the foreign contribution regulation act

8/10/2019 The Foreign Contribution Regulation Act

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The Foreign Contribution Regulation Act, 2010 (FCRA 2010) is an enactment that is relativelyunknown even to practising Chartered Accountants. Besides it is a law where compliance isdifficult to monitor and implementation presents practical difficulties. The result is that thelaw is often practised in breach.

It was felt that the earlier Act of 1976 (FCRA 1976) required a complete overhaul as it hadfailed to keep pace with the changing face of Indias economic growth. In fact there was alobby that felt that the law had outlived its utility and needed to be scrapped. Particularly


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after the introduction of the Prevention of Money Laundering Act, 2002, it was felt that FCRAdid not serve any meaningful purpose.

In this article we will discuss the basic provisions of FCRA 2010 with particular focus on thechanges brought about vis--vis FCRA 1976. It may however, be noted that the Act has notyet received assent of the President and will come into force only thereafter, on such date as

is notified in the Official Gazette by the Central Government.The basic purpose of FCRA 2010 as mentioned in the preamble to the Act is to consolidatethe law to regulate the acceptance and utilisation of foreign contribution or foreign hospitalityby certain individuals or associations or companies and to prohibit acceptance and utilisationof foreign contribution or foreign hospitality for any activities detrimental to the nationalinterest and for matters connected therewith or incidental thereto.

It is generally believed that both these Acts cover only the Non-Profit Organisations (NPOs)and not others. It is true that organisations having a definite cultural, economic, educational,religious or social programme are specifically covered. However, it also covers persons insensitive government positions, political parties and persons associated with the news media.

After all, the avowed purpose of the Act is to regulate and prohibit acceptance and utilisationof foreign contribution for any activities detrimental to national interest. As such theprovisions of FCRA 2010 can be broadly classified in the following three categories and wewill discuss each of them separately :

(1) Prohibition on certain persons from accepting foreign contribution.

(2) Restriction on certain persons from accepting foreign hospitality.

(3) Regulating the acceptance of foreign contribution by persons having a definite cultural,economic, educational, religious or social programme. NPOs are covered under this category.

Before we discuss the above, it is essential to understand two most important terms used inboth the Acts.

Foreign contribution :

Foreign contribution is defined to mean any donation, delivery or transfer made by a foreignsource of any article, currency (whether Indian or foreign) or any security. It will beappreciated that the definition is very wide both in terms of coverage and the mode oftransfer of the assets covered. It brings within its ambit not only money, but practically anyasset transferred from a foreign source. It covers all modes of receipt of foreign contribution,be it transfer, gift or delivery in any manner. Even advance or loan received from a foreignsource would be treated as foreign contribution.

The definition is also broad enough to cover any indirect receipt from a foreign source. Evenif the money or article is routed through several intermediaries, it will not be cleansed ofbeing treated as foreign source if the original source is foreign.

The only exception is with regard to gifts received for personal use, and that too only if the

market value of the article gifted is not more than such sum as may be specified in the rulesto be framed by the Central Government. Under FCRA 1976, the monetary limit was set inthe Act itself at Rs.1,000 which was found grossly inadequate, as it had failed to keep pacewith inflation and the consequent depreciation in the value of money. Hopefully, the rules willnot only set a more realistic limit (say Rs.50,000), but will also periodically revise the same.

The definition of foreign contribution created all kinds of practical difficulties and FCRA 2010has sought to address some of them. An explanation is inserted to the definition of foreigncontribution to provide that any amount received by any person from a foreign source by wayof fee (including fees charged from foreign students) or towards cost in lieu of goods sold orservices rendered by such person in the ordinary course of business, trade or commerce,whether within or outside India, shall not be treated as foreign contribution. As such feespaid by a foreign student for enrolment to an Indian educational institution or fees for

enrolment to any seminar or workshop will not be treated as foreign contribution.


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Though this seems to be a well-intentioned change, it leaves several problems unattended.Only the cost in lieu of goods sold and services rendered is excluded from the definition offoreign contribution. What if the goods are sold or services rendered by adding a nominalmargin ? In any case how would one determine the exact cost, would it include overheads ornot ? Even if the NPO has no intention of making profits, it might realise some surplus, as itwould price its product or service based on certain costing assumptions. It would be

impossible to arrange the affairs in such a manner that sale proceeds exactly match the cost.If the NPO has recovered even one rupee above the cost, would it lose the benefit of theexplanation ? Clearly, restricting the explanation only to the cost will be practicallyunworkable and self-defeating.

Another interesting example is that of a temple trust offering the facility of online Aarti at acharge. If the payment is from a person who is not a citizen of India, then it would be treatedas foreign contribution and would not qualify for exemption as the payment cannot strictly betreated as fees, nor can it be said to be for services in the ordinary course of trade,commerce or business.

Further, the term goods or services rendered in the ordinary course of business, trade orcommerce seems too restrictive and will hopefully be liberally interpreted to also cover goods

sold or services rendered by the NPO in the course of carrying out its charitable activities.

Foreign source :

To understand the meaning of the term foreign contribution, one has to understand the termforeign source. This is an inclusive definition, again with a very wide coverage. It covers aforeign government or its agency, any international agencies (other than certain specifiedagencies such as United Nations, World Bank, etc.), foreign citizen, foreign company, anyother foreign entity such as trade unions, trusts, societies, clubs, etc. formed or registeredoutside India. It also covers multi-national corporations and any company where more than50% of the share capital is held by foreign government, entity or citizen.

Receipts from foreign citizen are considered as foreign source and hence by implication onecould argue that amounts received from Indian citizen would not be treated as foreign

source. As such, even foreign currency would be treated as received from Indian source, if itis received from an Indian citizen. The basic principle is to determine the source from whichthe currency or asset is being received. If the source is Indian, then it does not matterwhether the currency is Indian or not. Conversely, if the source is foreign, then even if thereceipt is in Indian Rupees, the same would be considered as foreign contribution.

Multi-national company has been defined to mean a corporation incorporated in a foreigncountry if it has a subsidiary or branch or place of business in two or more countries, orotherwise carries on business or operations in two or more countries. Thus a foreigncompany having operations in any one or more country besides India would fit into thisdefinition. For example several foreign banks operating in India would fall under thiscategory.

