foreign contribution (regulation) act, 2010 september 10, 2011 ca hiren d. shah kandivali cpe study...

Foreign Foreign Contribution Contribution

(Regulation) Act, (Regulation) Act, 20102010SEPTEMBER 10, 2011SEPTEMBER 10, 2011

CA Hiren D. ShahCA Hiren D. Shah

KANDIVALI CPE STUDY KANDIVALI CPE STUDY CIRCLE OF WIRC OF ICAICIRCLE OF WIRC OF ICAI

PreamblePreamble Foreign Contribution ( Regulation) Foreign Contribution ( Regulation)

Act,2010 came into effect from May 1,2011Act,2010 came into effect from May 1,2011

Foreign Contribution Regulation Rules, Foreign Contribution Regulation Rules, 2011 have come into force from May 2011 have come into force from May 1,20111,2011

In exercise of the power conferred by In exercise of the power conferred by section 48 of the FCRA, the Central section 48 of the FCRA, the Central Government makes the rules Foreign Government makes the rules Foreign Contribution Regulation Rules.Contribution Regulation Rules.

In Layman Understanding…In Layman Understanding…ObjectObject

Any Foreign Contribution

Foreign Hospitality

Illegitimate Foreign Source or

With unknown source

Which will weaken nationalSecurity

Needs Close Scrutiny by

Home Ministry being Security Issues

Concern is Threat toEconomy

This is all about FCRA…..

FCRA Moves around….FCRA Moves around….

Objects :Objects :

Foreign Contribution

Foreign Source

Foreign Hospitality

Why FCRA Regulation????Why FCRA Regulation????

As per website of Ministry of Home As per website of Ministry of Home Affairs, purpose of FCRA is to facilitate Affairs, purpose of FCRA is to facilitate receipt of foreign contribution for receipt of foreign contribution for genuine purposes, without genuine purposes, without compromising national security concerns.compromising national security concerns.

Focus of FCRA has shifted to internal Focus of FCRA has shifted to internal securitysecurity

It is doubtful that destructive elements It is doubtful that destructive elements will use FCRA route to fund their will use FCRA route to fund their supporters in India supporters in India

Why FCRA Regulation????Why FCRA Regulation????

Aimed at regulating the acceptance and Aimed at regulating the acceptance and utilization of foreign contributions and utilization of foreign contributions and acceptance of foreign hospitality by acceptance of foreign hospitality by certain individuals or associations or certain individuals or associations or companiescompanies

To Prevent mis-utilisation of the foreignTo Prevent mis-utilisation of the foreign

contribution received by the Associationscontribution received by the Associations

FCRA ApplicabilityFCRA Applicability FCRA 2010 extends to whole of India FCRA 2010 extends to whole of India

and also applies to citizens of India and also applies to citizens of India outside India and associates/ branches outside India and associates/ branches and subsidiaries outside India of and subsidiaries outside India of Companies or bodies registered or Companies or bodies registered or incorporated in Indiaincorporated in India

The Act is applicable to any citizen of The Act is applicable to any citizen of India whether he is in India or outside India whether he is in India or outside India. However Act is not applicable to India. However Act is not applicable to a foreigner while outside India a foreigner while outside India

Applies to Citizen of India or Entity Registered in India

FCRA Override FEMA or FCRA Override FEMA or other General Actsother General Acts

Since the Act is a special Act, its Since the Act is a special Act, its provisions will prevail over provisions provisions will prevail over provisions of FEMA. Thus even if there is of FEMA. Thus even if there is permission for certain transactions permission for certain transactions ( like donation, gift etc..) under ( like donation, gift etc..) under FEMA, restrictions under FCRA will FEMA, restrictions under FCRA will be applicable if the transaction is be applicable if the transaction is covered under provisions of the FCRAcovered under provisions of the FCRA

Who Administrate Who Administrate FCRA??FCRA??

Ministry of Home Affairs, FCRA Ministry of Home Affairs, FCRA wing/Foreign Division, Government wing/Foreign Division, Government of India administrate FCRAof India administrate FCRA

Where to Apply & How to Where to Apply & How to Apply??Apply??

The Department has taken initiative The Department has taken initiative of e-governance. of e-governance.

Application for registration and Application for registration and permission can be downloaded from permission can be downloaded from the website i.e. the website i.e. http://mha.nic.in/fcra.htmhttp://mha.nic.in/fcra.htm

Returns to be filed under the FCRA Returns to be filed under the FCRA can be filed onlinecan be filed online

Some Key Feature of FCRASome Key Feature of FCRA The concept of “permanent” registration has The concept of “permanent” registration has

been done away been done away a five-year registration is provided so that a five-year registration is provided so that

dormant organizations do not continue dormant organizations do not continue All existing registered organizations are All existing registered organizations are

deemed to be on a five year validity from the deemed to be on a five year validity from the date of enforceability of the Actdate of enforceability of the Act

Organizations of a “ political nature” cannot Organizations of a “ political nature” cannot receive foreign fundsreceive foreign funds

A person granted prior permission to receive A person granted prior permission to receive foreign contribution shall utilize it for the foreign contribution shall utilize it for the purposes for which it has been received. It purposes for which it has been received. It cannot be used for speculative business; cannot be used for speculative business;

Organization cannot use more than 50 per Organization cannot use more than 50 per cent of its received for administration cent of its received for administration purposes. purposes.

