FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 Presented By: Suresh Kumar Kejriwal Go

FOREIGN CONTRIBUTION FOREIGN CONTRIBUTION (REGULATION) ACT, 2010(REGULATION) ACT, 2010

Presented By: Presented By:

Suresh Kumar KejriwalSuresh Kumar Kejriwal

Go

1. 1. HAS BECOME EFFECTIVE FROM 1HAS BECOME EFFECTIVE FROM 1STST MAY, 2011. MAY, 2011.

2. COMPARATIVE STATUS :2. COMPARATIVE STATUS :

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FOREIGN CONTRIBUTION REGULATION FOREIGN CONTRIBUTION REGULATION

ACT, 2010ACT, 2010

FCRA, 1976 FCRA, 2010

SECTION 32 54

RULE 9 24

FORM 9 10

DEFINITION & APPLICABILTYDEFINITION & APPLICABILTY

PROHIBITIONPROHIBITION

REGISTRATIONREGISTRATION

OPERATIONAL REQUIREMENTSOPERATIONAL REQUIREMENTS

RESTRICTIONSRESTRICTIONS

CONSEQUENCESCONSEQUENCES

ISSUES NEED CLARITYISSUES NEED CLARITY

IMMEDIATE ACTION POINTSIMMEDIATE ACTION POINTS

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COVERAGE COVERAGE

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DEFINITION & COVERAGEDEFINITION & COVERAGE

““FOREIGN CONTRIBUTION” FOREIGN CONTRIBUTION”

Means the donation, delivery or transfer, made by any foreignMeans the donation, delivery or transfer, made by any foreignsource of :-source of :- a) currency, whether Indian or foreigna) currency, whether Indian or foreign

IInclusionsnclusions : :a) Interest accrued on foreign contribution.a) Interest accrued on foreign contribution. b) Any other income derived from foreign contribution.b) Any other income derived from foreign contribution.

ExclusionsExclusions : : a) Amount received by way of fees or towards cost in lieu of a) Amount received by way of fees or towards cost in lieu of goods & servicegoods & service rendered in the ordinary course of business. rendered in the ordinary course of business.

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DEFINITIONDEFINITION

DEFINITION DEFINITION ““FOREIGN SOURCE”FOREIGN SOURCE” includes : includes :

a) government of any foreign country or territorya) government of any foreign country or territory

b) international agencyb) international agency

c) foreign companyc) foreign company d) citizen of a foreign countryd) citizen of a foreign country

e) Company with more than 50 % foreign shareholding.e) Company with more than 50 % foreign shareholding.

f) some of the sources appear to be foreign but are exemptedf) some of the sources appear to be foreign but are exempted from the definition of foreign source, e.g. Agencies of thefrom the definition of foreign source, e.g. Agencies of the United Nations, World Bank and other InternationalUnited Nations, World Bank and other International agencies as may be specified agencies as may be specified

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DEFINITION DEFINITION

IMPORTANT INDICATORS –IMPORTANT INDICATORS –

a) Source is important and not the currency.a) Source is important and not the currency.

b) Contribution from NRI through normal banking channels are b) Contribution from NRI through normal banking channels are not not foreign contribution. However it is advisable to obtain the foreign contribution. However it is advisable to obtain the passport details to establish that the person sending the passport details to establish that the person sending the remittance is an Indian citizen.remittance is an Indian citizen.

c) Foreign citizen making donation in Indian currency is c) Foreign citizen making donation in Indian currency is covered covered under foreign sources.under foreign sources.

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COVERAGE COVERAGE

a) Earlier only Association was covereda) Earlier only Association was covered

b) But now the Act is applicable to :-b) But now the Act is applicable to :-

i) Associationi) Association

ii) Individualii) Individual

iii) HUFiii) HUF

iv) Section 25 Companiesiv) Section 25 Companies

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SECTION -3SECTION -3

There is a prohibition on certain category of person to There is a prohibition on certain category of person to

receive foreign contribution. These categories include –receive foreign contribution. These categories include –

a) Member of legislature a) Member of legislature

b) Correspondent, editor, columnist of an b) Correspondent, editor, columnist of an

association/company engaged in production or broad-cast ofassociation/company engaged in production or broad-cast of

audiovisual news or current affairs program through any audiovisual news or current affairs program through any

electrical media or through any mode of mass electrical media or through any mode of mass communication.communication.

c)c)Organisation of a political nature as may be specified.Organisation of a political nature as may be specified.