What is most damaging is that even Indian companies where foreign shareholding is morethan 50% would be treated as foreign source. With liberalised FDI norms and also

liberalisation of permissible foreign investment limits in listed Indian companies, there areseveral Indian companies where the foreign holding is more than 51%.

Any donations received from such companies (for example, Hindustan Unilever, HDFC, ICICIBank, etc.) or even from branches of foreign companies (for example, Citibank, StandardChartered Bank, etc.) would be treated as foreign contribution. Such companies cannot givedonations to Indian trusts or even place advertisements in souvenirs brought out by suchtrusts, unless the trusts are either duly registered with the Central Government or have takenprior permission for receiving such donation. It was hoped that this situation would beremedied in FCRA 2010, but unfortunately the position has remained practically unaltered orhas been made even more stringent.

Now let us examine the provisions of FCRA 2010 from the three broad categories asenumerated above.


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Prohibition on certain persons from accepting foreign contribution :

The following persons are prohibited from accepting foreign contribution :

(a) Candidate for election;

(b) Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered

newspaper;(c) Judge, government servant or employee of any entity controlled or owned by thegovernment;

(d) Member of any Legislature;

(e) Political party or its office bearers;

(f) Organisations of a political nature as may be specified;

(g) Associations or company engaged in the production or broadcast of audio news oraudiovisual news or current affairs programmes through any electronic mode or form or anyother mode of mass communication;

(h) Correspondent or columnist, cartoonist, editor, owner of the association or companyreferred to in (g) above.

However, foreign contribution can be accepted by the above-mentioned persons in thefollowing specific situation :

(a) By way of remuneration for himself or for any group of persons working under him;

(b) By way of payment in the ordinary course of business transacted in or outside India or inthe course of international trade or commerce;

(c) As agent of a foreign source in relation to any transaction made by such foreign sourcewith the Central or State Government;

(d) By way of gift or presentation as a member of any Indian delegation. However, the gift orpresent should be accepted in accordance with the rules made by the Central Government;

(e) From his relative;

(f) By way of any scholarship, stipend or any payment of like nature.

It is important to note that barring the above exceptions, there is blanket prohibition on theabove-mentioned persons from accepting foreign contribution. The provisions are extremelystringent and are reminiscent of the FERA days where a foreign exchange offence wasconsidered as destroying the economic fibre of the country and hence was to be dealt with asruthlessly and strictly as a criminal offence.

It is clear that the above prohibition is in order to protect national interest, which can be avery ubiquitous term. However, whatever the intention, it is quite evident that FCRA 2010 hasfailed to keep pace with the liberalised exchange control regulations. For example, FDI is

permitted to the extent of 26% in news and current affairs TV channels. However, underFCRA 2010, companies engaged in production of such TV programmes or their keyemployees cannot accept foreign contribution. Mercifully, amounts received in the ordinarycourse of business or in the course of international trade are exempt.

Interestingly, correspondent, columnist, cartoonist, editor, owner, printer or publisher ofregistered newspapers were covered by FCRA 1976, but the same did not cover such personsconnected with the audio-visual and the electronic media. Perhaps this was because in 1976the radio and the TV channels were Government controlled and did not have the kind offoreign participation that we have today. As such they were not considered sensitive areasfrom the perspective of national interest. FCRA 2010 now covers both the print and theelectronic media.

The language used for bringing the electronic media and its key personnel within the ambit ofFCRA 2010 seem out of place with reference to the television and audio industry. The terms


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columnist, cartoonist, etc. are borrowed from the old clause under FCRA 1976 relating toprint media, and seem quite inappropriate in the context of the electronic media.

Under FCRA 1976, even gifts received by the above category of persons required previouspermission of the Central Government, if the value of the gift exceeded Rs.8,000 per annum.Even where the value of the gift was less than Rs.8,000, the Central Government was

required to be intimated about the details of the gift. Mercifully, FCRA 2010 now givesspecific exemption in respect of foreign contribution received from a relative as defined underthe Companies Act, 1956.

Restriction on certain persons from accepting foreign hospitality :

FCRA 1976 as well as FCRA 2010 prohibit members of Legislature, office bearers of a politicalparty, judges and government servants from accepting any foreign hospitality except with theprior permission of the Central Government. It is not necessary to obtain such priorpermission in case of medical emergency outside India. However, even in such medicalemergency, the person receiving the hospitality is required to intimate the CentralGovernment about the receipt of such hospitality, the source from which and the manner inwhich the hospitality was received by him within one month.

Foreign hospitality is defined to mean any offer, not being a purely casual one, made in cashor kind by a foreign source for providing a person with the costs of travel to any foreigncountry or with free boarding, lodging, transport or medical treatment.

It is interesting to note that a purely casual offer is not considered as foreign hospitality. Butit is not clear as to what kind of offer would be considered as a purely casual one.

Regulating the acceptance of foreign contribution by persons having a definitecultural, economic, educational, religious or social programme :

NPOs are directly affected by the provisions of FCRA (both FCRA 1976 and 2010), and theGovernment closely monitors the inflow of foreign contribution into this sector.

Both under FCRA 1976 and FCRA 2010, any individual or organisation carrying out a definite

cultural, economic, educational, religious or social programme is required to be registeredwith the Central Government or obtain prior permission of the Central Government beforeaccepting any foreign contribution. Such an NPO cannot in turn transfer the foreigncontribution received by it to any other person unless such other person is also registered orhas obtained prior permission.

The process of registration is stringent and fraught with bureaucratic process. Unless the NPOhas a track record of at least three years, as a matter of practice, registration has generallynot been granted under FCRA 1976. Under FCRA 2010, the requirement of having a trackrecord is now codified, as the Act specifically provides that before granting registration, theCentral Government shall verify whether the NPO has undertaken reasonable activity in itschosen field for the benefit of society. If the NPO is not able to fulfil the requisite conditionsfor registration, then the only alternative would be to apply for prior permission, which would

be valid only for the specific purpose and source for which it is obtained. Even for priorpermission the NPO would have to show that it has a reasonable project for the benefit ofsociety for which the foreign contribution is proposed to be utilised.

