FOREIGN CONTRIBUTION
(REGULATION) ACT, 2010
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FOREIGN CONTRIBUTION REGULATION
ACT, 2010
1. HAS BECOME EFFECTIVE FROM 1ST MAY, 2011.
2. COMPARATIVE STATUS :
FCRA, 1976
FCRA, 2010
32
54
RULE
9
24
FORM
9
10
SECTION
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COVERAGE
DEFINITION & APPLICABILTY
PROHIBITION
REGISTRATION
OPERATIONAL REQUIREMENTS
RESTRICTIONS
CONSEQUENCES
ISSUES NEED CLARITY
IMMEDIATE ACTION POINTS
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DEFINITION & COVERAGE
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DEFINITION
“FOREIGN CONTRIBUTION”
Means the donation, delivery or transfer, made by any foreign
source of :a) currency, whether Indian or foreign
Inclusions :
a) Interest accrued on foreign contribution.
b) Any other income derived from foreign contribution.
Exclusions :
a) Amount received by way of fees or towards cost in lieu of goods &
service rendered in the ordinary course of business.
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DEFINITION
“FOREIGN SOURCE” includes :
a) government of any foreign country or territory
b) international agency
c) foreign company
d) citizen of a foreign country
e)
Company with more than 50 % foreign shareholding.
f) some of the sources appear to be foreign but are exempted
from the definition of foreign source, e.g. Agencies of the
United Nations, World Bank and other International
agencies as may be specified
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DEFINITION
IMPORTANT INDICATORS –
a) Source is important and not the currency.
b) Contribution from NRI through normal banking channels are not
foreign contribution. However it is advisable to obtain the
passport details to establish that the person sending the
remittance is an Indian citizen.
c) Foreign citizen making donation in Indian currency is covered
under foreign sources.
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COVERAGE
a) Earlier only Association was covered
b) But now the Act is applicable to :i) Association
ii) Individual
iii) HUF
iv) Section 25 Companies
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PROHIBITION
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PROHIBITION
SECTION -3
There is a prohibition on certain category of person to
receive foreign contribution. These categories include
–
a) Member of legislature
b) Correspondent, editor, columnist of an
association/company engaged in production or broad-cast of
audiovisual news or current affairs program through any
electrical media or through any mode of mass communication.
c) Organisation of a political nature as may be specified.
The member of legislature shall include the Panchayat member.
However the payment in ordinary course of business towards rendering of
goods & services or in the form of salary & wages are allowed.
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PROHIBITION
Organisation of political in nature :
As per Rule 3 the Central Govt. may specify an organisation
as a political in nature if it falls under following situations –
a) Organisation having political objectives in its
Memorandum of Association or bylaws;
b) Any voluntary action group with objectives of a political
nature or which participates in political activities.
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PROHIBITION
c) Organisation which is not directly aligned to any political
party, but whose objectives, as stated in the Memorandum
of Association, or activities gathered through other material
evidence, include steps towards advancement of political
interests of such groups;
d) Any organisation, by whatever name called, which habitually
engages itself in or employs common methods of political action
like `bandh’ or `hartal’, `rasta roko’ or `jail bharo’ in support
of public causes.
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REGISTRATION
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REGISTRATION
WHO CAN RECEIVE FOREIGN CONTRIBUTION?
A) A person
having a definite cultural, economic, educational,
religious or social program can receive foreign contribution
after it –
a) obtains the prior permission of the Central Government (FC – 4)
or,
b) gets itself registered with the Central Government. ( FC – 3)
B) Application for registration or prior permission, under the
previous Act : To furnishes the prescribed fees of Rs.1,000/for prior permission & Rs.2,000/- for permanent registration.
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REGISTRATION
KEY ISSUES :
a) The permanent registration is valid for 5 years from
the date of issue of registration.
b) For existing registered NGOs the date of 5-year shall be
calculated from 1st May, 2011.
c) Prior permission shall be valid for the specific amount
of contribution proposed to be received.
d) No deemed approval of prior permission within 90 days from the
date of receipt of application.