The member of legislature shall include the Panchayat member. The member of legislature shall include the Panchayat member.

However the payment in ordinary course of business towards rendering However the payment in ordinary course of business towards rendering of goods & services or in the form of salary & wages are allowed.of goods & services or in the form of salary & wages are allowed.

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Organisation of political in nature :Organisation of political in nature :

As per Rule 3 the Central Govt. may specify an organisation As per Rule 3 the Central Govt. may specify an organisation

as a political in nature if it falls under following situations –as a political in nature if it falls under following situations –

a) Organisation having political objectives in its a) Organisation having political objectives in its

Memorandum of Association or bylaws;Memorandum of Association or bylaws;

b) Any voluntary action group with objectives of a politicalb) Any voluntary action group with objectives of a political

nature or which participates in political activities.nature or which participates in political activities.

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c) Organisation which is not directly aligned to any political c) Organisation which is not directly aligned to any political

party, but whose objectives, as stated in the Memorandumparty, but whose objectives, as stated in the Memorandum

of Association, or activities gathered through other materialof Association, or activities gathered through other material

evidence, include steps towards advancement of political evidence, include steps towards advancement of political

interests of such groups;interests of such groups;

d) Any organisation, by whatever name called, which habituallyd) Any organisation, by whatever name called, which habitually

engages itself in or employs common methods of political engages itself in or employs common methods of political actionaction

like `bandh’ or `hartal’, `rasta roko’ or `jail bharo’ in supportlike `bandh’ or `hartal’, `rasta roko’ or `jail bharo’ in support

of public causes.of public causes.

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REGISTRATIONREGISTRATIONWHO CAN RECEIVE FOREIGN CONTRIBUTION?WHO CAN RECEIVE FOREIGN CONTRIBUTION?

A) A person having a definite cultural, economic, educational, A) A person having a definite cultural, economic, educational,

religious or social program can receive foreign contribution religious or social program can receive foreign contribution

after itafter it – –

a) obtains the prior permission of the Central Government a) obtains the prior permission of the Central Government (FC – 4) (FC – 4)

or,or,

b) gets itself registered with the Central Government. ( FC – b) gets itself registered with the Central Government. ( FC – 3)3)

B) Application for registration or prior permission, under the B) Application for registration or prior permission, under the

previous Act : To furnishes the prescribed fees of previous Act : To furnishes the prescribed fees of Rs.1,000/- for prior permission & Rs.2,000/- for permanent Rs.1,000/- for prior permission & Rs.2,000/- for permanent registration.registration.

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KEY ISSUES :KEY ISSUES :

a) The permanent registration is valid for 5 years from a) The permanent registration is valid for 5 years from

the date of issue of registration.the date of issue of registration.

b) For existing registered NGOs the date of 5-year shall be b) For existing registered NGOs the date of 5-year shall be

calculated from 1calculated from 1stst May, 2011. May, 2011.

c) Prior permission shall be valid for the specific amountc) Prior permission shall be valid for the specific amount

of contribution proposed to be received.of contribution proposed to be received.

d) No deemed approval of prior permission within 90 days from d) No deemed approval of prior permission within 90 days from thethe

date of receipt of application. date of receipt of application.

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RENEWAL OF REGISTRATIONRENEWAL OF REGISTRATIONa) Application for renewal is to be made in Form FC-5 latest by a) Application for renewal is to be made in Form FC-5 latest by

six months before the date of expiry of the certificate.six months before the date of expiry of the certificate.

b) The person implementing multi year projects shall apply b) The person implementing multi year projects shall apply

for renewal latest by 12 months before the date of expiry offor renewal latest by 12 months before the date of expiry of

the certificate.the certificate.

c) If an organisation fails to renew within the due date, the c) If an organisation fails to renew within the due date, the

department may condone the delay. However such delaydepartment may condone the delay. However such delay

should not be more than 4 months after the expiry of theshould not be more than 4 months after the expiry of the

original certificate.original certificate.

