THE FOREIGN CONTRIBUTION

(REGULATION) ACT, 2010

Dr. (CA) Manoj Fogla

Applicability of the Act

• Extends to whole of India,

• Every citizen of India outside India

• Associate branches or

subsidiaries outside India

• Person

Definition of ‘Person’ :

• ‘Person’ means an Individual, HUF,

Section 25 Company and Association

Who can or cannot receive

Person with definite purpose

Person for self consumption

Prohibited person

Under Section 2(h) FC means transfer, delivery or donation of any currency, article or security.

Except consultancy or commercial receipt.

Includes interest or any other income from FC funds for assets.

The Scope of Foreign

Contribution Redefined

The FCRA 2010 has defined a “foreign

company” under clause (g) of section 2

which does not include Indian companies.

However section 2 (j) which defines the term

“foreign source” includes an Indian company

under the category of foreign source if more than

50 % of its equity is held by foreigners.

Foreign Company &

Foreign Source

a. candidate for election.

b. correspondent, columnist, cartoonist, editor, owner, printer

or publisher of a registered newspaper.

c. Judge, Government servant or employee of any

corporation.

d. member of any legislature

e. political party or office-bearer thereof.

f. Organisation of a political nature.

g. Association or company engaged in broadcast of audio

or visual news.

h. Correspondent, columnist etc. related with the

company referred in clause (g)

PERSONS SPECIFICALLY DEBARRED FROM

RECEIVING FOREIGN CONTRIBUTION

Salary, wages or remuneration for services rendered

Funds received in the course of international trade

Payment received as an agent in relation to any

transaction with the central or state government.

Gift or presentation as a part of any Indian delegation

within the Government norms.

Gift from relative.

Normal remittance under FEMA 1999.

By way of Scholarship, stipend etc.”

EXCEPTIONS TO PERSONS

SPECIFICALLY DEBARRED

Political nature organisations are not eligible

for registration under FCRA. Such organisations can not apply even for prior permission as was allowed earlier.

CAN AN ORGANISATION OF POLITICAL

NATURE RECEIVE FOREIGN

CONTRIBUTION

having avowed political objectives

any Trade Union with political goals;

any voluntary action group with political objectives

Students Unions, Workers’ Unions, Youth Forums and

Women’s wing of a political party;

Farmers, workers, students, youth based on caste,

community, religion, language with political objective

Habitually engages in ‘bandh’ or ‘hartal’, ‘rasta roko’,

‘rail roko’ or ‘jail bharo’ in support of public causes.

Declaration of an organisation to be

of a Political nature

The Central Government may notify an organisation as of

political nature not being a political party.

An opportunity in writing shall be provided

The organisation may respond within a period of thirty

days from the date of the notice

Every order shall be made within a period of one hundred

and twenty days from the date of issue of notice.

Procedure to notify an Organisation

to be of Political nature

Section 8 of FCRA 2010 provides that FC funds

cannot be used for speculative business.

Rule 4 prohibits speculative activity including

investment

Restriction On Speculative Business

& Speculative Activity

Administrative expenses shall not

exceed 50% without prior approval.

Administrative expenses are not required

to be reported separately

Restriction On

Administrative Expenses

Salaries, wages, travel of Board / Trustees.

Expenses towards hiring and travel of personnel for

management of the activities

Consumables

cost of accounting for and administering funds;

expenses towards running and maintenance of vehicles;

cost of writing and filing reports;

legal and professional charges; and

rent & repair of premises and other utilities:

However it excludes expenditure directly towards activity

Administrative expenses

includes

Designated Bank Account.

Multiple Bank Account.

Change of Designated Bank Account

Permissible Transaction from Bank Account

Closing Balance of Multiple Bank Account

Transaction with domestic Bank Account

Depositing income / refund in Bank Account

Using Bank Account of Staff

Bank Account

Foreign contribution can be transferred to another

FCRA registered organisation. Such transfer is

subject to the condition that such organisation has

not been proceeded against under any provisions

of the Act.

Such transfer of foreign contribution shall be

reflected in the returns in Form FC-6

Transfer of FC funds to another FC

registered organisation

The person may apply to the Central Government in

Form FC-10 to transfer foreign contribution not

exceeding 10% of the total value of foreign

contribution received.

Transfer on prior approval only

Transfer of FC funds to another Non

FC registered organisation

FC-6, FC-7, FC-8

CA Certificate in all three

Income & Expenditure A/c.

Receipt & Payment A/c.

Balance Sheet

Certified copy of Bank Statement

Filing of Returns

Interest income & other income

First Recipient & Subsequent Recipient

Transfer to other NGOs

Revised Return

Marking Envelop ‘FCRA Wing’

FC 7 filing for each item

FC 7 - Subsequent Recipient

Filing of Returns - Issues

2% or Rs.10,000/- whichever is higher,

within 90 days.

3% or Rs.25,000/- whichever is higher,

90 to 100 days.

