Foreign Contribution (Regulation) Act, 2010

The Foreign Contribution (Regulation) Act, 2010 [FCRA] has been passed by both the houses of Parliament to replace Foreign Contribution (Regulation) Act, 1976 [FCRA 1976] to

• regulate the acceptance and utilization of foreign contribution [FC] or foreign hospitality by specified persons and

• prohibit acceptance and utilization of FC or foreign hospitality for any activities detrimental to national interest.

FCRA 2010 would be brought into force from such date as the Central Government (CG) may by notification in the Official Gazette appoint. Different dates may be appointed for bringing into force different provisions of FCRA 2010.

Considering the flow of funds into the country for purposes other than business, the Government has specified that acceptance of FC against national interest would not be permissible, requiring persons accepting FC to be subject to enhanced scrutiny. The measures include prior CG approval for accepting FC, registration and renewal, conditions for end use of FC and for transfer of FC to other persons etc.

Salient changes between provisions of FCRA 2010 and FCRA 1976 are as under:

Modification of definition

FC would also inter alia include donation, delivery or transfer made by any foreign source of

• any security as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956

• interest accrued on FC deposited in bank, any other income derived from FC or interest thereon.

Prohibition to accept FC:

Following persons have been prohibited from accepting FC:

(i) Association or company engaged in the production or broadcast of audio news or audio visual news or current affairs programmes through any electronic mode or form or any other mode of mass communication

(ii) Correspondent or columnist, cartoonist, editor, owner of the association or company referred in (i) above.

(iii) Organization of political nature not being a political party, which may be specified by the CG, would be banned from accepting FC as against earlier provision of obtaining prior approval of CG for accepting FC.

Non applicability of FCRA 2010 to certain FC

FCRA 2010 will not apply to FC accepted

• from a relative (under FCRA 1976 prior approval of CG is required for receipt of FC in excess of ` 8000 p.a.)

• by way of any scholarship, stipend or any payment of like nature

Prohibition to transfer FC to other Person

• Person who is granted certificate of registration or has obtained prior permission under FCRA 2010 and receives any FC is prohibited from transferring such FC to any other person unless that other person is also granted certificate of registration or obtained prior permission under FCRA 2010.

• A part of FC can be transferred to any other person with prior approval of CG.

Restriction on utilization of FC

FCRA 2010 restricts utilization of –

• FC and any income arising from FC for speculative businesses

• FC for payment in excess of 50% of FC towards administrative purpose in one financial year

Registration with CG

Any person having definite cultural, economic, educational, religious or social programme can accept FC only after obtaining

• certificate of registration from CG; or

• prior permission from CG

Certificate of registration would be valid for 5 years (under FCRA 1976 no end date of validity of registration is specified) and prior permission would be valid for the specific purpose or specific amount of FC proposed to be received. Any registration / permission granted under FCRA 1976 would be valid for 5 years from the effective date.

CG shall within 90 days of receiving application grant the certificate of registration / permission or communicate reasons for not granting such registration / permission (under FCRA 1976 no timeframe is mentioned for disposal of application).

While granting registration / permission, CG would inter alia consider various factors including

• whether applicant is fictitious or benami,

• whether applicant has been prosecuted / convicted for creating communal tension or disharmony has been found guilty of diversion / mis-utilization of its funds etc.

• acceptance of FC is not likely to affect prejudicially sovereignty and integrity of India, public interest, freedom or fairness of election to any Legislature, friendly relation with any foreign State, harmony between religious, racial, social, linguistic, regional groups, castes or communities etc.

• acceptance of FC shall not lead to incitement of an offence or endanger the life or physical safety of any person etc.

• in case the person being an individual, such individual has been convicted under any law or prosecution for any offence is pending against him

• in case the person other than an individual, any of its directors or office bearers has been convicted under any law or prosecution for any offence is pending against him

Registration certificate can be suspended for a period upto 180 days or cancelled by CG on various grounds like:

• information in the application / renewal thereof is incorrect or false

• holder of certificate has violated terms of the certificate

• public interest

• holder of certificate has violated any provisions of FCRA 2010

• holder of certificate has not been engaged in any reasonable activity in its chosen field for the benefit of the society for 2 consecutive years or has become defunct

Bank Account

FC shall be received only in a single bank account. However, multiple bank accounts can be opened for utilization of FC.

Others

CG empowered to issue notification with regard to:

• person or class of persons who shall obtain prior permission of CG before accepting FC;

• area in which FC shall be accepted and utilized with prior permission of CG

• purpose for which FC shall be utilized with prior permission of CG

• source from which FC shall be accepted with prior permission of CG

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