The Central Government, before granting registration or prior permission, is required toensure that the person or organisation is in no way working to the detriment of nationalinterest. For example, (and the below-mentioned items are only illustrative) it should not beengaged in :

(a) Religious conversion through inducement or force;

(b) Creating communal tension or disharmony;

(c) Propagation of sedition or advocating violent methods to achieve its ends;

(d) Undesirable purposes.


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Besides, permission can be denied if the acceptance of foreign contribution is likely to affectprejudicially the sovereignty and integrity of India or is against the security, strategic,scientific or economic interest of the State; or is opposed to public interest.

This clearly brings out that the Central Government has almost absolute powers to denyregistration or prior permission. The manner in which some of the above criteria can be

interpreted is extremely subjective and fear is that too much power is placed in the hands ofthe bureaucracy and this may lead to undesirable consequences.

Under FCRA 1976, prior permission was relatively simpler to obtain as compared toregistration and was generally granted within 90 days if the paper-work was proper. UnderFCRA 2010, it is specified that application for registration or prior permission should, afterinquiry, be ordinarily granted within 90 days of the application or the Government shouldcommunicate the reasons for not granting the same. No specific consequences are providedfor not processing the application within the 90 days and hence the provisions are rightlyviewed with a great deal of skepticism, as it is unlikely that the sanctity of the time frame of90 days will be observed.

What is worst is that the certificate for registration is now valid for a period of five years,after which the registration process will have to be repeated. This is in deviation of thepresent situation under FCRA 1976 where registration once granted is valid for the lifetimeunless specifically revoked. The Central Government has wide powers under specifiedsituations to cancel the certificate of registration, after making such inquiry as it deems fit.For example, the certificate can be cancelled if the NPO has obtained the same by makingfalse statements or has violated any terms and conditions of registration or of FCRA or itsrules or it is necessary to do so in public interest. The certificate can also be cancelled if theNPO has not been engaged in any reasonable activity for the benefit of society for twoconsecutive years. Foreign contribution can be received only in a single designated bankaccount and it is not permissible to open multiple bank accounts. Often funding agenciesdemand that separate bank account be opened specifically to manage and monitor theforeign contribution sent to India by them. Unfortunately that is not permitted under FCRAand needs to be clearly explained to the funding agencies.

Often trusts have projects in far-flung and remote places and it is always advisable to open abank account at the project site. Recognising this need, it is provided that more than onebank account can be opened for actual utilisation of such foreign contribution. Such bankaccount is popularly referred to as project account and typically, the funds are transferredfrom the designated account, to the project account for direct spending on the project. Noother deposits are allowed to be made in such project account as they are meant only fordisbursement of expenses. Such project accounts were permitted under FCRA 1976 also byway of administrative directions, but under FCRA 2010, the same is legitimised by a specificprovision in the Act itself.

This restriction on opening separate bank accounts, throws up some tricky problems fortrusts carrying out work in remote areas. What if the trust engaged in micro credit activity

receives foreign contribution as part of its revolving fund and from such fund gives pettyloans to local artisans ? Arguably, the loan recovered would go back into the revolving fundand would continue to be treated as foreign contribution. The amount recovered could beless than Rs.100 but it would not be possible to deposit the same in the project account, andwould have to be physically carried to be deposited in the designated bank account, whichmay be at the head office far from the field office. Similarly any expenses reversed or any re-imbursement received cannot be redeposited in the project account from where it was madein the first place and will have to be deposited only in the main designated account.Therefore, the problem that existed under FCRA 1976 will continue to trouble NGOs underFCRA 2010 as well.

Surplus funds in the designated bank account can be invested in approved assets. However,there is a specific ban on using such assets for speculative business. Rules will be made to

specify which activities will be construed as speculative business. The investments as well asthe income from such investments will continue to be characterised as foreign contribution


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and accordingly the interest earned or proceeds realised on encashment of the investmentswill have to be re-deposited in the designated bank account.

The NGOs will have to maintain records and accounts in the prescribed manner andintimation will have to be sent to the Central Government reflecting the amount of eachcontribution received, its source and manner in which the same was utilised. The designated

bank also has to report the details of the foreign contributions routed through them directlyto the specified authority.

In recent times concerns have been raised that trusts do not spend adequate amounts ontheir core objects. There isnt enough transparency in the administration of the trusts,resulting in disproportionately high administrative expenses. Apparently to address theseconcerns, further controls over trusts are introduced, providing that not more than 50% ofthe foreign contribution received in a financial year by the trust shall be utilised to meetadministrative expenses. Administrative expenses exceeding 50% can be defrayed only withthe prior approval of the Central Government, which will prescribe the elements that will beincluded in the administrative expenses and the manner in which such administrativeexpenses shall be calculated.

Scholarships and stipend :

Under FCRA 1976, scholarship, stipend or any payment of like nature from any foreignsource, received by any citizen of India was required to be intimated to the CentralGovernment within the prescribed time and manner. There were some exceptions andrelaxation, but by and large this was one provision that was most often observed in breach.

Very few, if any, were actually intimating the Central Government about the scholarship orstipend received by them.

Fortunately the FCRA 2010 has done away with the requirement of intimating the CentralGovernment about the receipt of such scholarship or stipend. In fact, even persons who areprohibited from accepting foreign contribution (as discussed above) are free to acceptscholarship or stipend, as a specific exception has been carved out for the same.

In summary :The FCRA 2010 is by and large an old wine in a new bottle. Unfortunately, in a lot of respectsthe provisions have been made far more stringent than what they were under FCRA 1976.Philanthropy is ingrained in the Indian psyche and a vast number of organisations do yeomanwork, they serve the most basic problems of the neediest of the needy, where governmentmachinery has woefully failed. Such organisations need to be encouraged and provided witha framework where they can function efficiently and effectively. However the reality is thatcharitable trusts have found themselves targeted from several sides in recent years. It isunfortunate that for the misdeeds of a few, all charitable entities have to deal with punitivelegislation. The Foreign Contribution Regulation Act, 2010 is one more of such regulationsthat is only going to add to the already onerous burden that such trusts have to endure.

The Foreign Contribution (Regulation) Act, 2010

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

i. (i) of any article, not being an article given to a person* as agift for his personal use, if the market value, in India, of such article, on the


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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;

i. (ii) of any currency, whether Indian or foreign;

i. (iii) of any security as defined in clause (h) of section 2 of thesecurities Contracts(Regulation) Act, 1956 and includes any foreign security asdefined 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 personwho has received it form any foreign source, either directly orthrough one or more persons, shall also be deemed to be foreigncontribution with the meaning of this clause.

