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FAQ on FCRA 2010

Foreign Contribution Regulation Rule 2011

Q. 1 What is foreign contribution?

Ans. Foreign contribution has been defined in Section 2(1)(h) of FCRA, 2010. However, foreign contribution excludesearnings from foreign client(s) by an association in lieu ofgoods sold or services rendered by it as this is a

transaction of commercial nature.Q. 2 Section 2(c)(i) of repealed FCRA, 1976 interalia defined foreign contribution as the donation,delivery or transfer made by any foreign source ofany article, not given to a person as a gift forpersonal use, if the market value, in India, of sucharticle exceeds one thousand rupees. What limithas been prescribed in FCRA, 2000 in respect ofsuch article?

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Ans. Till any limit is fixed in the Rules, foreign contributionhas to be understood without any limit.

Q. 3 What is a foreign source?

Ans. Foreign source, as defined in Section 2(1) (j) of FCRA,2010 includes:-

(i) the Government of any foreign country or territory andany agency of such Government;

(ii) any international agency, not being the United Nationsor any

of its specialized agencies, the World Bank, InternationalMonetary Fund or such other agency as the CentralGovernment may, by notification, specify in this behalf;

(iii) a foreign company;

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

(v) a multi-national corporation referred to in sub-clause(iv) of clause (g);

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(vi) a company within the meaning of the Companies Act,1956, and more than one-half of the nominal value of itsshare capital is held, either singly or in the aggregate, byone 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 orterritory;

(D) trusts, societies or other associations of individuals(whether incorporated or not), formed or registered in a

foreign country or territory;

(E) Foreign company;

(vii) a trade union in any foreign country or territory,whether or not registered in such foreign country orterritory;

(viii) a foreign trust or a foreign foundation, by whatevername called, or such trust or foundation mainly financedby a foreign or territory;

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(ix) a society, club or other association or individualsformed or registered outside India;

(x) a citizen of a foreign country;

List of agencies of the United Nations, World Bank andsome other International agencies/multilateralorganisations, which are exempted from the definition offoreign source, are available on the websitehttp://mha.nic.in/fcra/intro/FCRA-exemptedAgenciesUN.pdf

Q. 4 Whether donation given by Non-ResidentIndians (NRIs) is treated as foreign contribution?

Ans. Contributions made by a citizen of India living inanother country (i.e. Non-Resident Indian), from hispersonal savings, through the normal banking channels, isnot treated as foreign contribution. However, whileaccepting any donations from such NRI, it is advisable toobtain his passport details to ascertain that he/she is anIndian passport holder.

Q. 5 Whether a Company incorporated in Indiaunder the Companies Act, 1956 having its

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operations in 2 or more countries is to be treated asan MNC under FCRA, 2010?

Ans. No. However, the definition of foreign source undersection 2(j)(vi) may be seen as explained above as answerto Question 3.

Q. 6 Whether foreigners can be appointed asExecutive Committee members?

Ans. Organisations having foreign nationals as members oftheir executive committees or governing bodies aregenerally not permitted to receive foreign contribution.

However, foreign nationals, fulfilling the followingconditions, may be appointed as Executive Committeemembers, after obtaining prior permission of the CentralGovernment:

(i) the foreigner is married to an Indian citizen;

(ii) the foreigner has been living and working in India for atleast five years;

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(iii) the foreigner has made available his/her specializedknowledge, especially in the medical and health relatedfields on a voluntary basis in India, in the past;

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

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

Q. 7 Whether Government servants, Judges andemployees of a Government owned/controlledcompany/body can be on the executivecommittees/boards of an association?

Ans. Yes. The legal entity of a person under FCRA, 2010is distinct from am individual person. Therefore,individuals who cannot receive foreign contribution may

happen to be on the executive committees/boards of suchan association.

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Q. 8 Who can receive foreign contribution?

Your browser may not support display of this image. Ans.A person, as defined in Section 2(1)(m) with theexclusion of those mentioned in Section 3 of FCRA, 2010,having a definite cultural, economic, educational, religiousor social programme can receive foreign contribution afterit obtains the prior permission of the Central Government,or gets itself registered with the Central Government.Illustrative but not exhaustive lists of activities which arepermissible and may be carried out by associations ofdifferent nature are available on the websitehttp://mha.nic.in/fcra/intro/permitted_programs.htm It may

also be noted that as per Explanation 3 of section 2(h) ofFCRA, 2010, the following is not covered in the definitionof foreign contribution:

Any amount received, by any person from any foreignsource in India, by way of fee (including fees charged byan educational institution in India from foreign student) ortowards the cost in lieu of goods or services rendered bysuch person in the ordinary course of his business, trade

or commerce whether within India or outside India or anycontribution received from an agent of a foreign source

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towards such fee or cost shall be excluded from thedefinition of foreign contribution within the meaning ofthis clause.

