FCRA & FCRR

Purpose of FCRA 

• Regulate acceptance and utilisation of

  • Foreign contribution

  • Foreign hospitality

• By certain Persons
• Prohibit if detrimental to national interests

Key Concepts/Definitions:

Foreign contribution

"Foreign contribution" means donation, delivery or transfer (directly or through another person) by any foreign source:

1. Of any article, not as gift for personal use (not FC upto Rs.1 lakh),

2. Of any currency, whether Indian or foreign

3. Of any security as defined in section 2 (h) of SCRA, 1956

Explanation to S.2‒ Any amount received by way of fee (including fees charged by an educational institution in India from foreign student) or towards cost in lieu of goods or services rendered by such person in the ordinary course of his business, trade or commerce within/outside India or any contribution received from an agent or a foreign source towards such fee/cost shall not be FC.

Deemed FC from local sources (interests, rent, pass-on now prohibited) also FC.

Foreign Hospitality

Foreign Hospitality means any offer, not being a purely casual one, made in cash. or kind by a foreign source for providing a person with the costs of travel to any foreign country or territory or with free boarding, lodging, transport or medical treatment.

Person

"Person" includes:

• An individual;
• A Hindu undivided family;
• An association;
• A company registered under section 25/8 of the Companies Act, 1956/2013

“Person” receive foreign contribution subject to following conditions:

• Must have a definite cultural, economic, educational, religious or social programme (CEERS) 
• Must obtain FCRA registration/prior permission from Central Government 
• Must not be prohibited under Section 3 of FCRA, 2010.

Person does not include:

• Statutory body wholly owned by Govt (Jan 2020) which must mandatorily get its accounts audited by CAG 
• Govt of India and foreign Govt transactions (Section 51) 

3 category of persons: Prohibited, Regulated and Not-Regulated

Prohibited person

1. Candidate for election;

2. Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper;

3. Public Servant, Judge, Government servant or employee of any corporation or any other body controlled or owned by the Government;

4. Member of any legislature;

5. Political party or office bearer thereof;

6. Organisation of a political nature as may be specified under sub-section (1) of Section 5 by the Central Government.

7. 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 any other electronic form as defined in clause (r) of sub-section (1) of Section 2 of the Information Technology Act, 2000 or any other mode of mass communication;

8. Correspondent or columnist, cartoonist, editor, owner of the association or company referred to in point (g).

9. Individuals or associations who have been prohibited from receiving foreign contributions.

Public person included in prohibited category in 2020.

Foreign source includes:

• Government/agency of foreign Government; 
• International agency (excluding UN, IBRD, IMF or agency Central Government may notify (list of 117 entities as per portal); 
• A foreign company; 
• A corporation, not being a foreign company, incorporated in a foreign country
• A multinational corporation 
• An Indian company with >50% of share capital held by:

  • Foreign Government; 

  • Foreign citizens; 

  • Corporations incorporated in a foreign country; 

  • Trusts, societies or other associations of individuals (whether incorporated or not) in a foreign country; 

  • Foreign company; [provided that such company shall not be a foreign source (FEMA compliant)-Finance Act 2016]

• A trade union in a foreign country 
• A foreign trust/foundation mainly financed by a foreign country; 
• A society, club or other association or individuals formed or registered outside India; 
• A foreign citizen

Very important to know that FC is from foreign source, should have adequate documentation

Foreign company

“Foreign company” means any company/association/body of individuals incorporated outside India and includes:

1. Foreign company within meaning of Section 379 of Companies Act, 2013 

2. A subsidiary of a foreign company 

3. The registered office/principal place of business of a foreign company 

4. A multinational corporation

Definition of MNC

A corporation incorporated in a foreign country which (a) has a subsidiary/branch/place of business in two or more countries or (b) carries on business/operates in two or more countries;

Applicability of Act:

• Whole of India 
• Citizens of India outside India; and 
• Associate

Administrative expenses. - The following shall constitute administrative expenses:-(i)