Explanation 2 The interest accrued on the foreign contributiondeposited in any bank referred to in sub-section (1) of Section 17 orany other income derived from the foreign contribution or interestthereon shall also be deemed to be foreign contribution within themeaning of this clause.

Explanation 3 Any amount received, by an person from anyforeign source in India, by way of fee (including fees charged by aneducational institution in India from foreign student) or towards cost

in lieu of goods or services rendered by such person in the ordinarycourse of his business, trade or commerce whether within India oroutside India or any contribution received from an agent or a foreignsource towards such fee or cost shall be excluded from the definitionof foreign contribution within the meaning of this clause.

* In terms of FCRA, 2010 "person" includes (i) an individual; (ii) aHindu undivided family; (iii) an association; and (iv) a company registeredunder section 25 of the Companies Act, 1956.

**The sum, as stated at (i) above, has not yet been specified in FCRR, 2011.

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,


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ii. (i) of any article, not being an article given to a person* as agift 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;

ii. (ii) of any currency, whether Indian or foreign;

ii. (iii) of any security as defined in clause (h) of section 2 of thesecurities Contracts(Regulation) Act, 1956 and includes any foreign security asdefined 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 personwho has received it form any foreign source, either directly orthrough one or more persons, shall also be deemed to be foreigncontribution with the meaning of this clause.

Explanation 2 The interest accrued on the foreign contributiondeposited in any bank referred to in sub-section (1) of Section 17 orany other income derived from the foreign contribution or interestthereon shall also be deemed to be foreign contribution within themeaning of this clause.

Explanation 3 Any amount received, by an person from anyforeign source in India, by way of fee (including fees charged by aneducational institution in India from foreign student) or towards costin lieu of goods or services rendered by such person in the ordinarycourse of his business, trade or commerce whether within India oroutside India or any contribution received from an agent or a foreignsource towards such fee or cost shall be excluded from the definitionof 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 registeredunder section 25 of the Companies Act, 1956.

**The sum, as stated at (i) above, has not yet been specified in FCRR, 2011.

Page 1 of 23Q. 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 excludesearnings from foreign client(s) by a person in lieu of goods sold or services


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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 foreignsource of any article, not given to a person as a gift for personal use, if themarket value, in India, of such article exceeds one thousand rupees. Whatlimit has been prescribed in FCRA, 2010 in respect of such article?

Ans. The limit hasnotbeen specified in FCRR, 2011. Till any limit isfixedin the Rules, foreign contribution has to be understood without any limit.

What is a foreign source

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

(i) The Government of any foreign country or territory and any agency of suchGovernment;

(ii) any international agency, not being the United Nations or any of itsspecialized agencies, the World Bank, International Monetary Fund or suchother agency as the Central Government may, by notification, specify in this

behalf;

(iii) a foreign company;

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

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

(vi) a company within the meaning of the Companies Act, 1956, and more thanone-half of the nominal value of its share capital is held, either singly or in theaggregate, 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;

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

(viii) a foreign trust or a foreign foundation, by whatever name called, or suchtrust or foundation mainly financed by a foreign country or territory;

(ix) a society, club or other association or individuals formed or registeredoutside India;

(x) a citizen of a foreign country;

List of agencies of the United Nations, World Bank and some other


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International agencies/multilateral organizations, which are not treatedforeign source, are available on the website

Who can receive foreign contribution?

A person, as defined in Section 2(1)(m) with the exclusion of thosementioned in Section 3 of FCRA, 2010, having a definite cultural,

economic, educational, religious or social program 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

Who cannot receive foreign contribution?

As defined in Section 3(1) of FCRA, 2010, foreign contributioncannot beaccepted by any :

(a) a candidate for election;

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

(c) Judge, government servant or employee of any Corporation or any otherbody controlled on owned by the Government;

(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 Central Government.

(g) association or company engaged in the production or broadcast of audionews or audio visual news or current affairs programmes through anyelectronic 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 ofmass communication;

(h) correspondent or columnist, cartoonist, editor, owner of the association

or company referred to in clause (g).

ExplanationIn clause (c) and section 6, the expressioncorporation means a corporation owned or controlled by theGovernment and

Page 3 of 23includes a Government company as defined in section 617 of theCompanies Act, 1956.

(i) individuals or associations who have been prohibited fromreceiving foreign contribution.


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

Ans. Yes. FCRA is meant to ensure that foreign contribution is receivedfrom legitimate sources and utilised for legitimate purposes by any person.A list of banned organisations is available in MHA's websitehttp://mha.nic.in/uniquepage.asp?Id_Pk=292 . In particular, the list offoreign entities/individuals can be seen inhttp://www.un.org/sc/committees/1267/AQList.htm

Q. 8 Whether donation given by Non-Resident Indians (NRIs) is treatedasforeign 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, whileaccepting 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 donation given by an individual of Indian origin and havingforeign nationality is treated as foreign contribution?

Ans. Yes. Donation from an Indian who has acquired foreign citizenship istreated as foreign contribution. This will also apply to PIO card holders andto Overseas Citizens of India. However, this will not apply to 'Non-residentIndians', who still hold Indian citizenship.

Q. 10 Whether foreign remittances received from a relative are to betreatedas foreign contribution as per FCRA, 2010?

Ans. The position in this regard as given in Section 4(e) of FCRA, 2010andRule 6 of FCRR, 2011 are as under:

Subject to the provisions of section 10 of the FCRA, 2010, nothingcontained in section 3 of the Act shall apply to the acceptance, by any

person specified in that section, of any foreign contribution where suchcontribution is accepted by him from his relative. However, in terms ofRule 6 of FCRR, 2011, any person receiving foreign contribution in excessof one lakh rupees or equivalent thereto in a financial year from any of hisrelatives shall inform the Central Government in Form FC-1 within thirtydays from the date of

Page 4 of 23receipt of such contribution. This form is available on the websitehttp://mha.nic.in/fcra/forms/fc-1.pdf


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Q.11 Can the fee paid by the foreign delegates/participantsattending/participating in a conference/seminar etc. be termed as foreigncontribution 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 whichis utilized for the purpose of meeting the expenditure of hosting theconference/seminar is not treated as foreign contribution and as such no

permission under FCRA is required.