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RENEWAL OF REGISTRATIONRENEWAL OF REGISTRATION

d) The Central Govt. may renew the certificate within 90 days d) The Central Govt. may renew the certificate within 90 days oror

reject the application communicating the reasons thereof.reject the application communicating the reasons thereof.

e) In case of rejection the aggrieved NGO has a right to file e) In case of rejection the aggrieved NGO has a right to file

an appeal within 60 days from the date of such order oran appeal within 60 days from the date of such order or

may apply for revision of order.may apply for revision of order.

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A) BANK ACCOUNT :A) BANK ACCOUNT :

a) All foreign contribution should be received through a) All foreign contribution should be received through

one designated bank accountone designated bank account

b) Now multiple bank account are allowed for utilisation b) Now multiple bank account are allowed for utilisation

purposes provided it is intimated to the Ministry within purposes provided it is intimated to the Ministry within 1515

days of the opening of the account.days of the opening of the account.

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B) BOOKS OF ACCOUNTS :B) BOOKS OF ACCOUNTS :

a) Rule 11 : a separate set of Books of Accounts & a) Rule 11 : a separate set of Books of Accounts &

records shall be maintained, exclusively for foreign records shall be maintained, exclusively for foreign

contribution received & utilised.contribution received & utilised.

b) If the foreign contribution is received in kind then the b) If the foreign contribution is received in kind then the

details should be preserved as mentioned in Form FC-7 details should be preserved as mentioned in Form FC-7

c) Books of accounts should be preserved for a period of c) Books of accounts should be preserved for a period of

six years [As per Rule 17 (7)]six years [As per Rule 17 (7)]

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C) SUBMISSION OF RETURNS :C) SUBMISSION OF RETURNS :

a) Annual Return : a) Annual Return :

1. Yearly Return in form FC-6 (earlier FC-3) accompanies 1. Yearly Return in form FC-6 (earlier FC-3) accompanies

by Receipt & Payment A/c, Income & Expenditure A/c by Receipt & Payment A/c, Income & Expenditure A/c

& Balance Sheet within nine months.& Balance Sheet within nine months.

2. Form FC-6 should reflect the foreign contribution 2. Form FC-6 should reflect the foreign contribution

received in the exclusive bank account & include received in the exclusive bank account & include

the details of fund transfer to other bank a/c for the details of fund transfer to other bank a/c for

utilisation.utilisation.

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C) SUBMISSION OF RETURNS :C) SUBMISSION OF RETURNS :

3. FC-6 form is more or less same except requirement of 3. FC-6 form is more or less same except requirement of

furnishing purpose wise expenditures on the basis of furnishing purpose wise expenditures on the basis of

location /place with address of each of specific location /place with address of each of specific

activitiesactivities 4. FC-6 shall also be accompanied with a statement of A/c4. FC-6 shall also be accompanied with a statement of A/c

from the bank through which FC money is received from the bank through which FC money is received

duly certified by the officer of the bank. duly certified by the officer of the bank.

5. Nil return shall be furnished if no receipt during 5. Nil return shall be furnished if no receipt during

the financial year. the financial year.

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D) INTIMATION :D) INTIMATION :

a) a) Rule 15Rule 15 : The bank should report to the FCRA : The bank should report to the FCRA

department within 30 days under two circumstances :department within 30 days under two circumstances :

1) if any foreign contribution is received without1) if any foreign contribution is received without

registration or prior permission,registration or prior permission,

2) if foreign contribution is receive in excess of2) if foreign contribution is receive in excess of

Rs.One Crore during a period of 30 days, Rs.One Crore during a period of 30 days,

b) b) Public DomainPublic Domain : Intimation for receipt of foreign : Intimation for receipt of foreign contribution contribution

is in excess of Rs.1.00 Crore in a Financial Year :is in excess of Rs.1.00 Crore in a Financial Year :

Organisation should place the data on receipt & Organisation should place the data on receipt & utilisationutilisation

pertaining to the year of receipt as well as for one year pertaining to the year of receipt as well as for one year

thereafter in public domain. thereafter in public domain.

