Individuals, campaigners and activist groups working in the non-government/non-profit sector have been battling to stay afloat in these times of scarce funds. In this article, Sarang Khanna, Researcher and Analyst at iPleaders, talks about how to obtain foreign funding for NGOs under FCRA.

Non-governmental organizations (NGOs) play a crucial role in influencing change in the society and also in upliftment of the weaker sections. Thousands of NGOs in India operate in almost all major sectors of the country, such as, health, education, rural development, food security,  etc. There is a long list of potential sectors with varied scope of work right from the grassroots.

However, NGOs often function around a blurry line when it comes to acquiring capital, and usually rely on donations, charity, government-funded campaigns, Corporate Social Responsibility (CSR), and foreign funding. Foreign funding for NGOs is regulated by the Foreign Contribution (Regulation) Act (FCRA) of 2010 and about 30,000 NGOs in India are registered with FCRA as eligible to obtain foreign money.

Reportedly, only last year as many as 6000 NGOs feared cancellation of their FCRA license. The issue was of non-compliance of the provisions of FCRA, and the Union Home Ministry issued show cause to all demanding explanation, and filing of the missing annual returns pertaining to five financial years.

Well recognized international organizations such as Amnesty International, Human Rights Watch and People’s Watch have all been targeted under FCRA norms.

People’s Watch has had their license suspended and bank account frozen by the government three times since 2012. They had to eventually approach the Delhi High Court to get a ruling in its favour. U.N. experts have said they are stunned by the way India implements their laws, and that the FCRA is “overly broad and vague” and the government uses it to frustrate its critics, according to a report by Thomson Reuters.

While the Modi government has been severely strict with non-profit organizations regulated under FCRA and has said that the groups that don’t disclose information on foreign funding indulge in “anti-national” activities.

Foreign investment is actively encouraged in all key sectors in India, but when it comes to the non-government groups that work for the vulnerable and marginalized, the government has been known to keep a strict stance. In this article, we will try to look at the relevant provisions of the FCRA and how NGOs and NPOs (Non-Profit Organizations) can procedurally raise foreign funding.

Is your NGO eligible?

Under the FCRA, 2010, all companies, associations, societies as well as NGOs need to fulfill certain criteria to be eligible to receive foreign funds. Registration with the Central Government is usually important, but there is also a separate provision of prior permission for case to case basis.

As FCRA is a broad legislation that regulates foreign contribution in all organizations, an organization must have a defined cultural, economic, educational, religious, or social programme to be first eligible to accept foreign contribution. For registration under FCRA, the organization must have been in operation for at least 3 years, whereas for prior permission no such minimum years of operations are required.

Eligibility for grant of registration

1.       Should be registered under an existing statute like the Societies Registration Act, 1860,  the Indian Trusts Act, 1882, or the Companies Act (1956 or 2013), etc.
2.       Having been in operation for 3 years
3.       Should not have a parent society already registered under FCRA
4.       No foreigner should be on the board of this aforementioned society

Apart from just being in operation for 3 or more years, the organization must also submit proof of activities undertaken in its chosen field of operation. The organization must have also spent at least Rs. 10,00,000 over the last three years on its aims and objectives, excluding administrative expenditure. Statements of Income & Expenditure which are duly audited by a Chartered Accountant are also to be furnished for the same.

A separate bank account must also be maintained by the organization which is solely for the purpose of foreign transactions, and no other funds must be kept in this account. This is applicable for registration and prior permission both.

Eligibility for grant of prior permission

An organization in its early stage may not be eligible for registration. Such organization may apply for grant of prior permission under FCRA, 2010. Prior permission is granted for receipt of a specific amount, from a specific donor, and for carrying out specific activities/projects.

An association or an organization can receive foreign contribution without registration only with prior permission from the FCRA department. Such prior permission for foreign contributions can only be received under these circumstances-

1.  Should be registered under an existing statute like the Societies Registration Act, 1860,  the Indian Trusts Act, 1882, or the Companies Act (1956 or 2013), etc.
2.  Should submit a specific commitment letter from the donor indicating the amount of foreign contribution and the purpose for which it is proposed to be given;
3.  For Indian recipient organizations and foreign donor organizations having common members, FCRA Prior Permission shall be granted to the Indian recipient organizations subject to some conditions.

When can you apply? Is there a time limit?

No. There is no specific time limit prescribed under the FCRA for making an application. Normally registration under FCRA is granted after 3 years of active existence, therefore, the application should be made after three years, though nothing in the Act prevents them from making such application earlier.

