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FCRA Registration

Introduction

The Foreign Contribution (Regulation) Act, 2010 (42 of 2010) dated the 26th September, 2010 was notified in the Gazette of India – Extraordinary – Part II - Section I dated the 27th September, 2010. However, the Act has come into force with effect from the 1st May, 2011 vide Gazette Notification vide G.S.R. 349 (E) dated the 29th April, 2011. Consequently, the earlier Act, viz., the Foreign Contribution (Regulation) Act, 1976 has been repealed. The Foreign Contribution (Regulation) Rules, 2011 made under section 48 of FCRA, 2010 have also come into force simultaneously with FCRA, 2010 vide Gazette Notification vide G.S.R. 349 (E) dated the 29th April, 2011. While the provisions of the repealed FCRA, 1976 have generally been retained, the FCRA, 2010 is an improvement over the repealed Act as more stringent provisions have been made in order to prevent misutilisation of the foreign contribution received by the associations. The prime objective of the Act is to regulate the acceptance and utilization of foreign contribution and foreign hospitality by persons and associations working in the important areas of national life. The focus of the Act is to ensure that the foreign contribution and foreign hospitality is not utilized to affect or influence electoral politics, public servants, judges and other people working the important areas of national life like journalists, printers and publishers of newspapers, etc. The Act also seeks to regulate flow of foreign funds to voluntary organizations with the objective of preventing any possible diversion of such funds towards activities detrimental to the national interest and to ensure that individuals and organizations may function in a manner consistent with the values of the sovereign democratic republic.

Organizations seeking foreign contributions for definite cultural, social, economic, educational or religious programmes may either obtain registration or prior permission to receive foreign contribution from Ministry of Home Affairs by making application in the prescribed format and furnishing details of the activities and audited accounts. The registration is granted only to such association which has proven track record of functioning in the chosen field of work during last three years and after registration, such organization is free to receive foreign contribution from any foreign source for its stated objectives. Registration is granted only after thorough security vetting of the activities and antecedents of the organization and office bearers thereof. However, such organizations which are newly established and do not have proven track record of functioning may also receive foreign contribution for specific activities, for a specific purpose and from a specific source after seeking project based prior permission (PP) from the Ministry of Home Affairs.

In order to bring in transparency in the administration of the Foreign Contribution (Regulation) Act, 2010 and the Rules framed thereunder, improve the functioning, disseminate the information and enhance user friendliness of the various procedures, the web-site is uploaded with all the related information for guidance of all concerned.

Foreign Contribution Regulation Act (FCRA) was enacted in the year 1976 with the prime objective of regulating the acceptance and utilization of foreign contribution and foreign hospitality by associations and persons working in the important areas of national life. The focus of this Act is to ensure that the foreign contribution and foreign hospitality is not utilized to affect electoral politics, public servants, judges and other people working the important areas of national life like journalists, printers and publishers of newspapers, etc.

The organizations seeking foreign contributions for definite cultural, social, economic, educational or religious programmes may either obtain registration to receive foreign contribution from Ministry of Home Affairs by making application in the prescribed format and furnishing details of the activities and audited accounts. The FCRA registration is granted only to such association, which has proven track record of functioning in the chosen field of work during last three years, and after registration, such organization is free to receive foreign contribution from any foreign source for stated objectives. The FCRA registration is granted thorough security vetting of the activities and antecedents of the organization and office bearers thereof. On the other hand, such organizations which are newly established and do not have proven track record of functioning may also receive foreign contribution for specific activities, for a specific purpose from a specific source after seeking project based previous permission (PP) from the Ministry of Home Affairs.