1. Salaries, wages, travel expenses or any remuneration realised by the Members of the Executive Committee or Governing Council of the person;
2. All expenses towards hiring of personnel for management of the activities of the person and salaries, wages or any kind of remuneration paid, including cost of travel, to such personnel;
3. All expenses related to consumables like electricity and water charges, telephone charges, postal charges, repairs to premises) from where the organisation or Association is functioning, stationery and printing charges, transport and travel charges by the Members of the Executive Committee or Governing Council and expenditure on office equipment;
4. Cost of accounting for and administering funds;
5. Expenses towards running and maintenance of vehicles;
6. Cost of writing and filing reports;
7. Legal and professional charges; and
8. Rent of premises, repairs to premises and expenses on other utilities:

Provided that the expenditure incurred on salaries or remuneration of personnel engaged in training or for collection or analysis of field data of an association primarily engaged in research or training shall not be counted towards administrative expenses:

Provided further that the expenses incurred directly in furtherance of the stated objectives of the welfare oriented organisation shall be excluded from the administrative expenses such as salaries to doctors of hospital, salaries to teachers of school etc.

FCRA Architecture for regulated entities

• Registration: Registration, Prior Permission

• Regulation: bank accounts-3 tir to operate FC, separate books to account for receipt and utilisation, AR and Declaration, Intimation of various kinds of changes

• Restriction: ceiling on Admin cost, prohibition on speculative activity, prohibition on FC transfer to another person, use of FC only for defined purpose as per 5 limbs

• Consequences: suspension, cancellation, prosecution, penalty

9 key amendments to FCRA in 2020

• No sub granting

• Cap on Administrative Exp

• Public servant included under prohibited persons category

• Suspension of registration for 360 days

• No utilisation during inquiry under PP

• FCRA Bank account with SBI

• Aadhaar/Passport mandatory

• Renewal after due inquiry

• Surrender of RegistrationCOMPLIANCE WITH THE AMENDED FCRA 2010 AND FCRR 2011

All FCRA registered Associations/prospective applicants must meet various mandatory requirements arising out of the latest Amendments in FCRA 2010 and the FCRR 2011. These requirements include, among others, the following three key compliances:

Credit of FC-which FC account

The following is an illustrative (but not exhaustive) list of such contributions which are Foreign Contribution as defined under The FCRA, 2010:

• Donations given in Indian rupees (INR) by any foreigner/Foreign Source including foreigners of Indian origin like OCI or PIO cardholders (in SBI, New Delhi Main Branch).
• Donations received in Indian rupees (INR) from any ‘foreign source’ even if that source is located in India at the time of such donation (in SBI, New Delhi Main Branch).
• FC received in cash/local cheque/demand draft or through overseas bank transfers in any currency including Indian rupees from any “foreign source” (in SBI, New Delhi Main Branch).
• All interest that accrues on the FC received in any bank account including interest on FDs (in any Bank Branch).
• Any income generated in India from assets created by spending the funds from FC. This includes proceeds from sales of such assets which have been credited even partly by spending the FC (in any Bank Branch).
• Proceeds from sale of FC received in kind or in the form of securities (in any Bank Branch).
• Re-depositing the unutilised FC which might have been drawn out as advance for any purpose by the NGO/association. Such a re-deposit, however, must be backed by matching withdrawal entries and relevant records to establish that it was an unutilised/unspent FC amount. This would include any refund received on account of cancellation of any services/tickets etc. sought to be taken by utilising FC (in any Bank Branch).

Key FCRR with changes in 2020

• Eligibility for Registration: 3 year track record and Rs. 15 lakhs expenditure (including fixed assets) from core activities

• Prior Permission: specific commitment letter, specific amount, specific donor specific activities. No common membership. More than Rs. 1 cr FC to be approved in instalments.

• Renewal: if validity expires, fresh registration unless Dept agrees to consider within period of 1 year with additional fee of Rs.5000/-

• Cessation: if renewal not filed before expiry or requisite fee, it is deemed cessation. No receipt or utilisation and assets with FC funds and FC in Bank vests with prescribed authority

• Cancellation: unutilized FC vests with prescribed authority. Fresh application after 3 years only.