Some Key Feature of Some Key Feature of FCRA..Contd..FCRA..Contd..

A procedure for suspension and A procedure for suspension and cancellation of registration has also cancellation of registration has also been prescribedbeen prescribed

A statutory role provided for the A statutory role provided for the banking sector in regulation banking sector in regulation

Time limits have been provided for Time limits have been provided for accountability on the part of officialsaccountability on the part of officials

A provision has been made for A provision has been made for Compounding OffenceCompounding Offence

Some Key Feature of Some Key Feature of FCRA..Contd..FCRA..Contd..

No person who receives foreign No person who receives foreign contribution as per provisions of this contribution as per provisions of this Act shall transfer to other person unless Act shall transfer to other person unless that person is also authorized to receive that person is also authorized to receive foreign contribution as per rules made foreign contribution as per rules made by the Central Government by the Central Government

NGO and individuals will have to submit NGO and individuals will have to submit their accounts in time failing which their accounts in time failing which actions would be taken against themactions would be taken against them

Important Provisions of FCRAImportant Provisions of FCRA Transfer of Foreign Contribution to other Transfer of Foreign Contribution to other

Registered or Unregistered personRegistered or Unregistered person Foreign Contribution received can be Foreign Contribution received can be

transferred to other registered or transferred to other registered or unregistered person with permission of unregistered person with permission of Central Government. Application should be Central Government. Application should be made in form FC-10made in form FC-10

Transfer up to 10% of foreign contribution Transfer up to 10% of foreign contribution can be made even to person who has not can be made even to person who has not been granted registration or prior been granted registration or prior permission, with approval of Central permission, with approval of Central GovernmentGovernment

Such transfer should be reported in forms Such transfer should be reported in forms FC-6 and FC-10 by the transferor and the FC-6 and FC-10 by the transferor and the recipient recipient

Changes in the 2010 Act Vis-à-vis Changes in the 2010 Act Vis-à-vis 1976 Act1976 Act

Scholarship/ stipend kept out of Scholarship/ stipend kept out of provisions of FCRAprovisions of FCRA

Foreign contribution received from Foreign contribution received from relative is now outside FCRArelative is now outside FCRA

Only subsidiaries of foreign companies Only subsidiaries of foreign companies will be covered within the definition of will be covered within the definition of “ foreign source”( presently, all “ foreign source”( presently, all companies with shareholding exceeding companies with shareholding exceeding 50% are covered in the definition)50% are covered in the definition)

Electronics media brought within list of Electronics media brought within list of persons who cannot accept foreign persons who cannot accept foreign collaborationcollaboration


Provisions of the repealed FCRA 1976 Provisions of the repealed FCRA 1976 have been retained, the FCRA 2010 is have been retained, the FCRA 2010 is an improvement over the repealed Act an improvement over the repealed Act as more stringent provisions have been as more stringent provisions have been made in order to prevent mis-utilisation made in order to prevent mis-utilisation of the foreign contribution received by of the foreign contribution received by the associationthe association

Provisions have been made for Provisions have been made for suspension as well as cancellation of suspension as well as cancellation of registration granted for violation of the registration granted for violation of the provisions of the Act.provisions of the Act.


Interest received on foreign Interest received on foreign contribution will also fall within the contribution will also fall within the meaning of “ foreign contribution”meaning of “ foreign contribution”

Provision made to permit transfer of Provision made to permit transfer of foreign contribution to other personforeign contribution to other person

Restriction to utilize foreign Restriction to utilize foreign contribution for administrative purpose contribution for administrative purpose to 50%to 50%

Prohibition on use of foreign Prohibition on use of foreign contribution for speculative purposescontribution for speculative purposes


Time limit of 90 days for giving decision on Time limit of 90 days for giving decision on registration or prior permission to obtain registration or prior permission to obtain foreign contributionforeign contribution

Management of foreign contribution and Management of foreign contribution and assets created out of such contribution of assets created out of such contribution of persons whose certificates have been persons whose certificates have been cancelledcancelled

Disposal of assets created out of foreign Disposal of assets created out of foreign contribution if the person becomes defunct or contribution if the person becomes defunct or ceases to existceases to exist

Revision by Central Government of orders Revision by Central Government of orders passed by itpassed by it

Penalty for making false statement, Penalty for making false statement, declaration or delivering false accountdeclaration or delivering false account

Unsolved Problems…Unsolved Problems… No lower limit for applicability of No lower limit for applicability of

FCRA provisions ( even small FCRA provisions ( even small donations attracts FCRA provisions)donations attracts FCRA provisions)

Liberalization announced under Liberalization announced under FEMA are not extended under FCRA FEMA are not extended under FCRA

Gifts are permitted under FEMA, but Gifts are permitted under FEMA, but gifts falling under FCRA will be still gifts falling under FCRA will be still governed by provisions of FCRAgoverned by provisions of FCRA

FCRA will override FEMA and other FCRA will override FEMA and other Allied LawsAllied Laws

Definition of “ Foreign Definition of “ Foreign Contribution”Contribution”

Means the donation, delivery or transfer Means the donation, delivery or transfer

made by any made by any foreign sourceforeign source Includes :Includes :