Q. 12 Whether a Company incorporated in India under the Companies Act, 1956 having its operations in 2 or more countries is to be treated as aMNC/foreign source under FCRA, 2010?

Ans. No. However, as defined under section 2(j)(vi), a company within

themeaning of the Companies Act, 1956 having more than one-half of thenominal 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. (A) the Government of a foreign country or territory;A. (B) the citizens of a foreign country or territory;

A. (C) corporations incorporated in a foreign country or territory;

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

territory"

Q. 13 Can foreign contribution be received in rupees?

Ans. Yes. Any amount received from foreign source in rupees or foreigncurrency is construed as foreign contribution under law. Such transactionseven in rupees term are considered foreign contribution.

Q. 14 Will interest or any other income earned from foreign contribution beconsidered foreign contribution?

Ans. Yes.

Q. 15 Whether interest or any other income earned out of foreign

contributions be shown as fresh foreign contribution receipt during that

year or not?

Ans. Yes. The interest or any other income earned out of such depositshould be shown as second / subsequent foreign contribution receipt in theannual return during the year in which it is earned.

Page 5 of 23


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Q. 16 Can NGOs use the foreign contributions for investment in MutualFunds and other speculative investments?

Ans.No. Speculative activities have been defined in Rule 4 of FCRR2011 as under:-

1. (a) any activity or investment that has an element of risk ofappreciation or depreciation of the original investment, linked tomarked forces, including investment in mutual funds or in shares;

(b) participation in any scheme that promises high returns likeinvestment in chits or land or similar assets not directly linked to thedeclared aims and objectives of the organization or association.

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

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

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

In view of the above, secure investments and fixed deposits in any bank orGovernment approved financial institution which ensures a fixed returnwill not be treated as speculative investment.

Q. 17 Can capital assets purchased with the help of foreign contributions beacquired in the name of the office bearers of the association?

Ans. No. Every asset purchased with foreign contribution should beacquired and possessed in the name of the association since association hasa separate legal entity distinct from its members.

Q. 18 Can an association invest the foreign contribution received by it inprofitable ventures and proceeds can be utilized for welfare activities?

Ans.No. The association should utilize such funds for the welfare purposeor activities for which it is received. The utilization should be in line withthe objectives of the association. However, foreign contributions can beutilized for self-sustaining activities, not meant for commercial purposes.

Q. 19 Can foreign contribution be received in and utilised from multiple Bank Accounts?

Ans. No fund other than foreign contribution can be deposited in theexclusive single FC account of a Bank, as mentioned in the order forregistration or prior permission granted by MHA, to be separately

maintained

Page 6 of 23


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by the associations. However, one or more accounts in one or more banksmay be opened for utilising the foreign contribution provided that no fundsother than foreign contribution shall be received or deposited in suchaccount or accounts and in all such cases, intimation on plain paper shallhave to be furnished within 15 days of the opening of the account.

Q. 20 Can foreign contribution be mixed with local receipts?

Ans. No. Foreign contribution can not be deposited or utilised from thebank account being used for domestic funds.

Q. 21 Whether expenses like 'interest paid to bank', 'bank charges', 'hospitality' etc. can be included in 'administrative expenses'?

Ans. No. The definition of as 'administrative expenses', as given in Rule 5ofFCRR, 2011 is explicit in this regard.

Q. 22 Is there any restrictions on transfer of funds to other organisations?

Ans. Yes. Section 7 of FCRA, 2010 states:-

No person who

a. (a) is registered and granted a certificate or has obtained priorpermission under this Act; and

a. (b) receives any foreign contribution,

shall transfer such foreign contribution to any other person unlesssuch other person is also registered and had been granted the certificate orobtained the prior permission under this Act:

Provided that such person may transfer, with the prior approval ofthe Central Government, a part of such foreign contribution to any other

person who has not been granted a certificate or obtained permission underthis Act in accordance with the rules made by the Central Government.

It may further be noted that Rule 24 of FCRR, 2011 prescribes theprocedure for transferring foreign contribution as under:

"Rule 24:- Procedure for transferring foreign contribution to otherregistered or unregistered persons:-

1. (1) Any person intending to transfer the foreign contribution may makean application to the Central Government in Form FC-10.http://mha.nic.in/fcra/forms/fc-10.pdf

1. (2) The Central Government may permit the transfer in respect of aperson who has been granted the certificate of registration or prior permissionunder section 11 of the Act, in case the recipient person has not been proceededagainst under any provision of the Act.

1. (3) Any transfer of foreign contribution shall be reflected in the returns


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Page 7 of 23

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

(4) In case the foreign contribution is proposed to be transferred to aperson who has not been granted a certificate of registration or

prior permission by the Central Government, the person

concerned may apply for permission to the Central Government

to transfer a part of the foreign contribution, not exceeding ten

per cent, of the total value of the foreign contribution received.The application shall be countersigned by the District Magistrate

having jurisdiction in the place where the transferred funds are

sought to be utilized. The District Magistrate concerned shall take

an appropriate decision in the matter within sixty days of the

receipt of such request from the person. The donor shall nottransfer any foreign contribution until the Central Governmenthas approved the transfer."

Q. 23 How would an organisation that is registered or has obtained priorpermission under FCRA and intends to transfer a part of the foreigncontribution received by it to another organisation registered under FCRAwould know whether the recipient organisation has been proceeded againstunder FCRA?

Ans. Where any organisation is proceeded against under FCRA, it is donewith due intimation to the organisation concerned. Therefore, the donororganisation is advised to insist on a written undertaking from the intendingrecipient organisation.

Q. 24 What are the eligibility criteria for grant of registration?

Ans. For grant of registration under FCRA, 2010, the association should:

i. (i) be registered under the Societies Registration Act, 1860 or theIndian Trusts Act, 1882 or section 25 of the Companies Act, 1956 etc;

i. (ii) normally be in existence for at least three years and hasundertaken reasonable activity in its chosen field for the benefit of the societyfor which the foreign contribution is proposed to be utilised. For this purpose,the association should have spent at least Rs.10,00,000/- over the last threeyears on its activities, excluding administrative expenditure. Statements ofIncome & Expenditure, duly audited by Chartered Accountant, for last threeyears are to be submitted to substantiate that it meets the financial parameter.