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FCRA, 2010 HAS COMPOSED FOLLOWING RESTRICTIONS :FCRA, 2010 HAS COMPOSED FOLLOWING RESTRICTIONS :

A) ADMINISTRATIVE EXPENDITURE : A) ADMINISTRATIVE EXPENDITURE :

a) Admin. Exp. should not be more than 50% of the totala) Admin. Exp. should not be more than 50% of the total

FC Received during a financial year . In excess of FC Received during a financial year . In excess of

50% can be incurred with prior approval of the 50% can be incurred with prior approval of the

Central Govt.Central Govt.

b) Rule 5 defines Admin. exp. & basically it includes :-b) Rule 5 defines Admin. exp. & basically it includes :-

> Remuneration & other expenditure to Board Members> Remuneration & other expenditure to Board Members

and Trustees and Trustees

> Remuneration for person managing activity and other> Remuneration for person managing activity and other

related expenses..related expenses..

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FCRA, 2010 HAS COMPOSED FOLLOWING RESTRICTIONS :FCRA, 2010 HAS COMPOSED FOLLOWING RESTRICTIONS :

> Expenses at the office of the NGO.> Expenses at the office of the NGO.

> Cost of accounting and administration.> Cost of accounting and administration.

> Expenses towards running & maintenance of vehicle > Expenses towards running & maintenance of vehicle

> Cost of writing and filing reports > Cost of writing and filing reports

> Legal and professional charges> Legal and professional charges

> Rent and repairs to premises> Rent and repairs to premises

The rule further provides that any type of expenditure The rule further provides that any type of expenditure expendedexpended

directly on program activities shall not be considered asdirectly on program activities shall not be considered as

administrative in nature. administrative in nature.

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B) Foreign Contribution shall be utilised for the purpose for B) Foreign Contribution shall be utilised for the purpose for

which the contribution has been received [Sec. 8(1)(a)].which the contribution has been received [Sec. 8(1)(a)].

C) Utilisation of FC for speculative purpose : C) Utilisation of FC for speculative purpose :

FC or income arising therefrom shall not be used for FC or income arising therefrom shall not be used for

speculative purpose.speculative purpose.

Rule 4 defines speculative activities :Rule 4 defines speculative activities :

> As per the Rule in investment in equity market even > As per the Rule in investment in equity market even throughthrough

mutual fund shall be considered as sepculative activities.mutual fund shall be considered as sepculative activities.

> The Rule basically prohibits investment into risk > The Rule basically prohibits investment into risk

bearing instruments or assets. bearing instruments or assets.

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D) Transfer of FC fund to other FC registered organisation : D) Transfer of FC fund to other FC registered organisation :

FC fund can be transferred to other FC registered FC fund can be transferred to other FC registered organisation organisation

provided the recipient organisation has not been proceeded provided the recipient organisation has not been proceeded

against under any of the provision of the act. against under any of the provision of the act.

E) Transfer of FC fund to Non-FC registered organisation :E) Transfer of FC fund to Non-FC registered organisation : a) Can be made under prior approval. a) Can be made under prior approval.

b) The application shall be made in form FC-10.b) The application shall be made in form FC-10.

c) As per Rule 24 the total transfer to non-FC registered c) As per Rule 24 the total transfer to non-FC registered

organisation shall not exceed 10% of the totalorganisation shall not exceed 10% of the total

contribution received.contribution received.

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A) CANCELLATION OF CERTIFICATE : A) CANCELLATION OF CERTIFICATE :

Sec. 14(1) : FCRA certificate can be cancelled if : Sec. 14(1) : FCRA certificate can be cancelled if :

a) the holder of the certificate has made a statement in, or a) the holder of the certificate has made a statement in, or

in relation to, the application for the grant of registration in relation to, the application for the grant of registration

or renewal thereof, which is incorrect or false; or or renewal thereof, which is incorrect or false; or

b) the holder of the certificate has violated any of the termsb) the holder of the certificate has violated any of the terms and conditions of the certificate or renewal thereof; or and conditions of the certificate or renewal thereof; or

c) if the holder of the certificate has not been engaged in c) if the holder of the certificate has not been engaged in any reasonable activity in its chosen field for the benefit any reasonable activity in its chosen field for the benefit of the society for two consecutive years or has becomeof the society for two consecutive years or has become

defunct.defunct.

