ACS Mamta Tiwari

Mamta Tiwari

Foreign contribution is regulated under the provisions of the Foreign Contribution (Regulation) Act, 2010 (FCRA, 2010) and the Foreign Contribution (Regulation) Rules, 2011 (FCRR, 2011) Both FCRA, 2010 and FCRR, 2011 have come into force simultaneously with effect from 1st May, 2011 through notifications in the Gazette of India [S.O. 999 (E) dated the 29th April, 2011]

Foreign Contribution (Regulation) Act, 1976 (FCRA, 1976) and the Foreign Contribution (Regulation) Rules, 1976 have been repealed.

The primary purpose of this Act is to ensure that foreign contribution is utilized for bonafide activities without compromising on concerns for national security to consolidate the law to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain individuals or associations or companies.

FCRA, 2010 has done away with the concept of a ‘permanent’ registration. Five-year validity has been stipulated for all Associations registered earlier. The Act has also stipulations for proactive disclosure of information in respect of foreign contributions exceeding Rs. 1(one) crore received by an NGO in a year.

There are two modes of obtaining permission to accept foreign contribution according to FCRA, 2010:

I. Registration

II. Prior Permission

Eligibility criteria for Grant of Registration

For grant of registration under FCRA, 2010, the association should:

i. be registered under an existing statute like the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or section 25 of the Companies Act, 1956 (Now Section 8 of Companies Act, 2013) etc;

ii. Normally be in existence for at least three 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. For this purpose, the association should have spent at least Rs.10, 00,000/- over the last three years on its aims and objects, excluding administrative expenditure. Statements of Income & Expenditure, duly audited by Chartered Accountant, for last three years are to be submitted to substantiate that it meets the financial parameter.

Eligibility criteria for Grant of Prior Permission

An organization in formative stage 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:

1. be registered under an existing statute like the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or section 25 of the Companies Act, 1956 etc;

2. 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; and

3. 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:

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

ii) 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.

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

iv) 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

*As defined in Section 2(1)(h) of FCRA, 2010, “foreign contribution” means the donation, delivery or transfer made by any foreign source, ─

(i) of any article, not being an article given to a person** as a gift for his personal use, if the market value, in India, of such article, on the date of such gift is not more than such sum as may be specified from time to time by the Central Government by rules made by it in this behalf. (This sum has been specified as Rs. 25,000/- currently);

(ii) of any currency, whether Indian or foreign;

(iii) of any security as defined in clause (h) of section 2 of the securities Contracts(Regulation) Act, 1956 and includes any foreign security as defined in clause (o) of Section 2 of the Foreign Exchange Management Act, 1999.

** “person” includes an individual; a Hindu undivided family; an association; a company registered under section 8 of Companies Act, 2013.

Application for grant of registration

1. Application for grant of registration / prior permission is to be submitted online in form FC-3. The applicant should be ready with the scanned copies of the following documents before filing the application online:

2. For registration the association is required to pay a fee of Rs. 2,000/- and for prior permission, the fee is Rs. 1,000/-

3. There is no bar on receiving such foreign contribution in installments. However, the aggregate amount should not exceed the specified amount for which prior permission has been granted.

The association shall have to submit the mandatory online return in FC- 4 form for receipt and utilization of the foreign contribution on a yearly basis, till the amount of foreign contribution is fully utilized. Even if no transaction takes place during a year, a NIL return should be submitted.

Transfer of Foreign Contribution

Procedure for transferring foreign contribution to any unregistered person. ─

1. A person who has been granted a certificate of registration or prior permission under section 11 and intends to transfer part of the foreign contribution received by him to a person who has not been granted a certificate of registration or prior permission under the Act, may transfer such foreign contribution to an extent not exceeding ten per cent of the total value thereof and for this purpose, make an application to the Central Government in Form FC-5.

2. Every application made under sub-rule (1) shall be accompanied by a declaration to the effect that-

(a) the amount proposed to be transferred during the financial year is less than ten per cent of the total  value  of  the  foreign  contribution  received  by  him  during  the  financial  year;

(b) the transferor shall not transfer any amount of foreign contribution until the Central Government approves such transfer.

3. A person who has been granted a certificate of registration or prior permission under section 11 shall not be required to seek the prior approval of the Central Government for transferring the foreign contribution received by him to another person who has been granted a certificate of registration or prior permission under the Act provided that the recipient has not been proceeded against under any of the provisions of the Act.

4. Both the transferor and the recipient shall be responsible for ensuring proper utilization of the foreign contribution so transferred and such transfer of foreign contribution shall be reflected in the returns in Form FC-4 to be submitted by both the transferor and the recipient.”

Filing of Annual Returns

The return is to be filed online for every financial year (1st April to 31st March) within a period of nine months from the closure of the year i.e. by 31st December each year.

An association permitted to accept foreign contribution is required under law to maintain separate set of accounts and records exclusively for the foreign contribution received and submit an annual return, duly certified by a Chartered Accountant, giving details of the receipt and purpose-wise utilization of the foreign contribution. The return is to be submitted online, in prescribed Form FC –4, duly accompanied with the balance sheet and statement of receipt and payment, which is certified by a Chartered Accountant.

Submission of a ‘NIL’ return, even if there is no receipt/utilization of foreign contribution during the year, is mandatory. However, in such case, certificate from Chartered Accountant, audited statement of accounts is not required to be uploaded.

Renewal of Registration.

As per Section 16 of FCRA, 2010 every person who has been granted a certificate of registration under Section 12 thereof shall have such certificate renewed within six months before the expiry of the period of the certificate.

Association which desire to renew their registration certificate may apply online in Form FC-3 six months before the expiry of their existing registration.

signature of Chief Functionary, seal of the association, registration certificate of the association Memorandum of Association/ Trust Deed, Self certified copy of registration are to be uploaded for renewal of registration.

Disclaimer:

The entire contents of this document have been developed on the basis of relevant information and are purely the views of the authors. Though the authors have made utmost efforts to provide authentic information however, the authors expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document.

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