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THE FOREIGN CONTRIBUTION (REGULATION) ACT,2010

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Title: THE FOREIGN CONTRIBUTION (REGULATION) ACT,2010


1
THE FOREIGN CONTRIBUTION (REGULATION) ACT,2010
2
THE FOREIGN CONTRIBUTION (REGULATION) ACT,2010
  • FCRA 2010 was passed by both the houses of
    parliament received the assent of President on
    26th September,2010.
  • It became law from 1st May 2011 vide S.O 909(E)
    Dated 29th April 2011.

3
Scope of fcra
  • Extends to whole of India,
  • Every citizen of India outside India
  • Associate branches or subsidiaries outside
    India
  • Person

4
Applicability of FCRA
  • An individual
  • HUF
  • An association
  • Company registered u/s 8 of Companies Act 2013

5
Important Definitions
  • Foreign Contribution(defined below)
  • Foreign company(defined below)
  • Foreign Source(defined below)
  • Legislature
  • Political party

6
Foreign contribution
  • Donation, delivery or transfer made by foreign
    source (either directly or through one or more
    persons)
  • a. Any article
  • b. Any currency whether Indian or
    foreign
  • c. Any security including foreign
    security

7
Foreign Company
  • Foreign company as defined as per sec 2(1) (g)
    of FCRA 2010, means any company or association or
    body of Individual incorporated outside India and
    includes
  • A foreign company within the meaning of sec 379
    of companies Act 2013.
  • A company which is a subsidiary of a foreign
    company

8
Foreign Source
  • The term foreign sources is given only an
    inclusive definition in FCRA
  • Foreign source includes-
  • Foreign company
  • Citizen of foreign country
  • Government of foreign country
  • Any international agency of foreign Government
  • A trade union in any foreign country
  • Foreign Trust or Foreign Foundation
  • Society, Club, Association of Individuals formed
    outside India.
  • A foreign source includes an Indian company if
    more than 50 of its share
  • capital is held by persons covered under foreign
    source
  •  

9
The Scope of Foreign Contribution Redefined
  • Under Section 2(h) FC means transfer, delivery or
    donation of any currency, article or security.
  • Except Fees or commercial receipt.
  • Includes interest or any other income from FC
    funds for assets

10
Business/Consultancy Income of an NGO
  • Under FCRA1976, the definition of foreign
    contribution included all kinds of foreign
    receipts. It does not distinguish between a
    commercial receipt or a voluntary contribution.
  • FCRA 2010 excludes income from business, trade or
    commerce from the ambit of foreign contribution.
  • This clause is in conflict with section 2(15) of
    the Income Tax Act.

11
Who can receive Foreign Contribution
  • A person as defined Under FCRA 2010 having a
    definite cultural, economic, educational,
    religious or social programme can receive FC
    after gets itself registered with central
    government or obtain prior permission.

12

Transactions Excluded from
foreign contribution
  • Movement of foreign funds in normal course of
    commerce and business is outside the purview of
    FCRA 2010
  • Contribution by Indian citizen
  • Fee paid by foreign delegates attending a
    conference / seminar
  • Any article gifted to a person for his personal
    use whose value does not exceed Rs. 25,000.

13

Persons
debarred from receiving Foreign Contribution
  • Candidate for election
  • Correspondent, cartoonist, editor, columnist,
    printer or publisher of registered news paper
  • Judge, government servant or employee of any
    corporation
  • Member of any legislature
  • Panchayat (has been included in the definition of
    legislature under FCRA 2010)
  • Political party or office bearer thereof
  • Organization of political nature
  • Association or company engaged in broadcasting of
    audio or visual news

14
Debarred persons can receive followings as
referred in sec 4 of FCRA 2010
  • Salaries or wages received from foreign source
  • Receipt towards business transaction with foreign
    entities
  • Gift from relatives
  • Stipend and scholarship
  • Remittance under normal course under FEMA 1999

