FCRA Registration, Permission, Benefits, Prohibition on Transfer and Bank Account By Kausha Mehta


FCRA refers to Foreign Contribution Regulation Act. All Charitable Organizations receiving foreign contribution come under the purview of this Act. NGOs find themselves in a constant need for donations, including foreign ones.

Eligibility of FCRA Registration

Following are the conditions that make you eligible to apply for FCRA Registration:

1. The NGO should actually exist.

2. There should have been no prosecution against the NGO for the following:

      a. Forced Conversion
      b. Creating Discord
      c. Creating Communal Tensions

3. There should be no evidence against the NGO that points towards it using violence to achieve its ends.

4. The NGO should not likely to divert foreign investment towards personal gains.

5. The NGO should not have been found guilty of utilizing the donated funds for doing anything other than charity.

6. NGO should not have been banned from accepting foreign charities.

7. NGO should not likely to divert foreign investment towards personal gains.

8. There should be no personnel or a group within an NGO who has been either been convicted under any law or with some pending case against them.
 
Foreign Contribution:

As per Section 2(1)(h) of FCRA, 2010, Foreign Contribution means the donation, delivery or transfer made by any foreign source –

i. Of any article, not being an article given to a person as a gift for his personal use, if the market value in India, of such article, on the date of such gift, is not more than Rs. 25000/-, (as may be specified by Central Government from time to time, by the rules made by it in this behalf);


ii. Of any currency, whether Indian or Foreign;


iii. Of any security, as defined in clause (h) of Section 2 of the Securities Contract (Regulation) Act, 1956 and includes any foreign currency as defined in clause (o) of Section 2 of the Foreign Exchange Management Act, 1999.
 
Explanation 1: A donation, delivery or transfer of any article, currency or foreign security referred to in this clause by any person who has received it from any foreign source, either directly or through one or more persons, shall also be deemed to be foreign contribution within the meaning of this clause.

Explanation 2: Interest accrued on Foreign Contribution deposited in Bank or any other income derived from the Foreign Contribution or interest thereon shall also be deemed to be Foreign Contribution within the meaning of this Clause.

Explanation 3: Any amount received, by any person from any foreign source in India, by way of fee (including fees charged by an education institution in India from foreign student) or towards cost in lieu of goods or services rendered by such person in the ordinary course of his business, trade or commerce whether within India or outside India or any contribution received from an agent of a foreign source towards such fee or cost shall be excluded from the definition of foreign contribution within the meaning of this clause.

Foreign Source:

“Foreign source” includes, —

i. the Government of any foreign country or territory and any agency of such Government;
 
ii. any international agency, NOT being the UN or any of its specialised agencies, the World Bank, IMF or such other agency as the CG may, by notification, specify in this behalf;

iii. a foreign company;


iv. a corporation, not being a foreign company, incorporated in a foreign country or territory;


v. a multi-national corporation referred to in sub-clause (iv) of clause (g);
 
vi. a company within the meaning of the Companies Act, 2013, and more than one-half of the nominal value of its share capital is held, either singly or in the aggregate, by one or more of the following, namely:-

  1. the Government of a Foreign Country or territory;
  2. the citizens of a Foreign Country or territory;
  3. corporations incorporated in a foreign country or territory;
  4. trusts, societies or other associations of individuals (whether incorporated or not), formed or registered
  5. in a foreign country or territory;
  6. foreign company;
vii. a trade union in any foreign country or territory, whether or not registered in such foreign country or territory;

viii. a foreign trust or a foreign foundation, by whatever name called, or such trust or foundation mainly financed by a foreign country or territory;


ix. a society, club or other association of individuals formed or registered outside India;


x. a citizen of a foreign country
 
Sec 3 specifies which group of people are prohibited from accepting Foreign Contribution. But not all Foreign Contribution accepted by such people is prohibited. Those transactions which are NOT PROHIBITED are specified in Sec 4. In other words, Sec 4 describes specific exemptions to people who are covered in Sec 3.