Q. 9 Who cannot receive foreign contribution?

Ans. As defined in Section 3(1) of FCRA, 2010, foreigncontribution cannot be accepted by any :

(a) a candidate for election;

(b) correspondent, columnist, cartoonist, editor, owner,printer or publisher of a registered newspaper;

(c) Judge, government servant or employee of anyCorporation or any other body controlled on owned by theGovernment;

(d) member of any legislature;

(e) political party or office bearer thereof;

(f) organization of a political nature as may be specified

under sub- section (1) of Section 5 by the CentralGovernment.

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(g) association or company engaged in the production orbroadcast of audio news or audio visuals or current affairsprogrammes through any electronic mode, or any otherelectronic 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;

(h) correspondent or communist, cartoonist, editor, ownerof the association or company referred to in clause (g).

Explanation In clause (c) and section 6, the expressioncorporation

means a corporation owned or controlled by theGovernment and includes a

Government company as defined in section 617 of theCompanies Act, 1956. (i) Individuals or associations whohave been prohibited from receiving foreign contribution.

Q. 10 Whether foreign remittances received from arelative are to be treated as foreign contribution asper FCRA, 2010?

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Ans. The position in this regard as given in Section 4(e) ofFCRA, 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 theacceptance, by any person specified in that section, of anyforeign contribution where such contribution is acceptedby him from his relative. However, in terms of Rule 6 ofFCRR, 2011, any person receiving foreign contribution inexcess of one lakh rupees or equivalent thereto in afinancial year from any of his relatives shall inform theCentral Government in Form FC-1 within thirty days fromthe date of receipt of such contribution. Available on the

website http://mha.nic.in/fcra/forms/fc-1.pdf

Q. 11 Can foreign contribution be received in andutilised from multiple Bank Accounts?

Ans. All foreign contribution should be received in thesame single Bank Account mentioned in the order forregistration or prior permission granted by MHA. Thisaccount number would be the same as has been intimated

by the organisation in their application forregistration/prior permission. One or more accounts in oneor more scheduled banks may be opened for utilizing the

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foreign contribution provided that no funds other thanforeign contribution shall be received or deposited in suchaccount or accounts. Section 17 of the FCRA, 2010 mayplease be referred.

Q. 12 Can foreign contribution be mixed with localreceipts?

Ans. No. Foreign contribution can not be deposited orutilised from the bank account being used for domesticfunds.

Q. 13 Can foreign contribution be received in

rupees?

Ans. Yes. Any amount received from foreign source inrupees or foreign currency is construed as foreigncontribution under law. Such transactions even in rupeesterm are considered foreign contribution.

Q. 14 Will interest earned from foreign contributionbe considered foreign contribution?

Ans. Yes.

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Q. 15 What is the procedure for change ofdesignated Bank Account?

Ans. For change of the bank account, an application inprescribed form mentioning the details of the old bankaccount and the proposed new bank account alongwith

justification for change of designated bank, name/ addressof the society, copy of registration under FCRA, copy offresh resolution of the executive committee ( in English orHindi) for change of designated back account, certificatefrom the proposed bank (copy of Bank Pass Book is notacceptable) that the account is being opened exclusivelyfor FCRA, may be submitted to MHA. This form is available

on websitehttp://mha.nic.in/fcra/forms/chng_name_addr.pdf

Q. 16 What are the eligibility criteria forregistration?

Ans. For grant of registration, the association should:

(i) be registered under the Societies Registration Act, 1860

or the Indian Trusts Act, 1882 or section 25 of theCompanies Act, 1956; (ii) normally be in existence for atleast three years and has undertaken

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tension or disharmony in any specified district or anyother part of the country;

(4) has not been found guilty of diversion or mis-utilisationof its funds;

(5) is not engaged or likely to engage in propagation ofsedition or advocate violent methods to achieve its ends;

(6) is not likely to use the foreign contribution for personalgains or divert it for undesirable purposes;

(7) has not contravened any of the provisions of this Act;

(8) has not been prohibited from accepting foreigncontribution; (9) the person and/or any of its directors oroffice bearers has neither been convicted under any lawfor the time being in force nor any prosecution for anyoffence is pending against him.