15
CAN AN ORGANISATION OF POLITICAL NATURE RECEIVE
FOREIGN CONTRIBUTION
  • Political nature organizations are not eligible
    for registration under FCRA. Such organizations
    can not apply even for prior permission as was
    allowed earlier. Therefore, such organisations
    are not eligible for receiving Foreign
    Contributions

16
Declaration of an organization to be of a
Political nature
  • Having avowed political objectives
  • Any Trade Union with political goals
  • Any voluntary action group with political
    objectives
  • Students Unions, Workers Unions, Youth Forums
    and Womens wing of a political party
  • Farmers, workers, students, youth based on caste,
    community, religion, language with political
    objective
  • Habitually engages in bandh or hartal, rasta
    roko, rail roko or jail bharo in support of
    public causes

17
Procedure to notify an Organization to be of
Political nature
  • The Central Government may notify an organization
    as of political nature not being a political
    party.
  • An opportunity in writing shall be provided
  • The organization may respond within a period of
    thirty days from the date of the notice
  • Every order shall be made within a period of one
    hundred and twenty days from the date of issue of
    notice.

18
Order declaring an organisation of political
nature to be laid before parliament
  • An order notifying an organisation as political
    nature become effective after it is laid before
    both houses of Parliament

19
Panchayat defined
  • Panchayat have been defined as a legislature

20
Community radio and fcra
  • Community Radio is generally used to broadcast
    programmes on developmental, agricultural,
    health, educational, social welfare, community
    development and cultural issues
  • In case,it is used for broadcast of news, then
    the FCRA permission is needed

21
Restriction on Speculative Business Speculative
Activity
  • Section 8 of FCRA 2010 provides that FC funds
    cannot be used for speculative business.
  • Rule 4 prohibits investment in speculative
    activities.

22
Power To Prohibit Sources From Which FC Can Be
Accepted
  • The Act provides power to notify such source(s)
    from which foreign contribution shall be accepted
    with prior permission only. It implies that the
    Central Govt. may notify specific donors or
    countries from which foreign funds could not be
    received or shall be received with prior
    permission only.

23
Foreigners on Board
  • Foreigners on Board through prior permission only
    under the following
  • Category.
  • Foreigner is married to Indian Citizen
  • Has been working in India for last 5 years
  • Has specialized knowledge in health in medical
    and health related fields.
  • Foreigner is the ex officio in terms of an
    inter-government agreement
  • Foreigner is an ex officio from a multilateral
    body which is exempted from the definition of
    foreign source.

24
Conditions for Registration or Prior permission
  • Person should not be benami
  • Not likely to use FC for personal gains
  • Not found guilty for diversion / misutilization
    of funds
  • Not prosecuted or convicted for any offence
  • Not likely to advocate sedition / violent methods
  • Not violated FCRA earlier
  • Reasonable project for prior permission

25
Application for Registration
  • Application for Registration is required to be
    made U/s 11 of FCRA 2010
  • All new registration have to be made in form FC
    -3
  • Application to be made online for registration
    along with a fee of Rs. 2000 /- (for prior
    permission along with a fee of Rs.1000/-)
  • All application should be made electronically
    followed by hard copies within 30days of the
    electronic submission otherwise the application
    will become void.

26
Time limit for processing an application for
registration
  • Application has to be processed within 90 days .
    FCRA department shall also provide reasons for
    rejections.
  • Time limit for submitting reapplication
  • If an application filed is invalidated then the
    person shall be eligible to reapply only after 6
    months from the date of cessation of the previous
    application.

27
Documents to be submitted with application for
registration
  • Hard copy of the online application
  • Certified copy of registration certificate
  • Details of activities during last three years
  • Copy of audited financial statement for last
    three years

28
Eligibility criteria for prior permission
  • Be registered as society / trust/ company
  • Submit commitment letter from the Donor
  • Submit Copy of reasonable project for which
    foreign contribution is proposed to be utilized

29
Application for Prior permission
  • Application for Registration is required to be
    made U/s 11 of FCRA 2010
  • All new prior permission registration has to be
    made in form FC -4
  • All application should be made electronically
    followed by hard copies within 30days of the
    electronical submission otherwise the application
    will become void.