However, form FC-3 (the form required to apply for registration and prior permission), provides for uploading of past three years audited statement. On the basis of the requirement of form FC-3, it is normally understood that application for registration under FCRA can only be after 3 years of the creation of the organisation.

However, the Hon’ble Supreme Court’s view in this matter in the case of STO vs. K.I. Abraham [1967] 20 STC 367, was that the rule making authority had no power to prescribe any time restriction. Infact, the FCRA rules also do not provide any restrictive time limit. It is only the requirement of Form FC- 4 (as per the old forms) as well as Form FC-3, which requires 3 years audited statements and activity reports. Such requirements are directory and general in nature and therefore, should not be construed as a mandatory requirement of the FCRA.

Consequently, in our opinion, although the application for registration under FCRA can be filed any time after the registration of the organisation, but, the organizations with a considerable past history of activities have a greater chance of convincing the FCRA authorities with regard to the genuineness and the relevance of their purpose. Even your organizational structure can be of much importance in getting an FCRA registration. To learn about the underlying realities and other practical challenges with respect to registration and prior permission, you can visit here.

For prior permission, an application under form FC-3 can be made any time after the legal constitution of an organization. Although the same clause of form FC-3 requires submission of details of activities of past three years and three years audited statements, but where the organisation is less than three years old, it can submit the documents for lesser number of years as may be available. Prior permission can be obtained at any time, for a specific reason and time duration.

What are the documents required to apply?

A long list of documents is required as proofs to apply for registration or prior permission with the FCRA.

• Registration Certificate of Association
• Memorandum of Association/Trust Deed
• Commitment Letter from the donor organization and agreement
• Project Report for which FC will be received
• Audited statement of accounts of past three years.
• Activities Report of past 3 years.
• If the association is a registered Trust or Society a certified copy of the registration certificate.
• Copy of the Memorandum of Association and/or the Articles of Association as applicable.
• A copy of the latest commitment letter from the donor.
• A copy of the proposal / project which has been approved by the foreign source for funding, including projected outlays, budget breakups.
• Details of names and addresses of the members of the Executive Committee/Governing Council etc. of the Association.
• Copy of any prior permission granted to the organization.
• List of present members of the Governing Body of the organisation and the office bearers.
• Copy of any Journal or other publication of the organization.
• If the association is having any parent or sister or subsidiary organisation which is registered under the FCRA then the registration number along with Ministry of Home Affairs file number should be mentioned.
• If the association has submitted any application earlier then its reference number should be mentioned.
• If the association has received any foreign contribution with or without the prior approval of the Central Government, then the detail should be given.
• Details of Bank along through which the foreign contribution shall be received.
• A recommendation certificate from any competent authority, if any.
• Copy of certificates of exemption or registration issued by the Income Tax Department u/s 12A, if any

How to make best use of these foreign funds?

The FCRA and the use of foreign money in India has been heavily scrutinized in the past. So much so, that the FCR Act has been asked to be scrapped off by many stakeholders. According to a report, major foreign donors continue to be churches, priest organizations, and other religious organizations year after year.

Evidently, the major sectors like rural development, education of the poor, health, etc. are being ignored when it comes to foreign funding. Also, according to a press release, the registration of about 15,000 NGOs has been cancelled since 2014. This is obviously a huge number and the main reason is the non-compliance of provisions of the FCRA.

Clearly, the government is not ready to grant any levay to organizations who are entitled to access foreign money but do not follow the correct procedures of doing so or later use the money for unassigned purposes. The lack of thorough knowledge and improper structural organization of your NGO can also lead to cancellation of your licenses. All essentials of FCRA and foreign funding for NGOs and NPOs can be understood and learnt here.

All funds received by an NGO must be used only for the purpose for which they were received. Such funds must not be used in speculative activities identified under the Act. Except with the prior approval of the Authority, these funds must not be given or transferred to any entity not registered under the Act. Every asset purchased with such fund must be in the name of the NGO and not its office bearers or members.

Various such conditions are imposed for the use of foreign funds, and many NGOs are known to be under constant scrutiny for not aligning with these conditions. Moreover, anti-national and other illegal activities are also suspected to be undertaken by various organizations with the use of these foreign grants. There is a high trust deficit around NGO operations and their workings are always under a close eye by the government.

The role of NGOs and NPOs is crucial in bringing a much needed change in the Indian society. If you are the owner of an NGO or planning to a start an NGO for the greater good, be responsible, and know the laws.