(iv) the acceptance of foreign contribution by theassociation/ person is not likely to affect prejudicially

(1) the sovereignty and integrity of India; or

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(2) the security, strategic, scientific or economic interestof the State; or

(3) the public interest; or

(4) freedom or fairness of election to any Legislature; or

(5) friendly relation with any foreign State; or

(6) harmony between religious, racial, social, linguistic,regional groups, castes or communities.

(v) the acceptance of foreign contribution-

(1) shall not lead to incitement of an offence;

(2) shall not endanger the life or physical safety of anyperson.

Q. 17 What are the eligibility criteria for grant ofprior permission?

Ans. An organisation in formative stage is not eligible for

registration. Such organisation may apply for grant of priorpermission under the law.

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Prior permission is granted for receipt of specific amountfrom specific donor for carrying out specificactivities/projects. For this purpose, the associationshould:

(i) be registered under the Societies Registration Act, 1860or the Indian Trusts Act, 1882 or section 25 of theCompanies Act, 1956; (ii) submit a specific commitmentletter from the donor; and

(iii) submit copy of a reasonable project for the benefit ofthe society for which the foreign contribution is proposedto be utilised.

(iv) should meet all the conditions for the grant ofregistration.

Q. 18 Is recommendation of District Collector orDistrict Commissioner or District Magistratemandatory?

Ans. No. Submission of verification certificate from the

District Collector or District Commissioner or DistrictMagistrate is not mandatory. However, in certain cases, ifthe amount applied for prior permission is less than Rs.50

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lakh, submission of such a certificate assists in speedyclearance of the application.

Q. 19 If an application for registration or priorpermission is submitted online by an association,does it need to submit that application in physicalform also?

Ans. Yes. When an application is filed online, a printout ofthe same may be taken after submission and thereafter, itshould be submitted, duly signed, alongwith the requisitedocuments to the Ministry of Home Affairs. The prescribedforms for submission of application for grant of

Registration and Prior Permission are FC-3 and FC-4respectively. Available at MHA websitehttp://mha.nic.in/fcra/forms/fc-3.pdf andhttp://mha.nic.in/fcra/forms/fc-4.pdf respectively.

Q. 20 What are the documents to be enclosed withthe application?

Ans. (a) Following documents should be enclosed with the

application for grant of Registration:

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(i) Hard-copy of the online application, duly signed by theChief Functionary of the association;

(ii) Certified copy of registration certificate or Trust deed,as the case may be;

(iii) Details of activities during the last three years;

(iv) Copies of audited statement of accounts for the pastthree years (Asset and Liabilities, Receipt and Payment,Income and Expenditure);

(v) If functioning as editor, owner, printer or publisher of a

publication registered under the Press and Registration ofBooks Act, 1867, a certificate from the Registrar ofNewspaper for India that the publication is not anewspaper in terms of section

1(1) of the said Act.

(vi) Fee of by means of demand draft or bankers chequeof Rs. 2000/- in favour of the Pay and Accounts Officer,Ministry of Home Affairs, payable at New Delhi.

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(b) Following documents should be enclosed with theapplication for grant of Prior Permission:

(i) Hard-copy of the online application, duly signed by theChief Functionary of the association;

(ii) Certified copy of registration certificate or Trust deed,as the case may be;

(iii) Commitment letter from foreign donor specifying theamount of foreign contribution;

(iv) Copy of the project report for which foreign

contribution is solicited/being offered;

(v) If functioning as editor, owner, printer or publisher of apublication registered under the Press and Registration ofBooks Act, 1867, a certificate from the Registrar ofNewspaper for India that the publication is not anewspaper in terms of section

1(1) of the said Act.

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(vi) Fee of by means of demand draft or bankers chequeof Rs. 1000/- in favour of the Pay and Accounts Officer,Ministry of Home Affairs, payable at New Delhi.

Note: The hard copy of the on-line application along withall the documents mentioned above must reach theMinistry of Home Affairs, Foreigners Division (FCRA Wing)within thirty days of the submission of the on- lineapplication, failing which the request of the person forgrant of registration or prior permission, as the case maybe, shall be deemed to have ceased.

Q. 21 How to find the status of pending application

for registration/prior permission. ?