30
Application for Prior permission
  • Application to be made online for prior
    permission along with a fee of Rs. 1,000/-

31
Time limit for processing an application for
registration
  • Application has to be processed within 90 days.
    FCRA department shall also provide reasons for
    rejections.
  • Time limit for submitting reapplication
  • If an application filed is invalidated then the
    person shall be eligible to reapply only after 6
    months from the date of cessation of the previous
    application

32
  • No Deemed approval
  • There is no provision which allows deemed
    approval in case of prior permission under FCRA
    2010.
  • Utilization for specific purpose
  • The FC fund received through prior permission
    should be utilized only for the purpose for which
    the prior permission has been granted

33
Documents to be submitted with application for
Prior Permission
  • Hard copy of the online application
  • Certified copy of registration certificate
  • Commitment letter from foreign donor specifying
    the amount of foreign contribution
  • Copy of project report for which foreign
    contribution is being offered.

34
Power to Prohibit Sources from Which FC Can Be
Accepted
  • The Act provides power to notify such source(s)
    from which foreign contribution shall be accepted
    with prior permission only. It implies that the
    Central Govt. may notify specific donors or
    countries from which foreign funds could not be
    received or shall be received with prior
    permission only

35
Power to Manage FC after Cancellation of
Certificate
  • After cancellation of registration certificate
    all the foreign contribution and assets thereof
    shall vest with such authority as may be
    prescribed.
  • The government authorities may take charge of the
    foreign contribution and the FC assets till the
    registration is restored.

36
Foreign Gifts
  • Gift from Relatives exempted still to be reported
    in FC-1 excess of Rs. 1 lakh.
  • Earlier FC up to Rs. 1,000 was exempted now there
    is no such lower limit

37
Bank Account
  • A person applying for prior permission or
    registration shall open an exclusive an FC bank
    account to receive the foreign contribution.
  • Multiple bank accounts can be opened for
    utilization purpose only.
  • The applicant may use local funds (minimum amount
    required to open and maintain a bank account) for
    opening of the exclusive FC bank account.
  • Inter account transfer of funds between multiple
    account is not permissible

38
Report by Bank in case of receipt over Rs 1 crore
  • The bank should report FCRA department if foreign
    contribution is received in excess of Rs 1 Crore
    during a period of 30 days.
  • If any foreign contribution is received without
    registration or prior registration.

39
Books of Account
  • Maintain separate books of Accounts
  • Separate books of accounts and records shall be
    maintained by every person who has been granted
    registration or prior registration exclusively
    for foreign contribution received and utilized.
  • Display of Financial Information if receipts
    exceeds Rs1 crore
  • It is necessary to place the summary data on
    receipts and utilization of the FC in public
    domain if the FC receipt is in excess of Rs 1
    Crore in financial year

40
Renewal of Registration
  • FCRA 2010 provides for renewal of registration of
    NGOs in every 5 years
  • All existing registered NGOS have to renew their
    registration at the end of the period of 5 years
    from the date of enactment of FCRA 2010
  • NGOs have to apply in form FC-5 six month
    before the due date
  • An NGO fails to apply for renewal within the due
    date, its registration shall become invalid.

41
Suspension of Registration Certificate
  • Section 13 of FCRA act allows the power to
    suspend the registration for a period up to 180
    days.
  • During suspension the organization cannot receive
    any foreign funds without prior approval
  • The organization can utilize the existing foreign
    funds to the extent of 25 with the prior
    approval from FCRA department
  • Central government shall provide reasons in
    writing to the organization whose certificate is
    suspended. .
  • FCRA 2010 does not provide any opportunity of
    being heard before affecting the suspension
    order.