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A) CANCELLATION OF CERTIFICATE : A) CANCELLATION OF CERTIFICATE :

d) in the opinion of the Central Government, it is necessary d) in the opinion of the Central Government, it is necessary

in the public interest to cancel the certificate. in the public interest to cancel the certificate.

e) No order of cancellation shall be made unless the persone) No order of cancellation shall be made unless the person

concerned has been given a reasonable opportunity of concerned has been given a reasonable opportunity of

being heard.being heard.

f) Once the certificate is cancelled, eligibility of registrationf) Once the certificate is cancelled, eligibility of registration

or prior permission only after a period of threeor prior permission only after a period of three

years from the date of cancellation. years from the date of cancellation.

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B) SUSPENSION OF CERTIFICATE :B) SUSPENSION OF CERTIFICATE :

a) During the period of cancellation of certificate :-a) During the period of cancellation of certificate :-

> The new act allows the power to suspend the> The new act allows the power to suspend the

registration for a period upto 180 days.registration for a period upto 180 days.

> FC can be received only with prior approval.> FC can be received only with prior approval.

> the organisation can utilise existing foreign fund > the organisation can utilise existing foreign fund

upto 25% that too with prior approval.upto 25% that too with prior approval.

b) Before suspending any organisation the department shallb) Before suspending any organisation the department shall

record the reason in writing. However provision of record the reason in writing. However provision of

opportunity of being heard is not provided.opportunity of being heard is not provided.

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C) CUSTODY OF FUNDS & ASSETS IN THE C) CUSTODY OF FUNDS & ASSETS IN THE

EVENT OF CANCELLATION :EVENT OF CANCELLATION :

a) In case of available bank balances, the respective a) In case of available bank balances, the respective banking banking

authority will become the custodian till the Central Govt. authority will become the custodian till the Central Govt.

issues further directions.issues further directions.

b) If funds have been transferred to another NGO after b) If funds have been transferred to another NGO after

cancellation, then the funds in the bank a/c of such NGOcancellation, then the funds in the bank a/c of such NGO

will also go to the custody of the banking authority.will also go to the custody of the banking authority.

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C) CUSTODY OF FUNDS & ASSETS IN THE C) CUSTODY OF FUNDS & ASSETS IN THE

EVENT OF CANCELLATION :EVENT OF CANCELLATION :

c) All other assets of the organisation shall go to the interim c) All other assets of the organisation shall go to the interim

custody of the District Magistrate or any other authority custody of the District Magistrate or any other authority

which the Central Govt. may direct and for such period as which the Central Govt. may direct and for such period as

may be prescribed. may be prescribed.

d) May also sale the assets if funds are not available for d) May also sale the assets if funds are not available for running running

the activity.the activity.

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ISSUES NEED CLARITYISSUES NEED CLARITY

ISSUES NEED CLARITY ISSUES NEED CLARITY

a) Giving of loans under Micro Credit program to individuals a) Giving of loans under Micro Credit program to individuals

or groups.or groups.

b) Whether transfer of fund directly to end beneficiaries is b) Whether transfer of fund directly to end beneficiaries is

permissible? permissible?

c) Will non-receipt of foreign contribution for two years c) Will non-receipt of foreign contribution for two years

results in cancellation?results in cancellation?

d)d)How to report multiple bank accounts opened earlier? How to report multiple bank accounts opened earlier?

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IMMEDIATE ACTION POINTSIMMEDIATE ACTION POINTS

IMMDIATE ACTION POINTS IMMDIATE ACTION POINTS

a) Operational bank account & intimation thereof. a) Operational bank account & intimation thereof.

b) Review of investments in view of the definition of speculative b) Review of investments in view of the definition of speculative

activities.activities.

c) Adjust the accounting framework so that the location wise c) Adjust the accounting framework so that the location wise

expenditure can be determined. expenditure can be determined.

d) Separate books of accounts for documenting & accountingd) Separate books of accounts for documenting & accounting

of foreign contribution received in kind.of foreign contribution received in kind.

e) Process of transfer of foreign fund to FC registerede) Process of transfer of foreign fund to FC registered

organisation after obtaining a certificate. organisation after obtaining a certificate.

f) Process of transfer of fund to non-FC organisation with f) Process of transfer of fund to non-FC organisation with

prior approval.prior approval.

g) Application for prior permission and registration filed underg) Application for prior permission and registration filed under

the old act to be regularised by furnishing filing feesthe old act to be regularised by furnishing filing fees

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THANK YOUTHANK YOU

Documents

FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 Presented By: Suresh Kumar Kejriwal Go