FCRA Registration Procedure
Application for registration under FCRA can be filed any time after registration of the organization, but the organization with a considerable past history of activities have a greater chance of convincing the FCRA authorities with regard to genuineness and the relevance of their purpose. Organizations desirous of registering themselves with the FCRA department are required to apply in form FC 8 along with various documents. The FCRA department may ask the intelligence bureau for a report on which FCRA department decides whether to accept or reject the application. The FCRA department issues a registration certificate and provides a permanent registration number, which is required to be quoted in all future correspondence and filing of returns and forms. Under certain circumstances application for registration will be refused if it affects the sovereignty and integrity of India.

FREQUENTLY ASKED QUESTIONS (FAQs) ON FCRA
Q. 1 What is foreign contribution?

Ans. As defined in Section 2(1)(h) of FCRA, 2010, "foreign contribution" means the donation, delivery or transfer made by any foreign source, ─

  • 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 such sum as may be specified from time to time by the Central Government by rules made by it in this behalf;
  • Of any currency, whether Indian or foreign;
  • Of any security as defined in clause (h) of section 2 of the securities Contracts(Regulation) Act, 1956 and includes any foreign security as defined in clause (o) of Section 2 of the Foreign Exchange Management Act, 1999.

Explanation 1 – A donation, delivery or transfer or any article, currency or foreign security referred to in this clause by any person who has received it form any foreign source, either directly or through one or more persons, shall also be deemed to be foreign contribution with the meaning of this clause.

Explanation 2 _ The interest accrued on the foreign contribution deposed in any bank referred to in sub-section (1) of Section 17 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 an person from any foreign source in India, by way of fee (including fees charged by an educational 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 or a foreign source towards such fee or cost shall be excluded from the definition of foreign contribution within the meaning of this clause.

In terms of FCRA, 2010 "person" includes _
(i) an individual;
(ii) a Hindu undivided family;
(iii) an association; and
(iv) a company registered under section 25 of the Companies Act, 1956.
The sum, as stated at (i) above, has not been specified in FCRR, 2011.

Q. 2 Whether earnings from foreign client(s) by a person in lieu of goods sold or services rendered by it is treated as foreign contribution?

Ans. No. As clarified at Explanation 3 above, foreign contribution excludes earnings from foreign client(s) by a person in lieu of goods sold or services rendered by it as this is a transaction of commercial nature.

Q. 3 Section 2(c)(i) of repealed FCRA, 1976 inter alia defined foreign contribution as the donation, delivery or transfer made by any foreign source of any article, not given to a person as a gift for personal use, if the market value, in India, of such article exceeds one thousand rupees. What limit has been prescribed in FCRA, 2010 in respect of such article?

Ans. The limit has not been specified in FCRR, 2011. Till any limit is fixed in the Rules, foreign contribution has to be understood without any limit.
Q. 4 What is a foreign source?

Ans. Foreign source, as defined in Section 2(1) (j) of FCRA, 2010 includes:-
  • The Government of any foreign country or territory and any agency of such Government;
  • Any international agency, not being the United Nations or any of its specialized gencies, the World Bank, International Monetary Fund or such other agency as the Central Government may, by notification, specify in this behalf;
  • A foreign company;
  • A corporation, not being a foreign company, incorporated in a foreign country or territory;
  • A multi-national corporation referred to in sub-clause (iv) of clause (g);
  • A company within the meaning of the Companies Act, 1956, 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:-
  • (A) The Government of a foreign country or territory;
    (B) The citizens of a foreign country or territory;
    (C) Corporations incorporated in a foreign country or territory;
    (D) Trusts, societies or other associations of individuals (whether incorporated or not), formed or registered in a foreign country or territory;
    (E) Foreign company;
  • A trade union in any foreign country or territory, whether or not registered in such foreign country or territory;
  • A foreign trust or a foreign foundation, by whatever name called, or such trust or foundation mainly financed by a foreign country or territory;
  • A society, club or other association or individuals formed or registered outside India;
  • A citizen of a foreign country;” List of agencies of the United Nations, World Bank and some other International agencies/multilateral organisations, which are exempted from the definition of ‘foreign source’,
Q. 5 Who can receive foreign contribution?

