Foreign Contribution Regulation Act

Latest Context

• The Center for Policy Research's (CPR), Foreign Contribution Regulation Act (FCRA) licence was recently suspended by the Ministry of Home Affairs
• The Income Tax authorities previously studied and surveyed CPR (not-for-profit group), along with Oxfam India, and the Independent and Public-Spirited Media Foundation (IPSMF).

About Foreign Contribution Regulation Act

• Foreign donations are governed by the "Foreign Contribution (Regulation) Act" (FCRA), which also makes sure they don't compromise domestic security.
• First passed in 1976, it was revised in 2010 and a plethora of new regulations regarding foreign donations was established.
• The Ministry of Home Affairs is responsible for implementing the FCRA act.
• According to the new regulations announced by the MHA in 2015, NGOs must certify that accepting foreign donations won't jeopardise India's sovereignty and integrity, have a negative influence on friendly relations with other countries, or cause racial strife.

Need for FCRA

• The act intends to prevent foreigners from meddling in Indian political politics, journalism, public service, etc. for improper ends or actions harmful to the general welfare. Those who violate the FCRA's rules risk up to five years in prison.

Applicability

• All associations, groups, and even NGOs that wish to accept foreign donations must comply with the FCRA norm. All of these NGOs are required by law to register with the FCRA.

About FCRA 1976

• The Foreign Contribution and Hospitality Regulation Act (FCRA) was passed on March 31, 1976, to regulate how individuals and organisations use foreign contributions and hospitality while upholding the principles of a sovereign, democratic republic. To maintain stringent control over non-profit organisations and political groupings that accepted foreign funds, the FCRA was enacted in 1976. The act was amended in 1984 to mandate that all nongovernmental organisations register with the Home Ministry. The law was repealed in 2010 and replaced with a new one that had stricter regulations.

About FCRA 2010

• A consolidation law known as FCRA 2010 was adopted by the Indian government in that year. It aims to control foreign contributions, donations, and hospitality (travel, lodging, etc.) given to Indian organisations and people, as well as to prevent such contributions from harming the country's interests. It is a law that was passed to control and forbid businesses, associations, or people from accepting or using foreign contributions or hospitality for actions that would be harmful to the interests of the country, as well as for issues related to or incidental to those activities.
• Although being a financial statute, the Act is under the competence of the Home Ministry and not the Central Bank of India because it is internal security legislation (RBI).

Amendment

• In 2010, the UPA administration passed an amended FCRA.
• The law was once again revised by the current administration in 2020, providing it greater oversight and control over how foreign contributions are received and used by NGOs.
• In April of this year, the Supreme Court rejected a legal challenge to the 2020 revisions.

Provision of the Act

• The Act stipulates that to receive foreign donations, a person or Organisation must register with the Act and open a bank account with the State Bank of India in Delhi.
• to only use such funds for the purposes for which they were intended and in accordance with the Act.
• Additionally, they must submit yearly reports and refrain from giving the money to another Organization.
• The Act forbids political parties, legislators, candidates for public office, journalists, newspaper and media firms, judges, government employees, and organisations with a political bent from accepting foreign donations.

Enrollment in the FCRA

• FCRA registrations are given to people or organisations with established social, religious, educational, economic, and cultural initiatives.
• MHA investigates the applicant's history through the Intelligence Bureau and processes the application as a result.
• The MHA has 90 days to approve or reject the application; if it does not, it is expected to notify the NGO of its decision and provide justification.
• A FCRA registration is good for five years after it has been approved.
• NGOs are required to submit a renewal application within six months of the registration expiration date. If a renewal application is not submitted, the registration is presumed to have expired.

When does a registration become cancelled or suspended?

• If the government determines that an NGO is in breach of the Act, it reserves the power to revoke its FCRA registration.
• If "the Central Government considers it necessary for the public interest to cancel the certificate," for example, registration may be cancelled.
• An NGO cannot re-register for three years after having its registration terminated.

New guidelines to banks on Foreign Contribution (Regulation) Act rules

• Branch of the State Bank of India in New Delhi: A new clause was included that mandates that all NGOs receive foreign donations in a specific bank account at the branch of the State Bank of India in New Delhi.
• Any Organizations looking for donations from abroad are required to open a dedicated FCRA account at the local SBI branch.
• The NGOs may keep their current FCRA accounts with any other bank, but they must be compelled to link them to the New Delhi branch of SBI.

only permitted banking channels Only through banking channels may foreign contributions be received, and they must be recorded according to the rules.