Q. 25 What are the eligibility criteria for grant of prior permission?

Ans. An organisation in formative stage is not eligible for registration.


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Such organisation may apply for grant of prior permission under FCRA,2010. Prior permission is granted for receipt of specific amount fromspecific donor

Page 8 of 23for carrying out specific activities/projects. For this purpose, the association

should:

i. (i) be registered under the Societies Registration Act, 1860 or theIndian Trusts Act, 1882 or section 25 of the Companies Act, 1956 etc;

i. (ii) submit a specific commitment letter from the donorindicating the amount of foreign contribution and the purpose for which it is

proposed to be given; and

i. (iii) submit copy of a reasonable project for the benefit of thesociety for which the foreign contribution is proposed to be utilised.

Q. 26 Whether the amount of foreign contribution for which priorpermission has been granted can be received by an association in

installments?

Ans. There is no bar on receiving such foreign contribution in installments.However, the aggregate amount should not exceed the specified amount forwhich prior permission has been granted. The association shall have tosubmit the mandatory return in FC-6 form for receipt and utilisation of theforeign contribution on a yearly basis, till the amount of foreign

contribution is fully utilised. Even if no transaction takes place during ayear, a NIL return should be submitted.

Q. 27 Whether an association should open an exclusive FC A/c beforesubmission of an application for registration or prior permission?

Ans. Yes. Since the FC A/c through which foreign contribution is proposedto be received and utilised is to be mentioned in the application seekingregistration or prior permission, as the case may be, the association shouldopen such an exclusive FC A/c with a Bank. This A/c number would be

mentioned in the letter granting registration or prior permission to theassociation.

Q. 28 Whether Banks should allow an association which is applying forregistration or prior permission under FCRA, 2010 to open an exclusive FCA/c with INR?

Ans. Yes. However, the Banks should not allow any foreign inward remittance in that A/c till such time the association is granted registration or

prior permission, as the case may be.

Q. 29 What are the conditions to be met for the grant of registration and


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prior permission?

Ans. In terms of Sec.12 (4) of FCRA, 2010, the following shall be the conditions for the grant of registration and prior permission:

Page 9 of 23(a) The 'person' making an application for registration or grant of

prior permission-

i. (i) is not fictitious or benami;

i. (ii) has not been prosecuted or convicted for indulging inactivities aimed at conversion through inducement or force, either directly orindirectly, from one religious faith to another;

i. (iii) has not been prosecuted or convicted for creatingcommunal tension or disharmony in any specified district or any other part ofthe country;

i. (iv) has not been found guilty of diversion or mis-utilisation ofits funds;

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

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

i. (vii) has not contravened any of the provisions of this Act;

i. (viii) has not been prohibited from accepting foreigncontribution;

i. (ix) the person being an individual, such individual has neitherbeen convicted under any law for the time being in force nor any prosecutionfor any offence is pending against him.

(ix) the person being other than an individual, any of its

directors or office bearers has neither been convicted underany law for the time being in force nor any prosecution forany offence is pending against him.

(b) the acceptance of foreign contribution by the association/ person isnot likely to affect prejudicially

i. (i) the sovereignty and integrity of India; or

i. (ii) the security, strategic, scientific or economic interest ofthe State; or

iii. (iii) the public interest; or

iii. (iv) freedom or fairness of election to any Legislature; orv. (v) friendly relation with any foreign State; or


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

c. (c) the acceptance of foreign contribution-

i. (i) shall not lead to incitement of an offence;i. (ii) shall not endanger the life or physical safety of any person.

Page 10 of 23Q. 30 Can a private limited company or a partnership firm get registration or prior permission under FCRA, 2010?

Ans. The answer is 'No' as the Memorandum & Articles of association of

such a company would not have such a provision in its objects clause to

receive and utilise foreign donations for the purposes prescribed under

FCRA, 2010. However, such a company may create a separate registered

foundation or trust which would be able to obtain prior permission orregistration under FCRA, 2010 subject to fulfillment of the conditions

prescribed under the Act.

Q. 31 Whether infusion of foreign share capital in a company registered

under section 25 of the Companies Act, 1956 attracts the provisions of

FCRA, 2010?

Ans. Yes, infusion of foreign share capital in a company registered undersection 25 of the Companies Act, 1956 is treated as foreign contribution.

Q. 32 Is recommendation of District Collector or Deputy Commissioner orDistrict Magistrate mandatory for submission of an application forregistration or prior permission?

Ans. No. Submission of verification certificate from the District Collectoror Deputy Commissioner or District Magistrate is not mandatory. However,in certain cases, if the amount of foreign contribution for which prior

permission is being sought is less than Rs.50 lakh, submission of such acertificate assists in speedy clearance of the application.

Q. 33 If an application for registration or prior permission is submittedonline by an association, does it need to submit that application in physicalform also?

Ans. Yes. When an application is filed online, a printout of the same is to be taken after submission and thereafter, it should be submitted, dulysigned, alongwith the requisite documents to the Ministry of Home Affairs.

The prescribed forms for submission of application for grant ofRegistration and Prior Permission are FC-3 and FC-4 respectively. The


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forms are available atMHA website http://mha.nic.in/fcra/forms/fc-3.pdfand http://mha.nic.in/fcra/forms/fc-4.pdf respectively.

Q. 34 What are the documents to be enclosed with the application?

Ans. (a) Following documents should be enclosed with the application forgrant of Registration:

Page 11 of 23i. (i) Hard-copy of the online application, duly signed by the ChiefFunctionary of the association;

i. (ii) Certified copy of registration certificate or Trust deed, asthe case may be;

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

i. (iv) Copies of audited statement of accounts for the past threeyears (Asset and Liabilities, Receipt and Payment, Income and Expenditure);

i. (v) If functioning as editor, owner, printer or publisher of apublication registered under the Press and Registration of Books Act, 1867, acertificate from the Registrar of Newspaper for India that the publication is nota newspaper in terms of section 1(1) of the said Act.