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RENEWAL OF REGISTRATION
a) Application for renewal is to be made in Form FC-5 latest by
six months before the date of expiry of the certificate.
b) The person implementing multi year projects shall apply
for renewal latest by 12 months before the date of expiry of
the certificate.
c) If an organisation fails to renew within the due date, the
department may condone the delay. However such delay
should not be more than 4 months after the expiry of the
original certificate.
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RENEWAL OF REGISTRATION
d)
The Central Govt. may renew the certificate within 90 days or
reject the application communicating the reasons thereof.
e) In case of rejection the aggrieved NGO has a right to file
an appeal within 60 days from the date of such order or
may apply for revision of order.
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OPERATIONAL REQUIREMENTS
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OPERATIONAL REQUIREMENTS
A) BANK ACCOUNT :
a)
All foreign contribution should be received through
one designated bank account
b) Now multiple bank account are allowed for utilisation
purposes provided it is intimated to the Ministry within 15
days of the opening of the account.
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OPERATIONAL REQUIREMENTS
B) BOOKS OF ACCOUNTS :
a) Rule 11 : a separate set of Books of Accounts &
records shall be maintained, exclusively for foreign
contribution received & utilised.
b) If the foreign contribution is received in kind then the
details should be preserved as mentioned in Form FC-7
c) Books of accounts should be preserved for a period of
six years [As per Rule 17 (7)]
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OPERATIONAL REQUIREMENTS
C) SUBMISSION OF RETURNS :
a) Annual Return :
1. Yearly Return in form FC-6 (earlier FC-3) accompanies
by Receipt & Payment A/c, Income & Expenditure A/c
& Balance Sheet within nine months.
2. Form FC-6 should reflect the foreign contribution
received in the exclusive bank account & include
the details of fund transfer to other bank a/c for
utilisation.
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OPERATIONAL REQUIREMENTS
C) SUBMISSION OF RETURNS :
3. FC-6 form is more or less same except requirement of
furnishing purpose wise expenditures on the basis of
location /place with address of each of specific
activities
4. FC-6 shall also be accompanied with a statement of A/c
from the bank through which FC money is received
duly certified by the officer of the bank.
5. Nil return shall be furnished if no receipt during
the financial year.
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OPERATIONAL REQUIREMENTS
D) INTIMATION :
a) Rule 15 : The bank should report to the FCRA
department within 30 days under two circumstances :
1) if any foreign contribution is received without
registration or prior permission,
2) if foreign contribution is receive in excess of
Rs.One Crore during a period of 30 days,
b)
Public Domain : Intimation for receipt of foreign contribution
is in excess of Rs.1.00 Crore in a Financial Year :
Organisation should place the data on receipt & utilisation
pertaining to the year of receipt as well as for one year
thereafter in public domain.
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RESTRICTIONS
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RESTRICTIONS
FCRA, 2010 HAS COMPOSED FOLLOWING RESTRICTIONS :
A) ADMINISTRATIVE EXPENDITURE :
a) Admin. Exp. should not be more than 50% of the total
FC Received during a financial year . In excess of
50% can be incurred with prior approval of the
Central Govt.
b) Rule 5 defines Admin. exp. & basically it includes :> Remuneration & other expenditure to Board Members
and Trustees
> Remuneration for person managing activity and other
related expenses..
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RESTRICTIONS
FCRA, 2010 HAS COMPOSED FOLLOWING RESTRICTIONS :
> Expenses at the office of the NGO.
> Cost of accounting and administration.
> Expenses towards running & maintenance of vehicle
> Cost of writing and filing reports
> Legal and professional charges
> Rent and repairs to premises
The rule further provides that any type of expenditure expended
directly on program activities shall not be considered as
administrative in nature.