• Fees: Registration Rs.10k, Renewal and PP: Rs.5k

• Proforma AA: Affidavit for change of members mentioned in initial registration application or making FC 3C and valid on approval

• Organisation declared to be of political nature: not political unless there is evidence of party politics/active politics

• Fes for revision of order or compounding of offences: Rs.3000/-. Also next compounding after 3 years

4. Forms under FCRA

Changes in FC 4 (Annual Return)

Changes in FC 4 FormNew FC 4

Newly Added

8. *Whether during the period under report:

• Any foreign contribution was transferred to any FCRA registered association?
• Any foreign contribution was transferred to any Non FCRA registered association?
• Any functionary of the Association has been prosecuted or convicted under the law of the land?
• Any asset created out of foreign contribution is registered in names other than the Association?
• Any domestic contribution has been credited in any “FCRA Account”?
• The Association has received any foreign Contribution in an account other than the designated FCRA receipt Account?
• The Association has utilised foreign contribution for any purpose other than the defined purposes in the FCRA certificate of registration or prior permission?
• The Association has invested any foreign contribution in any speculative activity as defined in rule 4 of the Foreign Contribution (Regulation) Rules, 2011?
  

4. Speculative activities.- 

(1) The following activities shall be treated as speculative activities:-

(a) any activity or investment that was an element of risk of appreciation or depreciation of the original investment, linked to market forces, including investment in mutual funds or in shares;

(b) participation in any scheme that promises high returns like investment in chits or land or similar assets not directly linked to the declared aims and objectives of the organisation or association.

(2) A debt-based secure investment shall not be treated as speculative investment.

(3) Every association shall maintain a separate register of investments.

(4) Every register of investments maintained under sub-rule (3) shall be submitted for audit.

(ix) The Association or any of its functionary/office bearers has violated any of the conditions as enumerated under sub-section (4) of section 12 of the Act?

(x) The Association has made expenditure on Administrative expenses exceeding 20 per cent. of the foreign contribution received?

(xi) Any fixed asset acquired out of foreign contribution has been sold out?

(xii) Sale proceeds of above fixed asset has been diverted/ has not been deposited in “FCRA Account”?

(xiii) Any FD proceeds have been credited in any account other than the “FCRA Account”?

(xiv) Any organisation/entity not belonging to the Association is being managed/financially supported by the Association?

(xv) The Association has utilised any foreign contribution outside India?

Note: Wherever the answer of above question is in ‘yes’, brief details must be provided.

(Illustrated: Upload FCRA audited accounts within 9 months of close of FY on website ➡️ Intimation of quarterly FC receipts within 15 days on website-deleted ➡️ Avoid Project advance from FC funds, follow reimbursement ➡️ Understand definition under FCRA to know what is FC, person, foreign source etc. ➡️ Even for Nil FC receipt and utilisation, FC4 has to be filed annually, CA certificate not required ➡️ Please read Charter for (a) organisations registered/applying for registration or PP (b) for Banks© for Chartered Accountants on FCRA portal www.fcraonline.nic.in ➡️ Please visit FCRA website for additional resources like FCRA FAQ. ➡️ Helpdesk launched www.helpdesk.fcraonline.gov.in)

Recent updates

• Public Notice, Registration certificate valid until 31st March 2024 unless rejected.
• Disclosure of movable and immovable assets in FC 4 made mandatory
• Section 10(5) of FEMA 1999 requires authorised person for foreign exchange transaction to get undertaking from account holder that it is not in contravention of FEMA or Rules thereto
• One time FEMA declaration cum undertaking for transactions in FCRA account with SBI
• NJ stamp paper with value applicable for agreement. Two parties, first organisation and second SBI NDMB. Signed and stamped by authorised signatories in the FCRA Bank account
• WEF 15.3.23, where FC is transferred by intermediary banks through NEFT/RTGS to SBI, donation details (name, address, amount, purpose) must be provided since SBI has to submit a report with these details to MHA daily otherwise SBI may not accept the FC funds. Not required for SWIFT transfer by foreign banks.

 

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