Article, not given to a person as a gift for Article, not given to a person as a gift for personal use, if the market value, in India, of personal use, if the market value, in India, of such exceeds Rs 1,000/-such exceeds Rs 1,000/-

Any Currency, whether Indian or foreignAny Currency, whether Indian or foreign Any securities defined under Section 2(h) of the Any securities defined under Section 2(h) of the

Securities Contracts (regulation) Act,1956Securities Contracts (regulation) Act,1956 Any foreign securities as defined in Section2(o) of Any foreign securities as defined in Section2(o) of

the Foreign Exchange Management Act,1999the Foreign Exchange Management Act,1999 This excludes earning from foreign client by an This excludes earning from foreign client by an

NGO/ association in lieu of goods sold or services NGO/ association in lieu of goods sold or services rendered by it as this is a transaction of rendered by it as this is a transaction of commercial naturecommercial nature

Meaning of Security under Securities Meaning of Security under Securities Contracts (Regulation) Act,1956Contracts (Regulation) Act,1956

Securities include – Securities include – (i). (i). Shares, Scripts, Stocks, Bonds, Shares, Scripts, Stocks, Bonds,

debentures, debenture stock or other debentures, debenture stock or other marketable securities of a like nature in marketable securities of a like nature in or of any incorporated company or other or of any incorporated company or other body corporatebody corporate

(ii). Derivatives(ii). Derivatives (iii). Units or any other instruments (iii). Units or any other instruments

issued by any collective investment issued by any collective investment scheme to the investors in such schemesscheme to the investors in such schemes

(iv). Security Receipt issued by (iv). Security Receipt issued by Securitization Company Securitization Company

Meaning of Security under Meaning of Security under Securities Contracts (Regulation) Securities Contracts (Regulation)

Act,1956Act,1956 Units or other instruments issued to Units or other instruments issued to

investors under any mutual funds schemeinvestors under any mutual funds scheme Any certificate or instrument issued to an Any certificate or instrument issued to an

investor by any issuer being a special investor by any issuer being a special purpose distintict entity, which possesses purpose distintict entity, which possesses any debt or receivable, including any debt or receivable, including mortgage debt, as the case may bemortgage debt, as the case may be

Government securitiesGovernment securities Such other instruments as may be Such other instruments as may be

declared by the Central Government to declared by the Central Government to be securitiesbe securities

Rights or interest in securitiesRights or interest in securities

Meaning of Foreign Security Meaning of Foreign Security under Foreign Exchange under Foreign Exchange

Management ActManagement Act “ “ Foreign Security” means any Foreign Security” means any

security in the form of shares, security in the form of shares, stocks, bonds, debentures or any stocks, bonds, debentures or any other instrument denominated or other instrument denominated or expressed in foreign currencyexpressed in foreign currency

It includes securities expressed in It includes securities expressed in foreign currency, but where foreign currency, but where redemption or any form of return redemption or any form of return such as interest or dividend is such as interest or dividend is payable in Indian currencypayable in Indian currency

Who cannot accept foreign Who cannot accept foreign ContributionContribution……

No foreign contribution shall be accepted No foreign contribution shall be accepted by any –by any – Candidate for electionCandidate for election Correspondent, columnist, cartoonist, Correspondent, columnist, cartoonist,

editor, owner, printer or publisher of a editor, owner, printer or publisher of a registered newspaperregistered newspaper

Judge, Government Servant or Judge, Government Servant or employee of any corporation or any employee of any corporation or any other body controlled or owned by the other body controlled or owned by the GovernmentGovernment

Member of any legislatureMember of any legislature Political party or office-bearer thereof,Political party or office-bearer thereof,

Who cannot accept foreign Who cannot accept foreign Contribution…Contribution…

Organization of a political nature as may Organization of a political nature as may be specified by Central Governmentbe specified by Central Government

Association or Company engaged in the Association or Company engaged in the production or broadcast of audio news or production or broadcast of audio news or audio-visual news or current affairs audio-visual news or current affairs programmes through any electronic programmes through any electronic mode, or any other electronic form as mode, or any other electronic form as defined U/s 2 of the Information defined U/s 2 of the Information Technology Act,2000Technology Act,2000

Correspondent or columnist, cartoonist, Correspondent or columnist, cartoonist, editor, owner of the association or editor, owner of the association or company company

Who cannot accept foreign Who cannot accept foreign contribution on behalf of other contribution on behalf of other

personperson No person, resident in India, and no No person, resident in India, and no

citizen of India resident outside citizen of India resident outside India, shall accept any foreign India, shall accept any foreign contribution, or acquire or agree to contribution, or acquire or agree to acquire any currency from a foreign acquire any currency from a foreign source, on behalf of any political source, on behalf of any political party, or any person referred under party, or any person referred under FCRAFCRA

Prohibited Organization to Prohibited Organization to accept foreign contributionaccept foreign contribution

Organization with fictitious or Organization with fictitious or benami accounts, have indulged in benami accounts, have indulged in conversation directly or indirectly, conversation directly or indirectly, created communal tension, created communal tension, supported sedition or have diverted supported sedition or have diverted funds earlier would be barred from funds earlier would be barred from receiving foreign contributionsreceiving foreign contributions

Exception to foreign Exception to foreign contributioncontribution

Contribution made by citizen of Contribution made by citizen of India living in another country ( i.e. India living in another country ( i.e. Non Resident Indian), from his Non Resident Indian), from his personal savings, through the personal savings, through the normal banking channels is not normal banking channels is not treated as foreign contribution. treated as foreign contribution. However, while accepting any However, while accepting any donations from such NRI, it is donations from such NRI, it is advisable to obtain his passport advisable to obtain his passport details to ascertain that he/she is an details to ascertain that he/she is an Indian passport holder. Indian passport holder.

