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Contribution (Regulation) Act, (FCRA), 2010 has come into force on 1st May, 2011 whereby after FCRA, 1976 stands repealed.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.
Who can get foreign contribution?
Any person which includes individual, association and company can receive contribution under FCRA if the condition given in the Act are fulfilled. An association in this regard denotes an association of individuals having an office in India. However, it is not necessary for the association to be incorporated. NGOs mustregister under FCRA to get foreign contribution in form of donation.
Which kind of organizations cannot accept contribution?
An organization which is of political nature and an association or company which is engaged in the production and broadcast of audio or audio visual news or current affairs programme cannot accept foreign contribution.
Process of getting contribution
An association can take prior permission for one time contribution. Prior permission is given on case by case basis. Generally prior permission for contribution is taken if the the organisation does not have permanent FCRA registration number; the FCRA registration number has been cancelled by the Government ; the association is instructed by the Central Government to take prior permission in case the organization is prohibited from receiving foreign funds under provisions of FCRA; the FCRA number is suspended due to violation of the provisions and conditions specified under the FCRA or foreign contribution is for one definite cultural, economic, educational, religious or social programme.
To obtain prior permission an online application in Form FC-4, is required to be filled. Thereafter, the hard copy of the online application along with a certificate of recommendation from collector of district or department of the state government or ministry or department of the Government of India needs to be forwarded to Ministry of Home Affairs. The application of prior permission has to be processed within 120 days at maximum; however, in case the application is not processed within such time duration, then the applicant organization can proceed on the basis that the permission has been granted.
An NGO has to register under FCRA to get foreign contribution on a regular basis. For registration, it has to fulfil certain eligibility requirements, which are explained below.
Preconditions for Registration
Before applying for registration, the organization should ensure that it has been in operation for 3yrs, it does not have a parent society that is already registered under FCRA and no foreigner is on the board of the society.
It is also necessary for the NGO to open a separate bank account in the name of the society with the purpose of receiving and utilizing funds received under Foreign Contribution and Regulation Act.
Procedure for registration
For the purpose of registration, an online application has to be made. The hard copy of the online filled application should be duly signed by the person seeking foreign contribution. Thereafter, it has to be forwarded to the Ministry of Home Affairs. The application has to be accompanied by required documents within thirty days of the submission of the on-line application, failing which the request of the person shall be deemed to have ceased. The required documents consist of Form No. FC. 3; copy of memorandum, rules and regulations of the organization and the audited accounts of the last three years; list of office bearers; description of the activity of the association during the past three years; name and address of the bank along with the account number in which the fund will be received and a copy of registration certificate.
Validity of certificate of registration
Every certificate of registration granted shall be valid for a period of five years. For renewal of certificate, the association shall apply six months prior to the date of expiry. The application will be in Form FC-5 and shall be accompanied by a fee of Rs. 500 i.e. re-registration charge.
In case no application is made, the registration shall be deemed to have ceased. A person implementing an ongoing multi-year project shall apply for renewal twelve months before the date of expiry of the certificate of registration.
An application made for grant of prior permission shall be accompanied by fees of Rs. 1000 while application for grant of registration shall be accompanied by fees of Rs. 2000
Restrictions on utilization of funds
Every person who has been granted registration or prior permission shall maintain a separate set of accounts and records, exclusively, for the foreign contribution received and utilized. No funds other than foreign contribution shall be deposited in such account.
The contribution shall be utilized only for the purpose for which it is received. In case the organization wants to meet their administrative expenses from the fund, it can use 50% of contribution for such purpose. However, in case the organization wants to use more than 50% of the contribution for administrative purpose then it needs to take prior permission of the central government.
Every person who receives foreign contribution under the Act shall submit a report, duly certified by a chartered accountant, in the Form FC-6, accompanied by an income and expenditure statement, receipt and payment account, and balance sheet for every financial year beginning on the 1st day of April within nine months of the closure of the financial year, to the Ministry of Home Affairs. The annual return in the prescribed Form shall reflect the foreign contribution received in the exclusive bank account and include the details in respect of the funds transferred to other bank accounts for utilization. In case no foreign contribution has been received in an year then a “NIL” report shall be furnished as annual return.
According to the new regulation, provision has been made for inspection of account if the registered person or person to whom prior approval is granted fails to furnish account in accordance with law.
In case, any person to whom certificate of registration or prior permission has been granted receives foreign contribution in excess of one crore rupees or equivalent thereto in a financial year, he shall keep the summary data on receipts and utilization of foreign contribution pertaining to the year of receipt as well as for one year thereafter in the public domain. There can be various ways such as through website, publicly accessible data record etc through which such summary data can be kept in public domain. The Central Government shall also display or upload the summary data of such persons through its website.
Cancellation or suspension of certificate granted under FCRA
The new provision has made provision regarding suspension or cancellation of prior approval and certificate of registration if there is violation of the provisions of the Act.
In case the certificate of registration is suspended, 25% of the foreign contribution received can be utilized for the declared purpose, however, the remaining 75% can be used only after revocation of such
In case of cancellation of certificate, the amount received as foreign contribution kept in exclusive foreign contribution bank account shall vest with the banking authority till the Central Government issues further directions in the matter.
Use of foreign contribution by third person
Under the new regulation, a person who receives foreign contribution as per the provision of Act cannot transfer it to any other person unless that person is also authorized to receive foreign contribution as per rules made by the Central Government.
However, if a person intends to transfer the foreign contribution, he may make an application to the Central Government in the Form F-10. The Central Government may permit the transfer in respect of a person who has been granted the certificate of registration or prior permission under FCRA, in case the recipient person has not been proceeded against under any provision of the Act.
Penalty for violation
The new regulation provides imprisonment of the person which may extend up to six years along with fine if a person knowingly gives false intimation with regard to foreign contribution and seeks prior permission or registration by means of fraud, false representation or concealment of material fact. Any person contravening the provisions of the Act shall be punishable with imprisonment for a term which may extend to five years or with fine or with both.
All these provisions makes the rules and law related to FCRA stringent, its important that an organization taking foreign contribution follow these regulations in order to get contribution and avoid penalty.