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

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

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

i. (ii) Certified copy of registration certificate or Trust deed, as

the case may be;

i. (iii) Commitment letter from foreign donor specifying theamount of foreign contribution and the purpose for which it is proposed to begiven;

i. (iv) Copy of the project report for which foreign contributionis solicited/being offered and is proposed to be utilised;

i. (v) If functioning as editor, owner, printer or publisher of apublication registered under the Press and Registration of Books Act, 1867, a

certificate from the Registrar of Newspaper for India that the publication is nota newspaper in terms of section 1(1) of the said Act.


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i. (vi) Fee of Rs. 1000/-by means of demand draft or bankerscheque 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 with all thedocuments mentioned above must reach the Ministry of HomeAffairs, Foreigners Division (FCRA Wing) within thirty days of thesubmission of the on-

Page 12 of 23

line application, failing which the request of the person for grant ofregistration or prior permission, as the case may be, shall be deemedto have ceased.

Q. 35 How to find the status of pending application for registration/prior

permission. ?

Ans. Status of pending applications for grant of registration or prior

permission may be checked on-line from the Ministry of Home Affairs

web-sitehttp://mha.nic.in/fcraweb/fc_online.htm. One needs to fill in thenumbers on acknowledgement letter or any correspondence from MHA

(Foreigners Division) in the blank format which pops up on the screen after

selection of status enquiry icon (registration/prior permission, as the case

may be)

Q. 36 Whether foreigners can be appointed as Executive Committee members of an association seeking registration or prior permission?

Ans. Organisations having foreign nationals, other than of Indian origin, as

members of their executive committees or governing bodies are generally

not permitted to receive foreign contribution. Foreigners may, however, be

allowed to be associated with such associations in an ex-officio capacity,representing multilateral bodies, foreign contribution from whom is

exempted from the purview of the Foreign Contribution(Regulation) Act,

2010, or in a purely honorary capacity depending upon the persons stature

in his/her field of activity. Subject to relaxation given on a case to case

basis, foreign nationals fulfilling the following conditions may be

appointed as Executive Committee members, after obtaining prior approval

of the Central Government:

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

i. (ii) the foreigner has been living and working in India for at least fiveyears;

iii. (iii) the foreigner has made available his/her specializedknowledge, especially in the medical and health related fields on a voluntary


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basis in India, in the past;

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

iv. (v) the foreigner is part of the Board of Trustee/ExecutiveCommittee, in an ex-officio capacity representing a multilateral body which isexempted from the definition of foreign source.

The need for such an appointment should, however, be adequately justified.

Q. 37 Whether Government servants, Judges and employees of aGovernment owned/controlled company/body can be on the executivecommittees/boards of an association?

Page 13 of 23

Ans. Yes. The legal entity of a 'person' under FCRA, 2010 is distinct from

am individual person. Therefore, individuals who cannot receive foreigncontribution may happen to be on the executive committees/boards of suchan association.

Q. 38 Whether organisations under Central/State Governments arerequiredto obtain registration or prior permission under FCRA, 2010 for acceptingforeign contribution?

Ans. In terms of Gazette Notification S.O. 1492(E) dated 01.07.2011, http://mha.nic.in/pdfs/ExempStatBodi-010711.pdf all statutory bodies

constituted or established by or under a Central Act or State Act requiringto have their accounts compulsorily audited by the Comptroller & AuditorGeneral of India are exempted from all the provisions of FCRA, 2010.

Q. 39 What is the procedure for seeking change in the name/address of anassociation registered under FCRA?

Ans. For seeking change in the name/address of the association, one shoulduse the prescribed form available on MHAs websitehttp://mha.nic.in/fcra/forms/chng_name_addr.pdf and submit the same

alongwith the requisite documents specified therein.

Q. 40 What is the procedure for change of designated FC Bank Account?

Ans. For change of the bank account, an application in prescribed formmentioning the details of the old bank account and the proposed new bankaccount alongwith justification for change of designated bank, name/address of the society, copy of registration under FCRA, copy of freshresolution of the executive committee ( in English or Hindi) for change ofdesignated back account, certificate from the proposed bank (copy of Bank

Pass Book is not acceptable) that the account is being opened exclusivelyfor FCRA, may be submitted to MHA. This form is available on website


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http://mha.nic.in/fcra/forms/chng_bank_acnt.pdf

Q. 41 Whether intimation regarding the change of Members of theExecutive Committee/Governing Council of the association is to be given

to the Government?

Ans. Yes. If at any point of time, such change causes replacement of 50%or more of such Members of the Executive Committee/Governing Councilof the association, intimation is to be given within thirty days of suchchange in accordance with the declaration given by the association in itsapplication for registration or prior permission, as the case may be.

Page 14 of 23

Q. 42 What is the procedure for filing Annual Returns?

Ans. An association permitted to accept foreign contribution is required under law to maintain separate set of accounts and records exclusively forthe foreign contribution received and submit an annual return, dulycertified by a Chartered Accountant, giving details of the receipt and

purpose-wise utilisation of the foreign contribution. The return is to be filed

for every financial year (1st

April to 31st

March) within a period of nine

months from the closure of the year i.e. by 31st

December each year.

Submission of a Nil return, even if there is no receipt/utilization offoreign contribution during the year, is mandatory. The return is to be

submitted, in prescribed Form FC 6, duly accompanied with the balancesheet and statement of receipt and payment, which is certified by aChartered Accountant. The form is available on MHAs web-site http://mha.nic.in/fcra/forms/fc-6.pdf For further details, please refer toSections 17, 18 and 19 of FCRA, 2010 and Rule 17 of FCRR, 2011.

Note: It may be noted that the annual return for the financial year2010

2011 is to be filed by the 31st

December, 2011 in Form FC-3, i.e., as perFCRA, 1976.

Q. 43 For how many years an association which has been granted priorpermission to receive foreign contribution should file the mandatory annualreturn?

Ans. 'Prior permission' is granted to an association to receive a specific

amount of foreign contribution from a specific donor for a specific purpose.After receipt of approval from the Government, the association shouldsubmit the mandatory return in FC-6 form for receipt and utilisation of theforeign contribution on a yearly basis, till the amount of foreign

contribution is fully utilised. Even if no transaction takes place during ayear, a NIL return should be submitted.