Read Also: Funding for NGOs

Foreign Contribution (Regulation) Act, 2010

• The Foreign Contribution (Regulation) Act, 2010 and rules framed under it (the “FCRA” or “Act”) regulate the receipt and usage of foreign contribution by non-governmental organisations (“NGOs”) in India.
• Since the Act is internal security legislation, despite being a law related to financial legislation, it falls into the purview of Home Ministry and not the Reserve Bank of India (RBI). It is implemented by the Ministry of Home Affairs, Government of India.

Objectives of FCRA

• The intent of the Act is to prevent use of foreign contribution or foreign hospitality for any activity detrimental to the national interest.
• It has a very wide scope and is applicable to a natural person, body corporate, all other types of Indian entities (whether incorporated or not) as well as NRIs and overseas branches/subsidiaries of Indian companies and other entities formed or registered in India.

Provisions of FCRA

• The Act prohibits acceptance and use of foreign contribution or foreign hospitality by a certain specified category of persons such as a candidate for election, judge, journalist, columnist, newspaper publication, cartoonist and others.
• Regulates the inflow to and usage of foreign contribution by NGOs by prescribing a mechanism to accept, use and report usage of the same.
• It defines the term ‘foreign contribution’ to include currency, article other than gift for personal use and securities received from foreign source. While foreign hospitality refers to any offer from a foreign source to provide foreign travel, boarding, lodging, transportation or medical treatment cost.
• The Act permits only NGOs having a definite cultural, economic, educational, religious or social programme to accept foreign contribution, that too after such NGOs either obtain a certificate of registration or prior permission under the Act.

Registration and prior approval under FCRA:

• In order to be registered under the FCRA, an NGO must be in existence for at least three years and must have undertaken reasonable activity in its field for which the foreign contribution is proposed to be utilised.
• Further, it must have spent at least INR 1,000,000 over three years preceding the date of its application on its activities.
• The registration certificate is valid for a period of five years and must be thereafter renewed in the prescribed manner.
• NGOs not eligible for registration can seek prior approval from FCRA for receiving foreign funding.
• This permission is granted only for a specific amount of foreign funding from a specified foreign source for a specific purpose. It remains valid till receipt and full utilisation of such amount.

Conditions on the use of foreign funds:

• All funds received by an NGO must be used only for the purpose for which they were received.
• Such funds must not be used in speculative activities identified under the Act.
• Except with the prior approval of the Authority, such funds must not be given or transferred to any entity not registered under the Act or having prior approval under the Act.
• Every asset purchased with such fund must be in the name of the NGO and not its office bearers or members.
• Every NGO registered or having prior approval under the Act must file an annual report with the Authority in the prescribed form. This report must be accompanied by an income and expenditure statement, receipt and payment account, and balance sheet for the relevant financial year. For financial years where no foreign contribution is received, a ‘NIL’ report must be furnished with the Authority.

Foreign Contribution (Regulation) Amendment Bill, 2020

• The Bill bars public servants from receiving foreign contributions. Public servant includes any person who is in service or pay of the government, or remunerated by the government for the performance of any public duty.
• The Bill prohibits the transfer of foreign contribution to any other person. The term ‘person’ under the Bill includes an individual, an association, or a registered company. The FCRA 2010 allows transfer of foreign contributions to persons registered to accept foreign contributions.
• The Bill makes Aadhaar number mandatory for all office bearers, directors or key functionaries of a person receiving foreign contribution, as an identification document. In case of a foreigner, a copy of the passport or the Overseas Citizen of India card for identification is required.
• The Bill states that foreign contribution must be received only in an account designated by the bank as FCRA account in such branches of the State Bank of India, New Delhi. No funds other than the foreign contribution should be received or deposited in this account. The person may open another FCRA account in any scheduled bank of their choice for keeping or utilising the received contribution.
• The Bill allows the government to restrict usage of unutilised foreign contribution. This may be done if, based on an inquiry the government believes that such person has contravened provisions of the FCRA.
• The Bill proposes that not more than 20% of the total foreign funds received could be defrayed for administrative expenses. In FCRA 2010 the limit was 50%.
• The Bill allows the central government to permit a person to surrender their registration certificate.