RBI Introduces FCRA-related transac...
The FCRA was enacted with the objective of creating a transparent mechanism for individuals and...
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.
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 educational institute or in business transaction undertaken in the ordinary course of trade will not fall within the ambit of foreign contribution.
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:
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 b) Get prior permission under FCRA.
Criteria under FCRA Registration
Criteria under Prior Permission
In order to apply-
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.
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 donation 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 which wouldn’t be eligible for registration or grant of prior permission for 3 years from the cancellation date.
The annual inflow of foreign contributions had doubled in the last decade or so, but various recipients of foreign contribution 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.
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