Ans. Status of pending applications for grant ofregistration or prior permission may be checked on-linefrom the Ministry of Home Affairs website http://mha.nic.in/fcra.htm. One needs to fill in the numberson acknowledgement letter or any correspondence fromMHA (Foreigners Division) in the blank format which popsup on the screen after selection of status enquiry icon

(registration/prior permission, as the case may be)

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Q. 22 Is there any restrictions on transfer of fundsto other organisations? Ans. Yes. Section 7 of FCRA,2010 states:-

No person who

(a) is registered and granted a certificate or has obtainedprior permission under this Act; and

(b) receives any foreign contribution,

shall transfer such foreign contribution to any otherperson unless such other person is also registered and had

been granted the certificate or obtained the priorpermission under this Act:

Provided that such person may transfer, with the priorapproval of the Central Government, a part of such foreigncontribution to any other person who has not beengranted a certificate or obtained permission under this Actin accordance with the rules made by the CentralGovernment.

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It may further be noted that Rule 24 of FCRR, 2011prescribes the procedure for transferring foreigncontribution as under:

Rule 24:- Procedure for transferring foreign contributionto other registered or unregistered persons:-

(1) Any person intending to transfer the foreigncontribution may make an application to the CentralGovernment in Form FC-10. http://mha.nic.in/fcra/forms/fc-10.pdf

(2) The Central Government may permit the transfer in

respect of a

person who has been granted the certificate ofregistration or prior permission under section 11 of theAct, in case the recipient person has not been proceededagainst under any provision of the Act.

(3) Any transfer of foreign contribution shall be reflected inthe returns in Form FC-6 http://mha.nic.in/fcra/forms/fc-

6.pdf as well as in Form FC-10http://mha.nic.in/fcra/forms/fc-4.pdf by the transferorand the recipient.

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(4) In case the foreign contribution is proposed to betransferred to a person who has not been granted acertificate of registration or prior permission by theCentral Government, the person concerned may apply forpermission to the Central Government to transfer a part ofthe foreign contribution, not exceeding ten per cent, of thetotal Page 9 of 13

value of the foreign contribution received. The applicationshall be countersigned by the District Magistrate having

jurisdiction in the place where the transferred funds aresought to be utilized. The District Magistrate concernedshall take an appropriate decision in the matter within

sixty days of the receipt of such request from the person.The donor shall not transfer any foreign contribution untilthe Central Government has approved the transfer.

Q. 23 How would an organisation that is registeredor has obtained prior permission under FCRA andintends to transfer a part of the foreigncontribution received by it to another organisationregistered under FCRA would know whether the

recipient organisation has been proceeded againstunder FCRA?

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Ans. Where any organisation is proceeded against underFCRA, it is done with due intimation to the organisationconcerned. Therefore, the donor organisation is advised toinsist on a written undertaking from the intendingrecipient organisation.

Q. 24 What is the procedure for filing AnnualReturns?

Ans. An association permitted to accept foreigncontribution is required under law to maintain separate setof accounts and records exclusively for the foreigncontribution received and utilised and submit an annual

return, duly certified by a Chartered Accountant, givingdetails of the receipt and purpose- wise utilisation of theforeign contribution. The return is to be filed for everyfinancial year (1st April to 31st March) within a period ofnine months from the closure of the year i.e. by 31stDecember each year. Submission of a Nil return, even ifthere is no receipt/utilization of foreign contribution duringthe year, is mandatory. The return is to be submitted, inprescribed Form FC 6, duly accompanied with the

balance sheet and statement of receipt and payment,which is certified by a Chartered Accountant. The form is

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available on MHAs web-site http://mha.nic.in/fcra/forms/fc-6.pdf For further details,please refer to Sections 17, 18 and 19 of FCRA, 2010 andRule 17 of FCRR, 2011.

Note: It may be noted that the annual return for thefinancial year 2010 2011 is to be filed by the 31stDecember, 2011 in Form FC-3, i.e., as per FCRA, 1976.

Q. 25 What is foreign hospitality?

Ans. Foreign Hospitality means any offer, not being apurely casual one, made in cash or kind by a foreign

source for providing a person with the costs of travel toany foreign country or territory or with free board, lodging,transport or medical treatment.

Q. 26 Who cannot accept foreign hospitality withoutprior approval of the Ministry of Home Affairs?

Ans. No member of a Legislature or office bearer of apolitical party or Judge or Government servant or

employee of any corporation or any other body owned orcontrolled by the Government shall, while visiting anycountry or territory outside India, accept, except with the

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prior permission of the Central Government any foreignhospitality.