Not to be Considered as Foreign Not to be Considered as Foreign ContributionContribution

Gift or Presentation made to Indian Gift or Presentation made to Indian delegation accepted in accordance delegation accepted in accordance with the rules made by the Central with the rules made by the Central Government Government

From relativeFrom relative By way of remittance received in the By way of remittance received in the

ordinary course of business through ordinary course of business through any official channel, post office, or any official channel, post office, or any authorized person in FEMAany authorized person in FEMA

By way of scholarship, stipend or By way of scholarship, stipend or any payment of like natureany payment of like nature

Not to be Considered as Foreign Not to be Considered as Foreign

ContributionContribution Foreign Contribution accepted:Foreign Contribution accepted:

By way of salary, wages or other By way of salary, wages or other remuneration due from any foreign source remuneration due from any foreign source or by way of payment in the ordinary or by way of payment in the ordinary course of business transacted in India by course of business transacted in India by such foreign sourcesuch foreign source

By way of payment, in the course of By way of payment, in the course of international trade or commerce, or in the international trade or commerce, or in the ordinary course of business transacted ordinary course of business transacted outside India outside India

As an agent of foreign source in relation to As an agent of foreign source in relation to any transaction made by such foreign any transaction made by such foreign source with the Central Government or source with the Central Government or State Government State Government

Who cannot deliver any Who cannot deliver any currency to other person…..currency to other person….. No person, resident in India, shall No person, resident in India, shall

deliver any currency, whether Indian deliver any currency, whether Indian or foreign, which ahs been accepted or foreign, which ahs been accepted from any foreign source, to any from any foreign source, to any person if he knows or has reasonable person if he knows or has reasonable cause to believe that such other cause to believe that such other person intends, or is likely, to deliver person intends, or is likely, to deliver such currency to any political party such currency to any political party or any person as defined under FCRAor any person as defined under FCRA

Public Disclosure of receiptPublic Disclosure of receipt

If foreign contribution received in a If foreign contribution received in a year exceeds Rs 1 crore, summary of year exceeds Rs 1 crore, summary of receipts and utilization shall be kept receipts and utilization shall be kept in public domain for the year and in public domain for the year and one year thereafter. Central one year thereafter. Central Government will also display the Government will also display the data on its website for information of data on its website for information of general public general public

Foreign Source….Foreign Source…. Includes:Includes:

Foreign Government, International Foreign Government, International agency ( but not UN or its agencies, agency ( but not UN or its agencies, World Bank, IMF etc..) – list of World Bank, IMF etc..) – list of agencies exempted on the website agencies exempted on the website http://mha.nic.in/fcra/intro/FCRA-http://mha.nic.in/fcra/intro/FCRA- exempted AgenciesUN.pdfexempted AgenciesUN.pdf

Foreign CompanyForeign Company Multi-national corporationMulti-national corporation Company where more than 50% Company where more than 50%

capital is held by foreigner or foreign capital is held by foreigner or foreign company, foreign trust, foreign company, foreign trust, foreign citizen etc..citizen etc..

Interesting FAQsInteresting FAQs

Whether donations by PIO cardholder Whether donations by PIO cardholder or PIO who holds passports or or PIO who holds passports or registered OCI or dual Citizen would be registered OCI or dual Citizen would be considered “ foreign source”?considered “ foreign source”?

Yes, because under all these three Yes, because under all these three categories are foreign nationals and hold categories are foreign nationals and hold passports of the country of their nationality passports of the country of their nationality

Foreign nationality is the Important criteria


Can foreign Contribution be received Can foreign Contribution be received in Rupees?in Rupees?

Yes. Any amount received from “ Yes. Any amount received from “ foreign source” in rupees or foreign foreign source” in rupees or foreign currency is construed as “ foreign currency is construed as “ foreign contribution “ under law. Such contribution “ under law. Such transactions even in rupees terms transactions even in rupees terms is considered foreign contribution.is considered foreign contribution.

Would donations by PIO / Would donations by PIO / OCI considered as “ foreign OCI considered as “ foreign

Source” Source” The donations by Persons of Indian The donations by Persons of Indian

Origin (PIO) Card holder or Persons Origin (PIO) Card holder or Persons of Indian Origin (PIO) who hold of Indian Origin (PIO) who hold other country’s passports or other country’s passports or registered Overseas Citizens of India registered Overseas Citizens of India (OCI) would be considered “ foreign (OCI) would be considered “ foreign source”source”

Meaning of Speculation Meaning of Speculation activities…activities…

Investment including investment in Investment including investment in mutual funds or in shares linked to mutual funds or in shares linked to market force as regards to market force as regards to appreciation or depreciation of the appreciation or depreciation of the original investmentoriginal investment

Speculative Activities….Speculative Activities…. Any activity or investment that has an Any activity or investment that has an

element of risk of appreciation or element of risk of appreciation or depreciation of the original investment, depreciation of the original investment, linked to market forces, including linked to market forces, including investment in mutual funds or in sharesinvestment in mutual funds or in shares

