not receive and utilize any FC except with the permission of Central government
Rule 14 of FCRR, Utilisation
of unspent amount in case of suspension:
·
Upto 25 percent with
the prior approval of the CG
for the declared aims and objects.
·
Remaining 75 per cent only after revocation of
suspension of the certificate.
Section 16, Renewal
of Certificate:
·
Certificate is renewed
by MHA ordinarily within ninety
days from receipt of application (else will specify the reasons for
delay or denial).
·
Certificate is renewed for a period of 5 years.
·
Further, please
refer rule 12 of FCRR for detailed understanding.
Foreign hospitality:
Foreign
Hospitality means any offer, not being a purely casual one, made in cash or
kind by a foreign source for providing a person with the costs of travel to any
foreign country or territory or with free
board, lodging, transport or medical treatment.
There
is at present no requirement for individuals
accepting foreign hospitality to give declaration or prior information.
Summing up:
FCRA
law deals with regulation of foreign donations received by NGO’s. The need for
it is to ensure that donations does not prejudicially affects strategic,
scientific or economic interest, sovereignty, freedom or fairness of elections,
friendly relations with a foreign state. Further, the government is regularly
updating the law so as to provide speedy administrative clearances and also to
keep track of the associations working to affect country by any means.
- CA SHIVASHISH KARNANI
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