Ans. A ‘person’, as defined in Section 2(1)(m) with the exclusion of those mentioned in Section 3 of FCRA, 2010, having a definite cultural, economic, educational, religious or social programme can receive foreign contribution after it obtains the prior permission of the Central Government, or gets itself registered with the Central Government. Illustrative but not exhaustive lists of activities which are permissible and may be carried out by associations of different nature are available on the website.

Q. 6 Who cannot receive foreign contribution?

Ans. As defined in Section 3(1) of FCRA, 2010, foreign contribution cannot be accepted by any :
  • A candidate for election;
  • Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper;
  • Judge, government servant or employee of any Corporation or any other body ontrolled on owned by the Government;
  • Member of any legislature;
  • Political party or office bearer thereof;
  • Organization of a political nature as may be specified under subsection
  • Of Section 5 by the Central Government.
  • Association or company engaged in the production or broadcast of audio news or audio visuals or current affairs programmes through any electronic mode, or any other electronic form as defined in clause (r) of sub-section (i) of Section 2 of the Information Technology Act, 2000 or any other mode of mass communication;
  • Correspondent or columnist, cartoonist, editor, owner of the association or company referred to in clause (g).
  • Explanation – In clause (c) and section 6, the expression “corporation’ means a corporation owned or controlled by the Government and includes a Government company as defined in section 617 of the Companies Act, 1956.
  • Individuals or associations who have been prohibited from receiving foreign contribution.

Q. 7 Are there any banned organisations from whom foreign contribution should not be accepted?

Ans. Yes. FCRA is meant for regulating the receipt and utilisation of funds by any person for legitimate purposes.

Q. 8 Whether donation given by Non-Resident Indians (NRIs) is treated as ‘foreign contribution’?

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

Q. 9 Whether foreign remittances received from a relative are to be treated as foreign contribution as per FCRA, 2010?

Ans. The position in this regard as given in Section 4(e) of FCRA, 2010 and Rule 6 of FCRR, 2011 are as under: Subject to the provisions of section 10 of the FCRA, 2010, nothing contained in section 3 of the Act shall apply to the acceptance, by any person specified in that section, of any foreign contribution where such contribution is accepted by him from his relative. However, in terms of Rule 6 of FCRR, 2011, any person receiving foreign contribution in excess of one lakh rupees or equivalent thereto in a financial year from any of his relatives shall inform the Central Government in Form FC-1 within thirty days from the date of receipt of such contribution.

Q.10 Can the fee paid by the foreign delegates/participants attending/participating in a conference/seminar etc. be termed as foreign contribution and thus require permission from FCRA?

Ans. “Delegate/participation Fees” paid in foreign currency by foreign delegates/participants for participation in a conference/seminar and which is utilized for the purpose of meeting the expenditure of hosting the conference/seminar is not treated as foreign contribution and as such no permission under FCRA is required.

Q. 11 Whether a Company incorporated in India under the Companies Act, 1956 having its operations in 2 or more countries is to be treated as a MNC/foreign source under FCRA, 2010?

Ans. No. However, as defined under section 2(j)(vi) as a company within the meaning of the Companies Act, 1956 having more than one-half of the nominal value of its share capital held, either singly or in the aggregate, by one or more of the following will be treated as a "foreign source":
(A) The Government of a foreign country or territory;
(B) The citizens of a foreign country or territory;
(C) Corporations incorporated in a foreign country or Territory;
(D) Trusts, societies or other associations of individuals Whether incorporated or not), formed or registered in a foreign Country or territory"

Q. 12 Can foreign contribution be received in rupees?

Ans. Yes. Any amount received from ‘foreign source’ in rupees or foreign currency is construed as ‘foreign contribution’ under law. Such transactions even in rupees term are considered foreign contribution.

Q. 13 Will interest earned from foreign contribution be considered foreign contribution?

Ans. Yes.

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