Participation in any scheme that Participation in any scheme that promises high returns like investment in promises high returns like investment in chits or land or similar assets not chits or land or similar assets not directly linked to the declared aims and directly linked to the declared aims and objectives of the organization or objectives of the organization or association association

Debt based secured investment shall not Debt based secured investment shall not be treated as speculative Investmentbe treated as speculative Investment

Intimation about Intimation about Investment in Speculative Investment in Speculative

Activities…Activities… Intimation or Information about Intimation or Information about

speculative activities of any speculative activities of any organization shall be furnished to organization shall be furnished to Secretary to Government of India, Secretary to Government of India, Ministry of Home Affairs, New Delhi Ministry of Home Affairs, New Delhi by registered postby registered post

Administrative Expenses…..Administrative Expenses….. Salaries, wages, travel expenses or any Salaries, wages, travel expenses or any

remuneration realized by the Members remuneration realized by the Members of the executive Committee or of the executive Committee or Governing Council of the person Governing Council of the person

The expenditure incurred on salaries The expenditure incurred on salaries or remuneration of personnel engaged or remuneration of personnel engaged in training or for collection or analysis in training or for collection or analysis of field data of an association of field data of an association primarily engaged in research or primarily engaged in research or training shall not be counted towards training shall not be counted towards administration expensesadministration expenses..

Administrative Administrative Expenses….Contd..Expenses….Contd.. All expenses towards hiring of personnel All expenses towards hiring of personnel

for management of the activities of the for management of the activities of the person and salaries, wages or any kind person and salaries, wages or any kind of remuneration paid, including cost of of remuneration paid, including cost of travel, to such personneltravel, to such personnel

All expenses related to consumables like All expenses related to consumables like electricity and water charges, telephone electricity and water charges, telephone charges, postal charges, repairs to charges, postal charges, repairs to premises from where the organization premises from where the organization or Association is functioning, stationery or Association is functioning, stationery and printing charges, transport charges and printing charges, transport charges by the Members of the Executive by the Members of the Executive Committee or Governing Council and Committee or Governing Council and expenditure on office equipment expenditure on office equipment

Administrative Administrative Expenses….Contd..Expenses….Contd..

Cost of accounting for and administering Cost of accounting for and administering fundsfunds

Expenses towards running and Expenses towards running and maintenance of vehiclesmaintenance of vehicles

Cost of writing and filing reportsCost of writing and filing reports Legal and professional chargesLegal and professional charges Rent of premises, repairs to premises and Rent of premises, repairs to premises and

expenses on other utilitiesexpenses on other utilities

Expenses directly related to the stated Expenses directly related to the stated objective of theobjective of the

Welfare oriented organization shall be Welfare oriented organization shall be excluded excluded

Registration for Acceptance of Foreign Registration for Acceptance of Foreign

ContributionContribution Any Association ( except political Any Association ( except political

nature) having a definite cultural, nature) having a definite cultural, economic, educational, religious or economic, educational, religious or social Programme can accept foreign social Programme can accept foreign contribution contribution

Prior Permission vis-à-vis RegistrationPrior Permission vis-à-vis Registration Prior Permission is for specific Donor Prior Permission is for specific Donor

and Specific Projectand Specific Project Registration is for General Donor and Registration is for General Donor and

Association objectAssociation object

Registration Registration On line ApplicationOn line Application Hard Copy to be sent within 30 days of Hard Copy to be sent within 30 days of

submitting Online Applicationsubmitting Online Application If the application is rejected, further If the application is rejected, further

application can be made only after six application can be made only after six monthsmonths

Application can not be made within 6 Application can not be made within 6 months after submitting application for months after submitting application for prior permission for same projectprior permission for same project

Registration shall be granted within 90 Registration shall be granted within 90 days. If not granted, reasons will be days. If not granted, reasons will be communicated within 90 days unless communicated within 90 days unless protected under RTI protected under RTI

Validity of Registration Validity of Registration Registration is granted for a period of 5 Registration is granted for a period of 5

years.years.

It can be renewed by making It can be renewed by making application by applying six month application by applying six month before expiry of registrationbefore expiry of registration

If the application for renewal is not If the application for renewal is not made, the registration will lapse at the made, the registration will lapse at the end of 5 years. In such case, fresh end of 5 years. In such case, fresh application has to be madeapplication has to be made

Application for renewal shall be made Application for renewal shall be made in Form FC-5 with fees of Rs 500/-.in Form FC-5 with fees of Rs 500/-.

