Decoding the Foreign Contribution (Regulation) Act – Blog

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Decoding the Foreign Contribution (Regulation) Act

June 6, 2022 | Contributed by Zeeshan Adil

The Foreign Contribution (Regulation) Act or commonly known as FCRA was first introduced in 1976 during the emergency period, when there were apprehensions and fear of external foreign intervention in India. The sole purpose of the act was to regulate the donations, like CSR support for children or donations for children made by an external entity or individual in India whilst following the due process of transparency.

FCRA was enacted in 2010 after being amended with the purpose to “consolidate the law” and “to prohibit” their use for “any activities detrimental to national interest”. The law was amended yet again in 2020 tightening the regulations on receiving the foreign funds and directed to utilize those funds only for the purpose donations have been received or as have been mentioned in the act in addition to filing annual returns. All non-governmental organizations are also required to be registered under the act to be able to receive foreign donations. The act was originally only meant for NGOs but with the amendments made, it has also included companies, electronic media, political organizations, political parties and organizations that are “political” in nature. Having FCRA is detrimental to stabilize the economy, while keeping a check on the foreign donations made, clumping down black money as well. Foreign donations are important for organizations for a smooth functioning and FCRA has created some restrictions, but it is a necessary step for greater transparency.

Understanding the Act

  • Section 3 of the act talk about individuals and entities that cannot take foreign donations, which includes people such as;

-A candidate in an election.
-Any person associated with a registered newspaper as columnist, cartoonist, editor or publisher.
-Any public servant.
-Member of any legislature, political party or holding a position in office.
-Any company involved in production of news.
-Any person prosecuted or convicted for creating communal tensions.
-Any person involved in any activity that is wrongful in nature.
-A person guilty of embezzlement of funds, diversion or misutilization of funds.

  • Under FCRA a person or an entity registered and has been granted a certificate or has received prior permission can take foreign contributions. It has also prohibited NGOs from receiving foreign contributions and channeling it to other unregistered NGOs which happened earlier before the 2020 amendments.
  • The act has made a cap of 20% of foreign contribution to be used only for administrative purposes.
  • Previously recipients were allowed to receive foreign contributions in any of the scheduled banks but with the recent amendment every person should open a FCRA account in the State Bank of India branch.
  • Ministry of Home Affairs(MHA) must be informed even if one key member is elected, resigns, appointed or dies within 15 days and will be made into effect only after the approval of MHA
  • Earlier the suspension of certificate was for 180 days but now it can be suspended for another 180 days i.e. 360 days.
  • The Central Government can ask any person to surrender their certificate in regard to not being in contravention with any of the provisions of the act.
  • The act gives the government any authority to declare an organization which is not a political party to be of “political nature”.

Registration under FCRA

  • Anyone seeking resignation should have been in existence for 3 years or more.
  • Must have spent a minimum amount of Rs. 15 Lakhs on core activities for the betterment of society in last 3 financial years
  • If a person or organizations don’t have registration, they must seek prior permission to receive foreign grant and must submit commitment letter from the donor signifying the money donated and the purpose of the donation as well.
  • For the renewal of registration an application must be submitted with an affidavit within 6 months from the expiry.
  • Once the registration expires the said organization cannot receive any foreign contribution or utilize the unused foreign contribution of the past.
  • The unutilized money will vest with the prescribed government authority until the registration is renewed.
  • If the registration is not renewed all the un-utilized amount of the foreign contribution will be ceased.
  • FCRA registration expires every 5 years and now after the expiration they will have to be part of an enquiry if they wish to renew the registration.
  • Fees for the prior permission and renewal of registration is Rupees five thousand and the fees for new registration is Rupees ten thousand.

FCRA and the new amendments have its pros and cons but the regulations have been made more stringent and NGOs might face more difficulties as getting a registration has become even more difficult. It’s difficult for registered NGOs, as they can’t collaborate or fund other unregistered NGOs. Apart from that, CSR funders also have to be careful of their non-profit partners and where they are funding whilst following all the conditions and rules mentioned in the act. CSR support for children, donations for children and other contributions which were made earlier easily will be more difficult and whether for good or bad it will affect NGOs and other social organizations and their efficiency. They will have to adapt to the current situation and work towards optimal results.

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