Background:
The Foreign Contribution (Regulation) Act, 2010 (FCRA) establishes strict guidelines for associations receiving foreign contributions in India. The Ministry of Home Affairs states, “Compliance with FCRA regulations ensures that foreign contributions are utilized for their intended purposes in a transparent and accountable manner.” This article outlines the essential compliance requirements and best practices for organizations granted registration or prior permission under FCRA. Adhering to these guidelines is very important because it will ensure the integrity and transparency of your organization’s operations.
Registration and Renewal
FCRA registration is granted for specific cultural, economic, educational, religious, or social programs under sections 11 and 12 of the Act. Registration is valid for five years and requires renewal six months before expiry via online Form FC-3C with prescribed fees. Failure to renew results in automatic cessation of registration upon completion of the five years, which can lead to severe consequences, including legal actions and loss of credibility.
Bank Account Requirements
- Foreign contributions must be received only in a designated FCRA account at the State Bank of India, Main Branch, New Delhi.
- Additional FCRA accounts may be opened in scheduled banks for utilization.
- No mixing of foreign contributions with local/domestic funds is permitted.
Utilization of Foreign Contributions
- Contributions must be used solely for the specified purpose and within India.
- Transfers to other associations for different purposes are prohibited.
- Administrative expenses are capped at 20% of foreign contributions received.
- Speculative business activities using foreign contributions are not allowed.
Accounting and Reporting
- Separate accounts and records must be maintained exclusively for foreign contributions.
- Annual returns must be filed online via Form FC-4, including: Income and expenditure statement Balance sheet Receipt and payment statement Chartered accountant certification
- Submission deadline: Within nine months of the financial year-end (December 31st)
- Account statements and chartered accountant certificates must be uploaded.
- Records must be preserved for six years.
- ‘Nil’ returns are required even if no foreign contribution is received.
Change Notifications
- Name, address, objectives, bank details, etc. changes must be reported online via Form FC-6 within 15 days.
- Changes in functionaries/members require approval from the Central Government (Form FC-6E).
Good Practices
Associations must adhere to Financial Action Task Force (FATF) guidelines, including:
- Informing authorities of suspicious activities
- Disclosing goals and activities on the association’s website
- Conducting due diligence on employees and beneficiaries
- Routing financial transactions over ₹20,000 through banking channels
- Holding biannual board meetings to review compliance
By meticulously following these guidelines, associations can ensure compliance with FCRA regulations and effectively manage foreign contributions to support their programs and initiatives.
Conclusion:
Adhering to FCRA compliance guidelines is essential for maintaining the trust and credibility of associations receiving foreign contributions. As the Ministry of Home Affairs emphasizes, “Strict compliance with FCRA regulations not only upholds the integrity of foreign contributions but also strengthens the organizational framework.” By meticulously following the outlined requirements and best practices, associations can ensure their foreign contributions are managed effectively and transparently, supporting their programs and initiatives while staying within the legal framework.
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