Foreign Contribution Regulations in India

Ashish M. Shaji

11 Jul, 2023

In order to regulate foreign funding obtained by charitable institutes, political parties, and media and to prevent foreign organizations, individuals from influencing social, political and religious matters in India, the Foreign Contribution Regulation Act was enacted. After its enactment in 1976, the Act was amended in 2010. The Act applies to all associations, groups and NGOs which seeks foreign donations. This article examines the various facets of foreign contribution regulations in India.

What is Foreign Contribution?

This means a donation, delivery, or transfer of a currency, any security or share of the company made by a foreign company, government or its agencies, MNCs, trust or society registered outside India or foreign citizens to an Indian citizen. An article provided as a gift for personal use to someone up to the amount of 1 lakh rupees cannot be considered as foreign contribution.

Any interest earned or accrued from this contribution in India will be considered as foreign contribution. However, an amount obtained by fee including the fee of an educational institute or in business transaction undertaken in the ordinary course of trade will not fall within the ambit of foreign contribution.

Who can receive Foreign Contribution and who cannot as per foreign contribution regulations in India?

A person, subject to the condition that the contribution is intended to be used in a definite cultural, economic, educational, religious, or social program, can receive foreign contribution. However, registration under FCRA is necessary to receive foreign contribution, and it should not be prohibited under Section 3 of the FCRA.

The following cannot receive foreign contribution directly or indirectly:

• Candidate for election;
• A media house or media person whether being a columnist, cartoonist, editor, owner, printer, or newspaper publisher or if it’s an association or a company engaged in the production or broadcast of news;
• A judge or government servant;
• Member of the legislature;
•  Political Party.

How to get Foreign Contribution?

One needs to get registration under FCRA to receive foreign contributions. In fact, there are two ways of obtaining permission to receive such contribution- a) Get FCRA Registration and b) Get prior permission under FCRA.

Criteria under FCRA Registration

• The association that seeks foreign contribution should be registered under the existing statute such as the Societies Registration Act 1860 or the Indian Trust Act 1882 etc.
• It should exist for a minimum of 3 years and must have spent a minimum of 15 lakh rupees during the last 3 years for definite cultural, economic, educational, and religious purposes.
• It must not have been convicted or prosecuted for an offence under any law.

Criteria under Prior Permission

• A person that seeks foreign contribution should be registered under the existing statute such as the Societies Registration Act 1860 or the Indian Trust Act 1882¹ etc.
• A commitment letter should be submitted from the donor specifying the contribution amount and the purpose.
• It must not have been convicted or prosecuted for an offence under any law.

Application Procedure

 In order to apply-

• Form FC-3A for registration and Form FC-3B for prior permission have to be submitted online;
• A fee of 10000 rupees in case of registration and 5000 rupees in case of prior permission needs to be submitted;
• It is mandatory to have an FCRA Bank account with SBI, Aadhaar number, and DARPAN ID.

The registration will be valid for 5 years period and it can be renewed before 6 months of expiry of such period in Form FC-3C.

Compliances related to Foreign Contributions

• Maintenance of proper books of account and records.
• Submission of Annual return in Form FC-4 with balance sheet and statement of receipt and payment account certified by a CA online by December 31 every year.
• Submission of nil return is necessary even though there is no receipt or utilization of foreign contribution.

When is a registration suspended or cancelled?

The MHA may inspect the accounts of an association and if it receives any adverse input against the functioning of the association, the MHA can suspend the FCRA registration initially for 180 days. The association will not be able to receive any fresh donations and also can’t use more than 25% of the amount available in the bank account without the prior permission of MHA.

The MHA may cancel the registration of an organization that wouldn’t be eligible for registration or grant of prior permission for 3 years from the cancellation date.

What was the need for Foreign Contribution Regulations in India?

The annual inflow of foreign contributions had doubled in the last decade or so, but various recipients of foreign assistance didn’t use it for the purpose for which they were registered or granted prior permission. Therefore to regulate it, it was necessary to introduce Foreign Contribution Regulations in India.

Further, to ensure that such contributions don’t affect the internal security of the country negatively and the regulations were brought in to enhance transparency and accountability in the receipt and use of foreign contributions.

Conclusion

As specified above, in order to ensure that foreign contributions don’t affect the internal security of the country negatively and to enhance transparency and accountability in the receipt and use of foreign contributions, the regulations were brought in. However, excessive regulations can affect the functioning of NGOs across the country. The foreign contribution regulations should not affect the sharing of resources across borders which is necessary for the functioning of the global community.

Read our article:FCRA Amendment Bill 2020- Key Developments

1. https://en.wikipedia.org/wiki/Indian_Trusts_Act,_1882