Legal Objective of the Act:
It Applies to whole of India including (also applies to the following):
Some Abbreviations used in the Article:
Meaning of some technical words
“Association” means an association of individuals and includes a society, whether incorporated or not, having an office in India by whatever name called.
Foreign Company (An Example of a foreign Source):
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” 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
Shall be same as per section 2(77) of Companies Act, 2013
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’ and its 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;
(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 FC after 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 programmes as per Section 2(i)(r) of the Information Technology Act, 2000 and their owners.
(h) prohibited Individuals 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:
Section 10, Prohibitory Order:
Visit MHA Website: http://mha1.nic.in/fcra.htm
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:
“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:
Rule 4 of FCRR, Meaning of Speculative activities/investments:
FC Utilization and Foreign Currency (FC) Account:
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.
Eligibility criteria and other documents required for grant of registration-Online:
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:
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.
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.
Status of pending applications for grant of registration or prior permission may be checked on-line from MHA website.
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.
Details to be furnished to Department and Website requirements:
Rule 16 of FCRR, Reporting by Banks:
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:
2. The acceptance of FC is not likely to affect prejudicially –
3. The acceptance of FC
Distinction of Legal Entity of a person to receive FC:
The legal entity of a ‘person’ under FCRA is distinct from an individual person. Therefore, individuals who cannot receive FC may happen to be on the executive committees/boards of such an association.
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 CG.
Separate Sets of Accounts & Annual Return:
Section 8, Utilisation of FC:
Offences and Penalties:
|Obtains Registration or PP on basis of fraud or concealment||Imprisonment upto Six Months or/and fine|
|Contravention of prohibitory order served upon a person under section 10 (Prohibitory Order: by CG prohibiting delivery, 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.|
|Assist or Accepts FC in contravention of any provision of Act and rules/orders||Imprisonment upto five years or/and fine|
|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|
|Offences where no separate punishment has been provided||Imprisonment upto a year or/and fine|
|Convicted of any offence under section 35 or section 37 relating to acceptance or utilization of FC is 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:
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.
Notification S.O. 2446 (E) dated 27.10.2011, CBI or Investigating Agencies of States:
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 opportunity of being heard if—
Once cancelled, not be eligible for registration/PP for next 3 years.
Rule 14 of FCRR, Utilisation of unspent amount in case of suspension:
Section 16, Renewal of Certificate:
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.
(Author CA Shivashish Karnani is a Practicing Chartered Accountant having office at F-50, Near Gurudwara, Madhu Vihar, I.P. Extension, Patparganj, Delhi-92 and has worked as a Tax Consultant with Ernst & Young and can be reached at +91-9818472772 or via mail on firstname.lastname@example.org)
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