Kickstarting your NGO with international funding – Legal Basics
Kickstarting your NGO with international funding – Legal Basics

For an NGO in India, funding from international organizations can really boost the efforts of NGOs. International organizations also look forward to donating to NGOs operating in Africa and India instead of developed nations, as that enables them to meet goals of reaching some of the most needy, and deprived sections of the world’s population. Before you look for funding for your NGO from a foreign organization, you need to know some basics about the law that governs international donations.

In India the new Foreign Contribution Regulation Act, 2010 governs the procedure for obtaining donations for NGOs. Under the Act, foreign contribution means the donation, delivery or transfer, made by any foreign source of any article whose value is more than one thousand rupees and has not been given to a person

  • as a gift for personal use,
  • currency, whether Indian or foreign,
  • or foreign security.

Foreign source under Foreign Contribution Regulation Act, 2010

Kickstarting your NGO with international funding – Legal Basics

Foreign Company:-

Under FCRA, a foreign company means a company established outside India but having a business establishment in India as given in Section 591 of the Companies Act, 1956. Foreign company also includes Indian subsidiary of a foreign company. Contribution from the subsidiary of a foreign company shall be considered as foreign contribution even if the subsidiary is an Indian company. Foreign company also includes Multi National Corporations under FCRA.

Company under Companies Act, 1956:-

A company within the meaning of the Companies Act, 1956 can denote money under FCRA if  more than one-half of the nominal value of its share capital is held, either singly or in the aggregate by,

(a) government of a foreign country or territory,

(b) citizens of a foreign country or territory,

(c) corporations incorporated in a foreign country or territory,

(d) trusts, societies or other associations of individuals (whether incorporated or not), formed or registered in a foreign country or territory,

Trade Union/ Foreign trust/ society, club/ Citizen of a foreign country

Contribution by;

  • a trade union in any foreign country or territory,
  • a foreign trust or a foreign foundation which is either in the nature of trust or is mainly financed by a foreign country or territory,
  • a society, club or other association of individuals formed or registered outside India, a citizen of a foreign country,

shall be considered as foreign source under FCRA.

Institutions which do not come within the ambit of  foreign source

Any foreign institution which has been permitted by the Central Government, by notification in the Official Gazette, to carry on its activities in India will not come within the ambit of foreign source. The Central Government has notified numerous UN agencies which do not qualify as foreign source under the FCRA, a complete list of which is available here.

Secondly, a company that is incorporated outside India and having a establishment in India may not be considered as foreign source if fifty per cent or more of the paid-up share capital is held by one or more citizens of India or by one or more bodies corporate incorporated in India, or by one or more citizens of India and one or more bodies corporate incorporate in India, whether singly or in the aggregate.

Who can receive contribution under FCRA?

An association having a definite cultural, economic, educational, religious or social programme can receive foreign contribution after it obtains prior permission of the Central Government or gets itself registered with the Central Government. An association in this regard means an association of individuals, whether incorporated or not, having an office in India and includes a society, whether registered under the Societies Registration Act, 1860.

Thus, association under the Act covers all charitable organisations, educational, social, cultural, religious, political etc. organisations, societies, trusts, companies etc.

Whether the foreign contribution received can be transferred?

No person who has registered and has been granted a certificate or has obtained prior permission and receives any foreign contribution shall transfer such foreign contribution to  any other person unless such other person is also registered and had been  granted the certificate or obtained the prior permission by central government.

Can you receive foreign contribution in your ordinary bank account?

Foreign contribution by the association registered under FCRA or granted prior approval by Central Government shall be received in a single bank account only through one of  the branches of such bank as specified in its application for grant of certificate. However, an association receiving the funds may open one or more accounts in one or more banks for utilising the foreign contribution received by it.

For an exhaustive description of compliance requirements for receiving donations under the FCRA, please see this post.

4 COMMENTS

  1. […] The new Foreign Contribution (Regulation) Act, (FCRA), 2010 has come into force on 1st May, 2011 whereby after FCRA, 1976 stands repealed. The new provision has brought significant changes in the Act, that has made the process of getting funds under FCRA stringent. This is post explains the salient features of this Act, registration and compliance requirements for NGOs which intend to get donations from foreign bodies. For an elementary analysis of the concepts you must know before you start looking for funding, see this post. […]

LEAVE A REPLY