Suspension or Cancellation of RegistrationSuspension or Cancellation of Registration Central Government can suspend registration Central Government can suspend registration

for 180 days by order in writing.for 180 days by order in writing. During this period, foreign contribution cannot During this period, foreign contribution cannot

be accepted or utilized or can be accepted or be accepted or utilized or can be accepted or utilized only as per terms and conditions utilized only as per terms and conditions specified by Central Government specified by Central Government

Reason should be given and principles of Reason should be given and principles of natural justice has to be followed. Such action natural justice has to be followed. Such action cannot be arbitrarycannot be arbitrary

If such order of suspension is passed, up to If such order of suspension is passed, up to 25% of unutilized amount can be spent with 25% of unutilized amount can be spent with prior approval of Central Government for prior approval of Central Government for declared aims and objects. Balance amount declared aims and objects. Balance amount can be spent only after suspension is revokedcan be spent only after suspension is revoked

No appeal is provided against the order of suspension, but writ petition can be filed

Prior Permission vis-à-vis Prior Permission vis-à-vis RegistrationRegistration

Prior PermissionPrior Permission Registration Registration Prior Permission is for Prior Permission is for Specific Donor and Specific Specific Donor and Specific ProjectProject

Registration is for all types of Registration is for all types of Donation within the object of Donation within the object of the Association and for any the Association and for any Donor Donor

Prior Permission is one Prior Permission is one time time

Registration shall be granted Registration shall be granted for 5 years for 5 years

Prior Permission do not Prior Permission do not registrationregistration

Registration includes Prior Registration includes Prior Permission Permission

No reasons for denial shall No reasons for denial shall be communicatedbe communicated

Reasons for denial shall be Reasons for denial shall be communicated unless communicated unless protected under RTI protected under RTI

Application shall be made Application shall be made in Form FC – 4 in Form FC – 4 electronically electronically

Application shall be made in Application shall be made in Form FC – 3 electronicallyForm FC – 3 electronically

Prescribed Fees Rs 1000/-Prescribed Fees Rs 1000/- Prescribed Fees Rs. 2,000/-Prescribed Fees Rs. 2,000/-Policy for Permission or registration is that Organization in existence for 3 years

and have spent at least 6 lakhs over its activities excluding Admn expenses

Adjudication Adjudication If adverse order is passed by If adverse order is passed by

Competent authority, application on Competent authority, application on plain paper for revision can be made plain paper for revision can be made to Secretary, Ministry of Home to Secretary, Ministry of Home Affairs, Government of India, New Affairs, Government of India, New Delhi. The prescribed fee shall be RS Delhi. The prescribed fee shall be RS 1,000/-.1,000/-.

Appeal against the order of refusing Appeal against the order of refusing registration or permission lies with registration or permission lies with High Court High Court

Important Provisions of FCRAImportant Provisions of FCRA Bank AccountBank Account

Foreign Contribution should be received Foreign Contribution should be received only in the branch of Bank as specified only in the branch of Bank as specified in the application for grant of in the application for grant of registration certificate registration certificate

Held in State v. M Kurian 2011 AIR SCW Held in State v. M Kurian 2011 AIR SCW 3540, it was held that if permission is 3540, it was held that if permission is obtained to receive foreign contribution obtained to receive foreign contribution in a designated account, depositing the in a designated account, depositing the same in other account is an offence. It same in other account is an offence. It was held that breach of undertaking was held that breach of undertaking given while submitting an application is given while submitting an application is an offence. an offence.

For utilization of the funds, one or more For utilization of the funds, one or more banks are permissiblebanks are permissible

Mandatory Reporting by Mandatory Reporting by BanksBanks

The banks also have been brought The banks also have been brought under the ambit of the act and every under the ambit of the act and every bank or authorized person in foreign bank or authorized person in foreign exchange shall report to such exchange shall report to such authority prescribed amount of authority prescribed amount of foreign remittance and the source foreign remittance and the source and manner in which the foreign and manner in which the foreign remittance was receivedremittance was received

Any organization receiving funds Any organization receiving funds over Rs 10 lakh, the bank will over Rs 10 lakh, the bank will immediately inform the government immediately inform the government to enable the agencies to “ track” the to enable the agencies to “ track” the funds. funds.

Why Immediate Intimation Why Immediate Intimation by Banks…by Banks…

Government Estimates…. 40,000 Government Estimates…. 40,000 organizations receiving foreign organizations receiving foreign contribution in the country out of contribution in the country out of which only 18,000 report the inflow which only 18,000 report the inflow of funds and submit their accountsof funds and submit their accounts

Audit & AccountsAudit & Accounts Separate set of accounts and records, Separate set of accounts and records,

exclusively for the foreign contribution exclusively for the foreign contribution received and utilizedreceived and utilized

Every person who receives foreign contribution Every person who receives foreign contribution shall submit a report, duly certified by a shall submit a report, duly certified by a Chartered Accountant in the prescribed form Chartered Accountant in the prescribed form accompanied by an Income and expenditure accompanied by an Income and expenditure statement, receipt and payment and balance statement, receipt and payment and balance sheet for every financial year to the secretary sheet for every financial year to the secretary to the Government of India, to the Government of India,

Foreign contribution received by a candidate Foreign contribution received by a candidate for election shall be furnished in the prescribed for election shall be furnished in the prescribed form within forty-five days from the date on form within forty-five days from the date on which he is duly nominated as a candidate for which he is duly nominated as a candidate for election election

Description of Forms to be filed…Description of Forms to be filed…Form Form NoNo

DescriptionDescription

FC- 1FC- 1 Information to the Central Government of receipt of foreign Information to the Central Government of receipt of foreign contribution by way of gift from relativecontribution by way of gift from relative

FC – 2FC – 2 Application for seeking prior permission of the Central Government Application for seeking prior permission of the Central Government to accept foreign hospitality to accept foreign hospitality

FC – 3FC – 3 Application for “ registration “ U/S 11 of the FCRA for acceptance of Application for “ registration “ U/S 11 of the FCRA for acceptance of foreign contribution by an Association having definite cultural, foreign contribution by an Association having definite cultural, economic, educational, religious or social programmeeconomic, educational, religious or social programme