Persons Prohibited from accepting Foreign Currency:-

Sec 3 (1): No Foreign Currency shall be accepted by any—
  1. candidate for election;
  2. correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered Newspaper;
  3. Judge, Government servant or employee of any corporation or any other body controlled or owned by the Government;
  4. member of any Legislature;
  5. political party or office-bearer thereof;
  6. organisation of a political nature as may be specified under sub-Sec (1) of Sec 5 by the Central Government
  7. association or company engaged in the production or broadcast of audio news or audio visual news or current affairs programmes through any electronic mode, or any other electronic form as defined in clause (r) of sub-Sec (1) of Sec 2 of the Information Technology Act, 2000 (21 of 2000) or any other mode of mass communication;
  8. correspondent, columnist, cartoonist, editor, owner of the association or company referred in above point
Sec 3 (2):

(a) No person, resident in India, and no citizen of India resident outside India, shall accept any foreign contribution, or acquire or agree to acquire any currency from a foreign source, on behalf of any political party, or any person referred to in sub-Sec (1), or both.
                                        
(b) No person, resident in India, shall deliver any currency, whether Indian or foreign, which has been accepted from any foreign source, to any person if he knows or has reasonable cause to believe that such other person intends, or is likely, to deliver such currency to any political party or any person referred to in sub-Sec (1), or both.
 
(c) No citizen of India resident outside India shall deliver any currency, whether Indian or foreign, which has been accepted from any foreign source, to—
 
  1. any political party or any person referred to in sub-Sec (1), or both; or
  2. any other person, if he knows or has reasonable cause to believe that such other person intends, or is likely, to deliver such currency to a political party or to any person referred to in sub-Sec (1), or both.
Sec3 (3): No person receiving any currency, whether Indian or foreign, from a foreign source on behalf of any person or class of persons, referred to in Sec 9, shall deliver such currency —
 
  1. to any person other than a person for which it was received, or
  2. to any other person, if he knows or has reasonable cause to believe that such other person intends, or is
likely, to deliver such currency to a person other than the person for which such currency was received.
 
Types of FCRA Permission:

The two types of FCRA registration are as follows:
  1. Prior Permission Certificate: This sort of certificate is possible after one year
  2. Permanent Certificate:  It is available for a span of 5 years.
Criteria for each type of Registration

Prior Permission:
 Following is the eligibility criteria for the prior permission certificate:

  • This Non-Governmental Organization should be running for at least one year.
  • The NGO has to provide a list of foreign donors, along with the donor’s credentials. This information entails the following:
                   -Address of the donors
                   -Designation of the donors
                   -Cause for which the donors are contributing
  • The NGO should have to specify the actual amount of money that it has received from the foreign contributors within the registration form.
Permanent Certificate: This particular form of registration is valid for up to 5 years, and has the following criteria:
  • The Non-Governmental Organization should have been in business for at least 3 years.
  • The NGO should submit the annual report for the last three years along with an audit report for the same timeframe.
  • Other documents that that NGO should  submit are:
                 -Pan Card
                 -The By-Laws
                 -The MOA and the AOA

Benefits of FCRA registration

With FCRA registration on its side, a section 8 company/NGO/public trust can reach out to international bodies like the following for donations:

  1. Oxfam
  2. British High Commission
  3. UNESCO
  4. Infinity Foundation
  5. Ford Foundation
  6. Canadian High Commission
  7. New Zealand High Commission
  8. SWISSAID
  9. AUSAID
  10. Japanese Embassy
  11. European Commission
  12. GIFRID
  13. BORDA
Prohibition to transfer Foreign Contribution to other Person:-

Transfer of Foreign Contribution done by possessor of Foreign Contribution to any other person shall be allowed only if:

Both transferor and transferee are registered and granted a certificate or have obtained prior permission under this Act.
 
Exception:

On following certain PROCEDURE, transfer of upto 10% of total Foreign Contribution received in that Financial Year can be done if ONLY THE TRANSFEROR is registered and granted a certificate or has obtained prior permission under this Act. Transfer should be reflected in return under Form FC-5 filed by transferor and recipient.

Grant of Certificate of Registration:

1. Application for Certificate/Prior Permission shall be made to Central Government.


2. If application is improper in form and manner, the Central Government shall, by an order reject it.
 
3. Central Government shall inquire into certain CONDITIONS, If CONDITIONS are satisfied then grant Certificate/ Prior Permission.

4. Certificate/ Prior Permission shall:

  1. be given within 90 days of receipt of Application, or
  2. if not given within 90 days, reasons shall be communicated to the applicant, or
  3. Certificate/Prior Permission may be refused after recording the reasons of refusal and giving copy thereof to Applicant (except in cases where there is no obligation to do so under RTI Act, 2005.
5. A person shall not be eligible for Certificate/Prior Permission, if his certificate has been suspended and such suspension of certificate continues on the date of making an application.
 
