Overview of the Foreign Contribution Regulation Act (FCRA)

Editorial Team
Last Updated
June 12, 2023

The Foreign Contribution Regulation Act (FCRA) is a crucial piece of legislation that non-governmental organizations (NGOs) operating in India must understand and abide by. The Act, enacted in 2010 by the Indian Parliament, regulates the inflow of foreign contributions with the aim of ensuring transparency, accountability, and national security. By complying with the FCRA, NGOs can improve their standing and increase their chances of qualifying for government grants and foreign-funded projects.

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Key features of the FCRA include:

It applies to all foreign contributions, encompassing donations, grants, and loans.
Foreign contributions can be allocated towards social welfare, education, and religious activities among others.
To receive foreign contributions, organizations must be registered with the Ministry of Home Affairs (MHA) or gain prior permission from the MHA.
Organizations are required to use separate designated bank accounts for receiving and utilizing foreign contributions.
The Act mandates submission of annual returns and audited financial statements to the government, providing a clear record of the receipt and utilization of foreign funds.
The MHA is responsible for overseeing the registration process, granting or denying permissions, and regulating activities of organizations that receive foreign contributions. Non-compliance or violation of the FCRA can lead to penalties, suspension, or cancellation of registration/permission.

In essence, the FCRA serves as a balance, facilitating legitimate foreign contributions for developmental activities while also preventing misuse of such contributions that could potentially compromise national interests or security.

Applicability

The Foreign Contribution Regulation Act (FCRA) 2010 is an essential law applicable to all associations, groups, and non-governmental organizations (NGOs) in India receiving foreign donations. This Act extends its jurisdiction across India and also includes Indian citizens abroad, as well as associate branches or subsidiaries of foreign companies operating in India. It’s important to understand the specific entities that the FCRA applies to:

Associations: This includes both registered and unregistered associations that are established for religious, charitable, social, cultural, or educational purposes.
Groups: This category includes any group of individuals, whether registered or unregistered, formed for religious, charitable, social, cultural, or educational purposes.
Non-governmental organizations (NGOs): These are organizations that are not government entities and are registered under the Societies Registration Act, 1860, the Companies Act, 2013, or any other applicable law.
Political parties: FCRA also applies to any political party that is registered under the Representation of the People Act, 1951.
Candidates for election: This includes any individual who is a candidate for election to any legislature or local authority.
Members of legislatures and local authorities: This category comprises individuals who are members of any legislature or local authority.
Public servants: FCRA applies to any individual who is a public servant under the Central Government, State Governments, or any local authority.
Media: This includes correspondents, cartoonists, editors, owners, printers, or publishers of a registered newspaper.

It should be noted that the FCRA does not apply to The Government of India, State Governments, Local authorities, and Government Bodies whose books are audited by the Controller General of India (CAG). By understanding the applicability of the FCRA, organizations can better navigate their responsibilities and requirements concerning foreign contributions.

What it Regulates:

FCRA regulates the acceptance and utilization of foreign contribution or foreign hospitality by individuals and associations. It prohibits acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to the national interest.

How the Regulations are Enforced:

The enforcement of the FCRA is undertaken by the Ministry of Home Affairs, Government of India. They have the power to prohibit any organizations believed to be against the public interest from receiving foreign contributions. The Ministry maintains a database of all organizations to which FCRA is applicable, and all such organizations are required to maintain account of all receipts and usage of foreign contributions, failing which they could lose their registration and face other penal consequences.

Services SetIndiabiz can Provide to an NGO:

★Consultation: Understanding the provisions and applicability of FCRA can be complex. SetIndiabiz can provide comprehensive consultation services to ensure your NGO understands its obligations under this law.
★ Registration Assistance: For an NGO to accept foreign contributions, it must first be registered under the FCRA. SetIndiabiz can help with this registration process.
★ Compliance and Reporting: SetIndiabiz can assist your NGO in maintaining proper accounts relating to foreign contributions, prepare and submit necessary filings, and ensure your organization remains in compliance with FCRA provisions.
★Legal Support: In case of any legal disputes related to FCRA compliance, SetIndiabiz can provide legal support and representation through their renowned panel of advocates and law firms.

FAQs

Q1: Who needs to register under the FCRA?

Any organization or individual in India that wishes to accept foreign contributions must register under the FCRA. This includes NGOs, non-profit organizations, societies, trusts, and Section 8 companies, among others.

Q2: Is it mandatory to register under the FCRA to receive foreign contributions?

Yes, it is mandatory to register under the FCRA or obtain prior permission to accept foreign contributions. Failure to do so can result in penalties and legal consequences.

Q3: What are the documents required for FCRA registration?

The documents required for FCRA registration typically include the organization’s registration certificate, audited financial statements, details of key office-bearers, project details, and bank account details, among others. The specific requirements may vary, and it is advisable to consult with experts for accurate guidance.

Q4: What is the process for FCRA registration?

The process for FCRA registration involves preparing the necessary documentation, filing an online application with the Ministry of Home Affairs, and completing the verification process. Upon successful evaluation, the organization will be issued an FCRA registration certificate.

Q5: What are the ongoing compliance requirements under the FCRA?

Ongoing compliance requirements include submitting annual returns (FC-6) with the details of foreign contributions received and utilized, maintaining separate designated bank accounts for foreign contributions, and undergoing foreign contribution audits by a chartered accountant.

Q6: What are the consequences of non-compliance with the FCRA?

Non-compliance with the FCRA can lead to penalties, suspension, or cancellation of registration/permission. It is essential to adhere to the regulations to avoid legal complications and maintain the organization’s credibility.

Q7: Can foreign contributions be used for any purpose?

No, foreign contributions received under the FCRA cannot be used for activities that are detrimental to the national interest, such as promoting communal disharmony, undermining national security, or encouraging activities prejudicial to the sovereignty and integrity of India.

Q8: Can an organization receive foreign contributions without FCRA registration?

No, organizations must either be registered under the FCRA or obtain prior permission to accept foreign contributions. Receiving foreign contributions without registration or permission is a violation of the FCRA.

Q9: How long does FCRA registration remain valid?

The FCRA registration certificate is generally valid for a period of five years. Organizations must apply for renewal well in advance to ensure continuity of their foreign funding.

Q10: Can FCRA-registered organizations receive contributions from foreign individuals?

Yes, FCRA-registered organizations can receive foreign contributions from foreign individuals, as well as foreign companies, foundations, or entities that are legally allowed to make donations.