Provided that it shall not be necessary to obtain any suchpermission for an emergent medical aide needed onaccount of sudden illness contracted during a visit outsideIndia, but, where such foreign hospitality has beenreceived, the person receiving such hospitality shall give,within one month from the date of receipt of suchhospitality an intimation to the Central Government as tothe receipt of such hospitality, and the source from which,and the manner in which, such hospitality was received byhim.

Q. 27 How one can seek permission of theGovernment for receiving foreign hospitality?

Ans. Application form (Form FC-2) for this purpose isavailable on MHAs web-site http://mha.nic.in/fcra/forms/fc-2.pdf. In terms of Rule 7 ofFCRR, 2011:

(i) Every application for acceptance of foreign hospitalityshall be accompanied by an invitation letter from the hostor the host country, as the case may be, and

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administrative clearance of the Ministry or departmentconcerned in case of visits sponsored by a Ministry ordepartment of the Government.

(ii) The application for grant of permission to acceptforeign hospitality must reach the appropriate authorityordinarily two weeks before the proposed date of onward

journey.

(iii) In case of emergent medical aid needed on account ofsudden illness during a visit abroad, the acceptance offoreign hospitality shall be required to be intimated to theCentral Government within sixty days of such receipt

giving full details including the source, approximate valuein Indian Rupees, and the purpose for which and themanner in which it was utilized.

Provided that no such intimation is required if the value ofsuch hospitality in emergent medical aid is up to one lakhrupees or equivalent thereto.

Q. 28 What is the procedure for seeking change in

the name/address of the association?

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Ans. For seeking change in the name/address of theassociation, one should use the prescribed form availableon MHAs websitehttp://mha.nic.in/fcra/forms/chng_name_addr.pdfandsubmit the same along with the requisite documentsspecified therein.

Q. 29 Can an organization, whose violation underFCRA has been condoned, apply forregistration/prior permission?

Ans. After the violation committed by an association hasbeen condoned, the association can apply for prior

permission (PP) only by submitting an application in formFC-4 http://mha.nic.in/fcra/forms/fc-4.pdf. Once the PP hasbeen granted and foreign contribution received for specificpurpose has been fully/partially utilized and organisationhas submitted annual FC-6 http://mha.nic.in/fcra/forms/fc-6.pdf returns and accounts in prescribed format pertainingto the PP, it becomes eligible for consideration ofregistration under FCRA. Registration would be grantedunder FCRA, if other parameters are fulfilled by the

association.

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Q. 30 Can NGOs use the foreign contributions forinvestment in Mutual Funds and other speculativeinvestments?

Ans. No. Speculative activities have been defined in Rule 4of FCRR

2011 as under:-

1. (a) any activity or investment that has an element ofrisk of appreciation or depreciation of the originalinvestment, linked to marked forces, including investmentin mutual funds or in shares;

(b) participation in any scheme that promises high returnslike investment in chits or land or similar assets notdirectly linked to the declared aims and objectives of theorganization or association.

(2) A debt-based secure investment shall not be treated asspeculative investment.

(3) Every association shall maintain a separate register ofinvestments.

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(4) Every register of investments maintained under sub-rule (3) shall be submitted for audit.

Q. 31 Whether expenses like interest paid to bank,bank charges, hospitality etc. can be included inadministrative expenses?

Ans. No. The definition of as administrative expenses, asgiven in Rule 5 of FCRR, 2011 is explicit in this regard.

Q. 32 Can capital assets purchased with the help offoreign contributions be acquired in the name ofthe office bearers of the association?

Ans. No. Every asset purchased with foreign contributionshould be acquired and possessed in the name of theassociation since association has a separate legal entitydistinct from its members.

Q. 33 Can an association invest the foreigncontribution received by it in profitable venturesand proceeds can be utilized for welfare activities?

Ans. No. The association should utilize such funds for thewelfare purpose or activities for which it is received. The

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utilization should be in line with the objectives of theassociation. However, foreign contributions can be utilizedfor self-sustaining activities, not meant for commercialpurposes.

Q. 34 Whether interest earned out of foreigncontributions be shown as fresh foreigncontribution receipt during that year or not?

Ans. Yes. The interest earned out of such deposit shouldbe shown as second / subsequent foreign contributionreceipt in the annual return during the year in which it isearned.

Q. 35 Can the fee paid by the foreigndelegates/participants attending/participating in aconference/seminar etc. be termed as foreigncontribution and thus require permission fromFCRA?

Ans. Foreign delegates/participants payingdelegate/participation Fees in foreign currency for

participation in a conference/seminar which is utilized forthe purpose of meeting the expenditure of hosting theconference/seminar and is not treated as foreign

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