6. Certificate is valid for a period of five years and the Prior Permission shall be valid for the specific purpose or amount of Foreign Contribution.
 
Condition for an inquiry by Central Government:

The following CONDITIONS are inquired into by Central Government before granting Certificate/Prior Permission:

(a)  the person making an application for Registration /Prior Permission:

  1. is not fictitious or benami;
  2. has not been prosecuted or convicted for indulging in activities aimed at conversion through inducement or force, either directly or indirectly, from one religious faith to another;
  3. has not been prosecuted or convicted for creating communal tension or disharmony in any specified district or any other part of the country;
  4. has not been found guilty or diversion or misutilisation of this funds;
  5. is not engage or likely to engage in propagation of sedition or advocate violent methods to achieve its ends;
  6. is not likely to use the foreign contribution for personal gains or divert it for undesirable purposes;
  7. has not contravened any of the provisions of this Act;
  8. has not been prohibited from accepting foreign contribution;
(b) the person making an application for REGISTRATION has undertaken reasonable activity in its chosen filed for the benefit of the society for which the Foreign Contribution is proposed to be utilised;

(c) the person making an application for giving PRIOR PERMISSION has prepared a reasonable project for the benefit of the society for which the Foreign Contribution is proposed to be utilised;


(d) in case the person being an INDIVIDUAL, such individual has neither been convicted under any law for the time being in force nor any prosecution for any offence pending against him;


(e) in case the person being OTHER THAN AN INDIVIDUAL, any of its directors or office bearers has neither been convicted under any law for the time being in force nor any prosecution for any offence is pending against him;


(f) the acceptance of foreign contribution by the person referred to in sub- Sec (1) is not likely to affect prejudicially—

  1. the sovereignty and integrity of India; or
  2. the security, strategic, scientific or economic interest of the State; or
  3. the public interest; or
  4. freedom or fairness of election to any Legislature; or
  5. friendly relation with any foreign State; or
  6. harmony between religious, racial, social, linguistic, regional groups, castes or communities;
(g) the acceptance of foreign contribution referred to in sub-Sec (1),—

  1. shall not lead to incitement of an offence;
  2. shall not endanger the life or physical safety of any person.
Suspension of Certificate:

i. Central Governemnt may, in writing, SUSPEND the CERTIFICATE for upto 180 days, if it is satisfied that it is necessary to do.
 
ii. Such action shall be pending consideration of the question of ‘CANCELLING the CERTIFICATE’ on any of the grounds mentioned in Sec 14(1)

iii. Every person whose certificate has been suspended shall:

  1. not receive any Foreign Contribution during the period of suspension of certificate, except on Central Government’s Terms & Conditions;
  2. Utilise Foreign Contribution in his custody with the prior approval of the Central Government.
Cancellation of Certificate:

i. Central Government may by order CANCEL THE CERTIFICATE, if satisfied after inquiry that :
 
  1. 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
  2. the holder of the certificate has violated any of the terms and conditions of the certificate or renewal thereof; or
  3. in the opinion of the Central Government, it is necessary in the public interest to cancel the certificate; or
  4. the holder of certificate has violated any of the provisions of this Act or rules or order made thereunder; or
  5. 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.
ii. Before cancellation of certificate every person concerned shall be given a opportunity of being heard.
 
iii. Once cancelled, person shall not be eligible for Registration/Prior Permission for a period of 3 years thereafter.
 
Renewal of Certificate:

i. Certificate u/s 12 shall be renewed within 6 MONTHS BEFORE THE EXPIRY OF THE PERIOD of the certificate.

ii. Application shall be made to the Central Government


iii. Renewed Certificate shall:

  1. be given within 90 days of receipt of Application, or
  2. if not renewed within 90 days, reasons shall be communicated to applicant, or
  3. Renewal may be refused in case of violation of any provision
iv. Renewal of Certificate shall be for 5 years.
 
Foreign Contribution Bank Account:

i. Person granted Registration/Prior Permission u/s 12 shall RECEIVE Foreign Contribution in a single A/c of a single bank branch.

ii. Multiple accounts in multiple banks for UTILISING the Foreign Contribution received by him can be opened.

iii. Except Foreign Contribution nothing shall be received or deposited in such account or accounts.
 
Annual Filling:

An Organization permitted to receive Foreign Contribution has to mandatorily submit an annual return in form FC-4 accompanied with income and expenditure statement, balance sheet and statement of receipt and payment duly certified by a Chartered Accountant.

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