5% or Rs.50,000/- whichever is higher

180 days, plus Rs. 500 per day for every

day beyond 180 days.

Filing of Returns – Penalties for Delay

Renewal of registration of NGOs every 5 years.

Exemption for the first 5 years.

Apply in Form FC-5, six months before the date

of expiry of the certificate of registration.

NGO having multi-year project shall apply for

renewal 12 months before the date of expiry.

Detail of FC since inception

No recommendation from Magistrate required

Renewal Of Registration

Every 5 years

Suspension of Certificate

Pending cancellation of the certificate FCRA Dept. may

suspend of certificate for such period not exceeding 180

days as may be specified in the order

No Opportunity of being heard – Insaf Case

Impact of suspension of certificate :

receive any foreign contribution during the

suspension period of certificate with prior approval

Utilize upto 25% of funds with approval of central

government

Cancellation of Certificate

Violated any of the terms and conditions

It is necessary in the public interest to cancel

No reasonable activity for two consecutive year or has

become defunct.

Any false or incorrect information in the application form

Shall not be eligible for registration or grant or permission for a minimum period of 3 years.

Review/Appeal of Cancellation

Review within one year by the NGO/person

Review within one year by the FCRA Dept

1000 rupees fees with application in plain paper

Appeal to the High Court

Unlike FCRA 1976 there is no deemed

prior permission under FCRA 2010.

No“Deemed” Prior Permission

The Act provides power to notify such source(s) from

which foreign contribution shall be accepted with prior

permission only. It implies that the Central Govt. may

notify specific donors or countries from which foreign

funds could not be received or shall be received with prior

permission only.

Power To Prohibit Sources From

Which FC Can Be Accepted

After cancellation of registration certificate all the foreign

contribution and assets thereof shall vest with such

authority as may be prescribed.

The government authorities may take charge of the

foreign contribution and the FC assets till the registration

is restored.

Power To Manage FC After

Cancellation Of Certificate

Gift from Relatives exempted still to be reported in FC-1

excess of 1 lakh.

FC article upto Rs. 25000 exempted

Foreign Gifts

The Donor organisation should take an

written undertaking

Subsequent Recipient should be

proceeded against

Foreigners on board through prior permission only under the following category.

the foreigner is married to an Indian citizen;

the foreigner has been working in India for at least five years;

the foreigner has specialized knowledge the medical and health related fields

the foreigner is ex-officio in terms of an inter-governmental agreement;

the foreigner is an ex-officio from a multilateral body which is exempted from the definition of foreign source.

Foreigners on Board

Every person who has been granted registration

or prior permission shall maintain a separate set

of accounts and such statements should be

preserved for a period of 6 years.

Maintenance Of Account And

Preservation

Accrual or Cash ?

Method Of Accounting

All NGOs have to provide information in

Public domain if receipt exceeds `1 Crore.

Disclosure Of Information If

Receipt Cross 1 Crore

Audit of Accounts

Central government has a power to audit any premises at any reasonable time for the purpose of auditing the prescribed books of accounts .

A Gazetted officer or a officer holding Group A post can undertake the audit under central government.

All bank should report within 30 days if :

More than 1 Crore received in 30 days.

FC received without registration or prior permission.

Reporting By Bank

Change since the time of registration

Undertaking given

Issues at the time of renewal

Change in 50% of Board

The new Act allows compounding of offences

Compounding Of Offences

Miscellaneous Power to call for information or documents

Investigation powers are same as that of an officer in-charge at police station

CBI or any other agency investigating cases under the act to furnish quarterly return on progress on all cases.

No suit / other legal proceeding against any of the govt. agencies or their officers for acting in good faith in the pursuance of act.

Certain administrative powers to make rules.

Procedure for laying of rules in parliament.

Power to exempt organizations from of all or any provision of this act .

Not to apply to transactions between Government of India & foreign governments.

Not apply to Government Bodies.

Miscellaneous Certain administrative powers to

make rules.

Procedure for laying of rules in parliament.

Power to exempt organizations from of all or any provision of this act .

Not to apply to transactions between Government of India & foreign governments.

FORM PARTICULARS

Form FC- 1 Intimation of Central Government of receipt of Foreign contribution by way of gift from relative

Form FC-2 Application for seeking prior permission of the Central Government to accept foreign hospitality.

Form FC-3 Application for registration for the acceptance of foreign contribution.

Form FC-4 Application for Prior permission for acceptance of foreign contribution

Form FC-5 Application for seeking renewal of registration certificate

Form FC-6 Account of foreign contribution for the year .

Forms

FORM PARTICULARS

Form FC-7 Intimation about foreign contribution (Articles) Account

Form FC-8 Intimation about foreign contribution (securities) account

Form FC-9 Intimation to the Central Government of Receipt of foreign contribution received by a candidate for Election

Form FC-10 Application for seeking permission for transfer of foreign contribution to other registered / unregistered persons.

Forms