FC -4FC -4 Application for “ prior permission” U/S 11(2) of FCRA for the Application for “ prior permission” U/S 11(2) of FCRA for the acceptance of foreign contribution by an Association having acceptance of foreign contribution by an Association having definite cultural, economic, educational, religious or social definite cultural, economic, educational, religious or social programmeprogramme

FC – 5FC – 5 Application for seeking of “ registration certificate “ U/S 13 of the Application for seeking of “ registration certificate “ U/S 13 of the FCRA ( To be submitted within six month before the date of expiry FCRA ( To be submitted within six month before the date of expiry of the certificate of registrationof the certificate of registration

FC - 6FC - 6 Account of Foreign Contribution for the year ending on the 31Account of Foreign Contribution for the year ending on the 31stst MarchMarch

FC - 7FC - 7 Information about Foreign Contribution( Articles) AccountInformation about Foreign Contribution( Articles) Account

FC - 8FC - 8 Intimation about foreign Contribution ( securities) AccountIntimation about foreign Contribution ( securities) Account

FC – 9FC – 9 Intimation to the Central Govt. of Receipt of foreign contribution Intimation to the Central Govt. of Receipt of foreign contribution received by a candidate for Electionreceived by a candidate for Election

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

What Foreign What Foreign Hospitality??Hospitality??

Means any offer not being casual one, Means any offer not being casual one, made in cash or kind by a foreign made in cash or kind by a foreign source for providing a person with the source for providing a person with the costs of travel to any foreign country costs of travel to any foreign country or territory or with free boarding, or territory or with free boarding, lodging, transport or medical lodging, transport or medical treatment. Thus casual hospitality is treatment. Thus casual hospitality is not “ foreign hospitality” not “ foreign hospitality”

( e.g. offering meals or casual lift in ( e.g. offering meals or casual lift in vehicle) vehicle)

Restriction on Acceptance of Foreign Restriction on Acceptance of Foreign HospitalityHospitality

A member of Legislature, Office bearer of A member of Legislature, Office bearer of political party, judge, Government servant political party, judge, Government servant or employee of any corporation or any body or employee of any corporation or any body owned or controlled by Central owned or controlled by Central Government cannot accept foreign Government cannot accept foreign hospitality without prior permission of hospitality without prior permission of Central GovernmentCentral Government

Such person shall apply in form FC-6 for Such person shall apply in form FC-6 for prior permission to accept foreign prior permission to accept foreign hospitality. Application should be with hospitality. Application should be with administrative clearance of concerned administrative clearance of concerned ministry and invitation letter from host ministry and invitation letter from host country. Application should be made country. Application should be made preferably two weeks prior to proposed preferably two weeks prior to proposed date of onward journey date of onward journey

Exception in case of urgent Exception in case of urgent

medical treatmentmedical treatment The only exception is in case of emergent The only exception is in case of emergent

medical aid on account of sudden illness medical aid on account of sudden illness contacted during a visit out of India. In such contacted during a visit out of India. In such case, report within one month from the date case, report within one month from the date of receiving hospitality giving details of of receiving hospitality giving details of hospitality receivedhospitality received

In such case, intimation of foreign hospitality In such case, intimation of foreign hospitality shall be made within 60 days of such receipt shall be made within 60 days of such receipt giving prescribed details, only if the value of giving prescribed details, only if the value of such hospitality in emergent medical aid is Rs such hospitality in emergent medical aid is Rs 1 lacs or more1 lacs or more


Whether Donation given by Non-Whether Donation given by Non-Resident Indians (NRIs) is treated as “ Resident Indians (NRIs) is treated as “ foreign contribution”?foreign contribution”? Contribution made by a citizen of India Contribution made by a citizen of India

living in another Country from his living in another Country from his personal savings through the normal personal savings through the normal banking channels, is not treated as banking channels, is not treated as foreign contribution. However, while foreign contribution. However, while accepting any donations from such accepting any donations from such NRI, it is advisable to obtain his NRI, it is advisable to obtain his passport details to ascertain that passport details to ascertain that he/she is an Indian passport holder.he/she is an Indian passport holder.

Interesting FAQsInteresting FAQs Whether donations by PIO cardholder or Whether donations by PIO cardholder or

PIO who holds passports or registered PIO who holds passports or registered OCI or dual Citizen would be considered OCI or dual Citizen would be considered “ foreign source”?“ foreign source”?

Yes, because under all these three categories Yes, because under all these three categories are foreign nationals and hold passports of are foreign nationals and hold passports of the country of their nationality the country of their nationality

Can foreign Contribution be received in Can foreign Contribution be received in Rupees?Rupees?

Yes. Any amount received from “ foreign Yes. Any amount received from “ foreign source” in rupees or foreign currency is source” in rupees or foreign currency is construed as “ foreign contribution “ construed as “ foreign contribution “ under law. Such transactions even in under law. Such transactions even in rupees terms is considered foreign rupees terms is considered foreign contribution.contribution.


What is the procedure for change of What is the procedure for change of designated Bank Account?designated Bank Account?