42
  • Cancellation of Registration
    Certificate
  • Central Government may cancel the
    registration certificate for various
  • reasons.
  • No certificate shall be cancelled unless
    reasonable opportunity of being
  • heard is provided.
  • Reapplication for registration after
    cancellation
  • Once a registration certificate is
    cancelled, such person shall not be
  • eligible for registration or prior
    permission for next three years from the
  • date of cancellation.

43
Reasons for cancellation are
  • Violating the Act or rules
  • Providing false information
  • Acting against public interest
  • Violating the terms and condition
  • No reasonable activity for two years

44
Transfer of FC fund to registered organization
  • Transfer of funds to another registered
    organization can be made without taking prior
    approval.
  • Such transfer is subject to the condition that
    such organisation has not been proceeded against
    under any provisions of the Act.
  • The recipient organization shall reflect it on FC
    -6 return.
  • Both the transferor and recipient shall be
    responsible for ensuring proper utilization of FC
    fund and such transfer shall be reflected in form
    FC -6 by both.

45
Transfer of FC fund to Un registered organization
  • FCRA 2010 permissible to transfer of funds to
    other UN registered organization which does not
    have any registration/permission under the Act.
  • Such transfer can be made only with prior
    permission in compliance of section 7 and rule
    24.
  • Total amount of transfer to unregistered
    organization shall not exceed 10 of the total FC
    receipt.
  • Rule provides that an organization may apply in
    Form 10 for transfer of FC fund to unregistered
    organization. Such transfer could be made to
    multiple recipient through one prior approval.

46
Methods of Accounting
  • FCRA 2010 and the rules thereof do not specify
    any method of Accounting.
  • Any method of accounting may be followed but
    the receipt of FC fund should be reported on Cash
    basis only
  • The new requirement of filing Income
    Expenditure account shown that accrual basis of
    accounting is also permissible

47
Preservation of Accounting Records
  • Rule 17 ( 7) provides that accounting statement
    shall be preserved for 6 years

48
Filing of Return
  • Rule 17 provide that the Annual return
    accompanied by Income Expenditure, Receipt
    Payment A/c and Balance sheet shall be Submitted
    by 31st Dec of the following year.
  • Return shall be filed in Form FC-6
  • Submission of Copy of bank statement certified by
    the Bank
  • Nil return is required to be filed even if there
    are no Transactions/ Activities.
  • All NGOs are required to file FC-7 if they
    receive Foreign contribution in Kind

49
Audit of Accounts
  • Central govt. has a power to audit any premise at
    any reasonable time for the purpose of auditing
    the prescribed books of accounts.
  • A Gazetted officer or an officer holding Group A
    post can undertake the audit under central Govt

50
Change of more than 50 of Board Members
  • Any change in the board members in excess of 50
    shall be made with prior permission.
  • There may be change of more than 50 in the board
    for reasons such as death or election by voting.
    In such Cases the organization should inform
    Central Government and get retrospective
    approval.
  • Those organizations who had not taken permission
    even after such change has occurred should apply
    for permission and condonation.
  • The FCRA law shall apply to the board members
    which were mentioned at the time of making
    application.

51
Administrative Expenses
  • Administrative Expenditure should not exceed 50
    of the total utilization of FC fund received in
    that year. If it exceeds more than 50, then the
    approval of the FCRA Department is required

52
Administrative expenses includes
  • Salaries, wages, travel of Board / Trustees.
  • Expenses towards hiring and travel of personnel
    for management of the activities
  • Consumables
  • cost of accounting for and administering funds
  • expenses towards running and maintenance of
    vehicles
  • cost of writing and filing reports
  • legal and professional charges and
  • rent repair of premises and other utilities
  • However it excludes expenditure directly towards
    activity

53
Investment on FC fund
  • Surplus FC fund may be placed in Fixed deposit
    with the bank
  • All the investments are in compliance with the
    section 11(5) of IT act
  • Investment in Speculative Activities are not
    permissible

54
Interest earned on Investment
  • The interest earned on FC investment is
    considered as FC receipt.
  • Interest earned should be reported as FC receipt
    as subsequent recipient in the FC-6 form