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RESTRICTIONS
B) Foreign Contribution shall be utilised for the purpose for
which the contribution has been received [Sec. 8(1)(a)].
C) Utilisation of FC for speculative purpose :
FC or income arising therefrom shall not be used for
speculative purpose.
Rule 4 defines speculative activities :
> As per the Rule in investment in equity market even through
mutual fund shall be considered as sepculative activities.
> The Rule basically prohibits investment into risk
bearing instruments or assets.
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RESTRICTIONS
D) Transfer of FC fund to other FC registered organisation :
FC fund can be transferred to other FC registered organisation
provided the recipient organisation has not been proceeded
against under any of the provision of the act.
E) Transfer of FC fund to Non-FC registered organisation :
a) Can be made under prior approval.
b) The application shall be made in form FC-10.
c) As per Rule 24 the total transfer to non-FC registered
organisation shall not exceed 10% of the total
contribution received.
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CONSEQUENCES
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CONSEQUENCES
A) CANCELLATION OF CERTIFICATE :
Sec. 14(1) : FCRA certificate can be cancelled if :
a) the holder of the certificate has made a statement in, or
in relation to, the application for the grant of registration
or renewal thereof, which is incorrect or false; or
b) the holder of the certificate has violated any of the terms
and conditions of the certificate or renewal thereof; or
c) if the holder of the certificate has not been engaged in
any reasonable activity in its chosen field for the benefit
of the society for two consecutive years or has become
defunct.
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CONSEQUENCES
A) CANCELLATION OF CERTIFICATE :
d) in the opinion of the Central Government, it is necessary
in the public interest to cancel the certificate.
e) No order of cancellation shall be made unless the person
concerned has been given a reasonable opportunity of
being heard.
f) Once the certificate is cancelled, eligibility of registration
or prior permission only after a period of three
years from the date of cancellation.
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CONSEQUENCES
B) SUSPENSION OF CERTIFICATE :
a) During the period of cancellation of certificate :> The new act allows the power to suspend the
registration for a period upto 180 days.
> FC can be received only with prior approval.
> the organisation can utilise existing foreign fund
upto 25% that too with prior approval.
b) Before suspending any organisation the department shall
record the reason in writing. However provision of
opportunity of being heard is not provided.
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CONSEQUENCES
C) CUSTODY OF FUNDS & ASSETS IN THE
EVENT OF CANCELLATION :
a) In case of available bank balances, the respective banking
authority will become the custodian till the Central Govt.
issues further directions.
b) If funds have been transferred to another NGO after
cancellation, then the funds in the bank a/c of such NGO
will also go to the custody of the banking authority.
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CONSEQUENCES
C) CUSTODY OF FUNDS & ASSETS IN THE
EVENT OF CANCELLATION :
c) All other assets of the organisation shall go to the interim
custody of the District Magistrate or any other authority
which the
Central Govt. may direct and for such period as
may be prescribed.
d) May also sale the assets if funds are not available for running
the activity.
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ISSUES NEED CLARITY
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ISSUES NEED CLARITY
a) Giving of loans under Micro Credit program to individuals
or groups.
b) Whether transfer of fund directly to end beneficiaries is
permissible?
c) Will non-receipt of foreign contribution for two years
results in cancellation?
d) How to report multiple bank accounts opened earlier?
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IMMEDIATE ACTION POINTS
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IMMDIATE ACTION POINTS
a) Operational bank account & intimation thereof.
b) Review of investments in view of the definition of speculative
activities.
c) Adjust the accounting framework so that the location wise
expenditure can be determined.
d) Separate books of accounts for documenting & accounting
of foreign contribution received in kind.
e) Process of transfer of foreign fund to FC registered
organisation after obtaining a certificate.
f) Process of transfer of fund to non-FC organisation with
prior approval.
g) Application for prior permission and registration filed under
the old act to be regularised by furnishing filing fees
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THANK YOU
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