For Change of the bank account, an For Change of the bank account, an application in prescribed form application in prescribed form mentioning the details of the old mentioning the details of the old account and the proposed new bank account and the proposed new bank account along with justification for account along with justification for change may be submitted to Ministry change may be submitted to Ministry of Home Affairs along with copy of of Home Affairs along with copy of resolution of the executive resolution of the executive committee for such change.committee for such change.


What is the procedure for seeking What is the procedure for seeking change in the name /address of the change in the name /address of the association ?association ?

For seeking change in the name / For seeking change in the name / address of the association, one should address of the association, one should use the prescribed form available on use the prescribed form available on Ministry of Home Affairs Ministry of Home Affairs

website http://mha.nic.in/fore.htmwebsite http://mha.nic.in/fore.htm

Interesting FAQsInteresting FAQs Whether foreigners can be appointed as Executive Committee Whether foreigners can be appointed as Executive Committee

members?members?

Foreign nationals are generally discouraged from being Foreign nationals are generally discouraged from being appointed as member of Executive Committee by an appointed as member of Executive Committee by an association. However, Foreign nationals, fulfilling the association. However, Foreign nationals, fulfilling the following conditions, may be appointed as Executive following conditions, may be appointed as Executive Committee members, after obtaining prior permission of the Committee members, after obtaining prior permission of the Central Government:Central Government:

(i).(i). The foreigner is married to an Indian citizen;The foreigner is married to an Indian citizen; (ii).(ii). The foreigner has been living and working in The foreigner has been living and working in

India for at least five yearsIndia for at least five years (iii).(iii). The foreigner has made available his/her The foreigner has made available his/her

specialized knowledge, especially in the medical and specialized knowledge, especially in the medical and health related field on a voluntary basis in India, in the health related field on a voluntary basis in India, in the pastpast

(iv).(iv). The foreigner is part of the Board of The foreigner is part of the Board of Trustees/ Executive Committee in terms of the Trustees/ Executive Committee in terms of the provisions in an inter-governmental agreement;provisions in an inter-governmental agreement;

(v).(v). The foreigner is a part of the Board of The foreigner is a part of the Board of Trustee/ Executive Committee in an ex-officio capacity Trustee/ Executive Committee in an ex-officio capacity representing a multilateral body which is exempted from representing a multilateral body which is exempted from the definition of foreign source. The need for such an the definition of foreign source. The need for such an appointment should, however, be adequately justified appointment should, however, be adequately justified

Can NGO use the foreign contributions for Can NGO use the foreign contributions for Investment in Mutual Funds and other Investment in Mutual Funds and other

speculative investmentsspeculative investments Investment cannot be made into Mutual Investment cannot be made into Mutual

fund or any speculative activities. fund or any speculative activities. Speculative activity is defined in Rule 4 Speculative activity is defined in Rule 4 of FCRP 2011 which is summaries as of FCRP 2011 which is summaries as under:under: Any activity or investment with the Any activity or investment with the

element of risk of appreciation or element of risk of appreciation or depreciationdepreciation

Participation in any scheme which Participation in any scheme which promises high returnspromises high returns

Debt based secured InvestmentDebt based secured Investment

Can the fee paid by the Can the fee paid by the foreign foreign

delegates/participants fees delegates/participants fees termed as foreign termed as foreign

contribution contribution Foreign delegates/participants paying “ Foreign delegates/participants paying “

delegate/participation Fees” in foreign delegate/participation Fees” in foreign currency for participation in a currency for participation in a conference/ seminar which is utilized for conference/ seminar which is utilized for the purpose of meeting the expenditure the purpose of meeting the expenditure of hosting the conference/seminar and is of hosting the conference/seminar and is not treated as foreign contribution and not treated as foreign contribution and as such no permission under FCRA is as such no permission under FCRA is requiredrequired

Can Capital assets Can Capital assets purchased in the name of purchased in the name of

the Office bearerthe Office bearer

Every asset purchased with foreign Every asset purchased with foreign contribution should be acquired and contribution should be acquired and possessed in the name of the possessed in the name of the association since association has a association since association has a separate legal entity distinct from its separate legal entity distinct from its membersmembers

What are Opportunity for What are Opportunity for CA??CA??

Assist for obtaining application for prior Assist for obtaining application for prior permission or registrationpermission or registration

Certificate for Accounts for foreign contribution Certificate for Accounts for foreign contribution for the year on 31for the year on 31stst March. ( i.e. Brought March. ( i.e. Brought forward foreign contribution, receipt of foreign forward foreign contribution, receipt of foreign contribution, balance of unutilized foreign contribution, balance of unutilized foreign contribution at the end of the year contribution at the end of the year

Certificate for Accounts for foreign contribution Certificate for Accounts for foreign contribution in kind for the year on 31in kind for the year on 31stst March. ( i.e. Brought March. ( i.e. Brought forward foreign contribution, receipt of foreign forward foreign contribution, receipt of foreign contribution, balance of unutilized foreign contribution, balance of unutilized foreign contribution at the end of the year contribution at the end of the year

Assisting banks to file annual return in the Assisting banks to file annual return in the prescribed form as regards to foreign prescribed form as regards to foreign contribution receivedcontribution received

foreign contribution (regulation) act, 2010 september 10, 2011 ca hiren d. shah kandivali cpe study...

Documents

fcra regulation

focus of fcra

fcra route

purpose of fcra

government of india

citizen of india

citizens of india

india of companies