55
  • Creation of Fixed Assets
  • Any asset purchased out of FC fund should be
    recorded as FC asset
  • FC asset will continue to remain an FC asset
    irrespective of time factor or closure of the
    project
  • Sale of fixed assets
  • Sale proceed of FC asset should be shown as
    foreign receipt
  • The sale proceed of FC asset should be deposited
    in designated bank account

56
Income from FC Asset
  • All income generated from all FC assets should be
    consider as a part of
  • FC contribution and should be reflected in FC -6
    as subsequent
  • recipient. Some examples income from FC assets
    are
  • Income from FC projects
  • Income from FC vehicles
  • Income from FC machine Equipments (Photo copier
    machine, projector, Laptop etc.)
  • Income from building , Training centers

57
Custody and Management of FC Asset in case of
cancellation of Registration
  • The central government determines the manner in
    which the asset shall be disposed off.
  • Central Government reserve the right to utilize
    the fund during the cancellation period.
  • Central Government shall return all the assets
    and fund if the FC registration is restored.

58
Disposal of assets
  • Any person , permitted for acceptance of foreign
    contribution under this act , ceases to exist or
    has become defunct , all the assets of above said
    person will be disposed off in accordance of
    relevant provisions of act .
  • Central government in the absence of applicable
    act will act with regard to the nature of assets
    created out of foreign contribution .

59
  • SECTION 3
  • OFFENCE PENALTIES FORMS

60
  • If Foreign contribution is not available for
    confiscation then central Government may impose
    on such person a fine not exceeding 5 times of
    the value of Foreign contribution or 1000 Rs
    whichever is more. (Sec 36)
  • Where no separate punishment is provided then
    person shall be punished with imprisonment, may
    extend to 1 year or fine or both. ( Sec 37)

61
Compounding of offences
  • Any offence not being an offence punishable with
    imprisonment only be compounded .
  • Once an offence is compounded the same person
    cannot avail the benefit of compounding if such
    offence is committed again within three years.

62
Inspection and Seizure
  • Central government may inspect any account or
    report maintained by any person covered in act
  • Seize such account or record if there is
    reasonable cause to believe with the violation of
    any of provision of act
  • Should return the seized accounts with in the
    maximum period of 6 months if there is no
    proceedings are initiated

63
Miscellaneous
  • Power to call for information or documents
  • Investigation powers are same as that of an
    officer in-charge at police station
  • CBI or any other agency investigating cases under
    the act to furnish quarterly return on progress
    on all cases.
  • No suit / other legal proceeding against any of
    the govt. agencies or their officers for acting
    in good faith in the pursuance of act.
  • Certain administrative powers to make rules

64
Contd..
  • Procedure for laying of rules in parliament.
  • Power to exempt organizations from of all or any
    provision of this act .
  • Not to apply to transactions between Government
    of India foreign governments.
  • Not to apply Government Bodies.

65
Contd..
  • Certain administrative powers to make rules.
  • Procedure for laying of rules in parliament.
  • Power to exempt organizations from of all or any
    provision of this act .
  • Not to apply to transactions between Government
    of India foreign governments.

66
FORMs to be filed
FORM FC-1 Intimation of central Government of Receipt of foreign contribution by way of gift from relative.
FORMFC-2 Application for seeking prior Permission of the Central Government to accept foreign hospitality.
FORM FC-3 Application for registration for the acceptance of foreign Contribution.
FORMFC-4 Application for prior Permission for acceptance of foreign contribution.
FORM FC-5 Application for seeking renewal of registration Certificate.
FORM FC-6 Account of Foreign Contribution for the Year.
67
FORM FC-7 Intimation about Foreign Contribution ( Articles ) account
FORM FC-8 Intimation about foreign Contribution ( Securities) account
FORMFC-9 Intimation to Central Govt of receipt of foreign contribution received by a candidate for election
FORM FC-10 Application for seeking permission for transfer of foreign contribution to other registered / unregistered persons.
68
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