Individuals, Associations and Non-Profit Companies intending to receive the funding in India from foreign source are needed to comply with and are subject to the regulations made by government in this regard.
Earlier Foreign Contribution (Regulation) Act 1976 (FCRA, 1976) was in force to regulate and facilitate the acceptance and utilization of foreign contribution. After that, Foreign Contribution (Regulation) Act, 2010 (FCRA, 2010) has came into force with effect from 1 May, 2011 as an improvement over the existing FCRA 1976 and with wider applicability. This FAQ has been prepared to give brief idea about the legal compliances for receiving foreign funding.
Q 1.What is FCRA 2010 ?
Foreign Contribution (Regulation) Act, 2010 is an act to consolidate the law to regulate the acceptance and utilization of foreign contribution by certain individuals or associations or companies and to prohibit acceptance and utilization of foreign contribution for any activities detrimental to the national interest and incidental matters.
Q 2. What is Foreign Contribution?
Foreign Contribution means contribution and donation made by foreign source of :
Q 3. What is foreign source?
Foreign source includes :
Q 4. What is foreign Security?
Foreign Security means any security in the form of shares, stocks, bonds, debentures or any other instrument denominated or expressed in foreign currency and securities expressed in foreign currency but where redemption or any other form of return such as interest or dividends is payable in Indian currency.
Q 5. Who can accept Foreign Contribution?
A person having a definite cultural, economic, educational, religious or social programme can accept foreign contribution after getting registration or prior permission from the Central Government.
Q 6. Who cannot accept Foreign Contribution?
Q 7. How can foreign contribution be accepted?
Foreign contribution can be accepted only by taking the permission of the Central Government. Such permission can be taken in the following two ways:
Q 8. What is the eligibility criteria for grant of registration?
Q 9. What is the eligibility criteria for grant of prior permission?
An Association, which has not completed 3 years of existence, is not eligible for grant of registration. Such organization may apply for grant of prior permission. For this, the Association:
Q10. What is the process for registration/ prior permission?
Following steps are to be followed:
Q11. What are the documents to be submitted for the grant of registration?
Following documents should be submitted for grant of registration:
Q12. What are the documents to be submitted for the grant of prior permission?
Following documents should be submitted for grant of prior permission:
Q13. Whether contributions given by Non- Resident Indians (NRIs) holding valid indian passport, i.e. Indian citizenship, is treated as foreign contribution?
No, Contribution made by a NRI holding valid indian passport from his personal savings/ earnings is not treated as foreign contribution.
Q14. Whether donation given by an individual of Indian origin and having foreign nationality is treated as ‘foreign contribution?
Yes, Donation from an Indian who has acquired foreign citizenship is treated as foreign contribution.
Q15. Whether foreign remittances received from a relative are to be treated as foreign contribution?
No, However in case foreign contribution received in excess of rupees one lakh or equivalent in a financial year from any of the relatives, information to the Central Government in Form FC-1 within thirty days from the date of receipt of such contribution will be given.
Q16. What can be accepted as Foreign Contribution even by the persons otherwise prohibited from accepting foreign contribution?
Persons otherwise prohibited can accept foreign contribution:
Q17. Whether an association should open an exclusive foreign currency A/c before submission of an application for registration or prior permission?
Yes, since the foreign currency A/c through which foreign contribution is proposed to be received and utilized is to be mentioned in the application seeking registration or prior permission, therefore the association should open such account with the Bank before submission of application.
Q18. What is the validity period of registration granted?
Registration granted under FCRA 2010 is valid for a period of 5 years from the date of its issue and it will be renewed six months before the date of expiry of said period. However in case of ongoing multi-year project, application for renewal shall be made twelve month before the date of expiry of registration.
Q19. What is the procedure for renewal of registration?
Q20. What are the consequences of non submission/delay in submission of renewal application?
In case an application for renewal of registration is not submitted or made after the due date, validity of registration is deemed to have ceased from the date of completion of period of 5 years from the date of grant of registration and application for the fresh registration will be made.
Q21. How can the foreign contribution be transferred from one person to another person?
Q22. Can foreign contribution be received in Indian rupees?
Yes, any amount received from ‘foreign source’ in Indian rupees or foreign currency is construed as ‘foreign contribution’. Such transactions even in Indian rupees term are considered foreign contribution.
Q23. What is the method for accounting under FCRA, 2010?
There is no specific method of accounting prescribed under FCRA act and rules. However separate set of accounts and records will be maintained for the foreign contribution received and utilized.
Q24. What are the reporting/ filing requirement under FCRA, 2010?
Q25. Can foreign contribution be received in and utilized from multiple bank accounts?
Foreign contribution can be received/deposited in the exclusive designated Foreign Currency account of a bank, as mentioned in the order for registration or prior permission granted by Ministry of Home Affairs.
However, one or more accounts in one or more banks may be opened for utilizing the foreign contribution after it has been received.
Q26. Can foreign contribution be mixed with local receipts?
No, Foreign contribution cannot be deposited or utilized from the bank account being used for domestic funds.
Q27. What are the reporting requirement in case of change in details of association registered with the FCRA department?
Intimation will be given online in Form – 6 within 15 days of change in details. Intimation will be given in the following cases:
Q28. Whether interest or any other income earned from foreign contribution be considered foreign contribution?
Yes, It will be shown as fresh foreign contribution receipt during the year in which it is earned and can be utilized for the activities/projects of the Association.
Q29. Whether infusion of foreign share capital in a company registered under section 8 of the Companies Act, 2013 (Non- profit Company) attracts the provisions of FCRA, 2010?
Yes, infusion of foreign share capital in a non- profit company is treated as foreign contribution.
Q 30. Is it mandatory for an Association to have registration under section 80G or 35 AC of Income Tax Act, 1961 to be eligible for getting registration or prior permission under FCRA, 2010
No, It is not mandatory to have registration under Income Tax Act, 1961 for seeking registration or prior permission under FCRA, 2010
Q31. Can an Association utilize the foreign contribution for any purpose?
No, Foreign contribution should be utilized only for the purposes for which it is received.
Q32. Is there any ceiling for the administrative expenses to be incurred?
Yes, Association should not incur more than 50 percent of the foreign contribution received in a financial year to meet administrative expenses. However more than 50 percent of such foreign contribution may be incurred with prior approval of the Central Government.
Q33. Can an Association use the foreign contribution for investment in mutual funds and other speculative investments?
No, the use of foreign contribution or any income derived there from is not allowed to be invested in mutual funds or any speculative business.
*No need to submit the copy of the online application in physical form to the Ministry of Home Affairs.
Disclaimer: This article has been prepared in good faith on the basis of information available on the date of publication without any independent verification. The Author does not guarantee or warrant the accuracy, reliability, completeness or currency of the information in this publication nor its usefulness in achieving any purpose. The Author will not be liable for any loss, damage, cost or expenses incurred or arising by reason of any person using or relying on information in this publication. Readers are requested to consult a professional before taking any action.
(Author – Sonika Bharati, FCS, LLB, is a Company Secretary in Practice from Delhi and can be contacted at email@example.com)