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Q. 44 What are theoffences and penalties under FCRA, 2010?

Ans. Section 11 of the FCRA, 2010 prescribes that no person, save asotherwise provided in the Act, shall accept foreign contribution unless such

person obtains a certificate of registration or prior permission of the CentralGovernment. Therefore, acceptance of foreign contribution without

obtaining registration or prior permission from the Central

Government constitutes an offence under the Act and is punishable.

The provisions of FCRA, 2010 regarding offences and penalties are

Section 33: Making of false statement, declaration or delivering false

accounts:

Page 15 of 23

Any person, subject to this Act, who knowingly,

a. (a) gives false intimation under sub-section (c) of section 9 or section18; or

a. (b) seeks prior permission or registration by means of fraud,false representation or concealment of material fact, shall, on conviction by acourt, be liable to imprisonment for a term which may extend to three years orwith fine or with both.

Section 34: Penalty for article or currency or security obtained incontravention of Section 10:

If any person, on whom any prohibitory order has been served under

section 10, pays, delivers, transfers or otherwise deals with, in any mannerwhatsoever, any article or currency or security, whether Indian or foreign,

in contravention of such prohibitory order, he shall be punished withimprisonment for a term which may extend to three years, or with fine, orwith both; and notwithstanding anything contained in the Code of CriminalProcedure, 1973, the court trying such contravention may also impose on

the person convicted an additional fine equivalent to the market value ofthe article or the amount of the currency or security in respect of which the

prohibitory order has been contravened by him or such part thereof as thecourt may deem fit.

Section 35: Punishment for contravention of any provision of the Act:

Whoever accepts, or assists any person, political party or organisation inaccepting, any foreign contribution or any currency or security from aforeign source, in contravention of any provision of this Act or any rule or

order made thereunder, shall be punished with imprisonment for a termwhich may extend to five years, or with fine, or with both.


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offence under this Act or any rule or order made thereunder has beencommitted by a company and it is proved that the offence has beencommitted with the consent or connivance of, or is attributable to anyneglect on the part of, any director, manager, secretary or other officer ofthe company, such director, manager, secretary or other officer shall also be

deemed to be guilty of that offence and shall be liable to be proceededagainst and punished accordingly.

Explanationfor the purposes of this section,

a. (a) "company" means any body corporate and includes a firm,society, trade union or other association of individuals; and

a. (b) 'director" in relation to a firm, society, trade union or otherassociation of individuals, means a partner in the firm or a members of thegoverning body of such society, trade union or other association of individuals.

Section 40: Bar on prosecution of offences under the Act:

No court shall take cognizance of any offence under this Act, except withthe previous sanction of the Central Government or any officer authorised

by that Government in this behalf.

Page 17 of 23

Section 41: Compounding of certain offences:

1. (1) Notwithstanding anything contained in the Code of Criminal

Procedure, 1973, any offence punishable under this Act (whether committed byan individual or association or any officer or employee thereof), not being anoffence punishable with imprisonment only, may, before the institution of any

prosecution, be compounded by such officers or authorities and for such sumsas the Central Government may, by notification in the official gazette, specifyin this behalf.

1. (2) Nothing in sub-section (1) shall apply to an offence committed byan individual or association or its officer or other employee within a period ofthree years from the date on which a similar offence committed by it or himwas compounded under this section.

Explanation For the purposes of this section, any second orsubsequent offence committed after the expiry of a period of threeyears from the date on which the offence was previouslycompounded, shall be deemed to be a first offence.

3. (3) Every officer or authority referred to in sub-section (1) shallexercise the powers to compound an offence, subject to the direction, controland supervisions of the Central Government.

3. (4) Every application for the compounding of an offence shall bemade to the officer or authority referred to in sub-section (1) in such form and


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manner along with such fee as may be prescribed.

3. (5) Where any offence is compounded before the institution of anyprosecution, no prosecution shall be instituted in relation to such offence,against the offender in relation to whom the offence is so compounded.

3. (6) Every officer or authority referred to in sub-section (1), whiledealing with a proposal for the compounding of an offence for a default incompliance with any provision of this Act which requires by an individual orassociation or its officer or other employee to obtain permission to file orregister with or deliver or sent to, the Central Government or any prescribedauthority any return account or other document, may, direct by order, if he or itthinks fit to do so, any individual or association or its officer or other employeeto file or register with, such return, account or other document within such timeas may be specified in the order.

Q. 45 Which are theoffences than can be compoundedand what would bethe penalties therefor?

Ans: In terms of Gazette Notification S.O. 1976 (E) dated 26.08.2011, http://mha.nic.in/fcra/forms/ComOffNoti-260811.pdf the categories ofoffences than can be compounded under section 41 of FCRA, 2010 and the

Page 18 of 23quantum of penalty for compounding, as indicated against each of theoffences, are

Nature of offence

(i) Acceptance of cheque or draft towards Rs. 10,000/- or 2

foreign contribution by a 'person' without per cent

registration or prior permission of the Central foreign contribution

Government even in cases where the cheque involved, whichever

or draft has not been deposited in a Bank by is higher.

the 'person'.

(ii) Acceptance of cheque or draft by a 'person' Rs. 25,000/- or 3

towards foreign contributio

registration or prior permission of the Central foreign contribution

Government and depositing the same in a involved, whichever

Bank notwithstanding non-utilisation of the is higher.

amount of the foreign contribution.

(iii) Acceptance of foreign contribution by a Rs. 1,00,000/- or 5

'person' without registration or prior per cent

permission of the Central Government and foreign contribution

utilisation of the same notwithstanding any involved, whichever

inquiry which revealed that the contribution is higher.received was not diverted towards any


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purpose other than the objectives or purpose

for which the same was received, utilisation

of the contribution was as per the objectives

of receipt of the same and records of receipt

and utilisation have been kept properly.(iv) Acceptance of foreign contribution in kind by Rs. 10,000/- or 2

a 'person' without registration or prior per cent

permission of the Central Government foreign contribution

notwithstanding that nothing adverse was involved, whichever

reported after inquiry.

Q. 46 How to apply for compounding of an offence under FCRA, 2010?

Ans: An application for the compounding of an offence under section 41 isto be made to the Secretary, Ministry of Home Affairs, New Delhi on a

plain paper along with a fee of Rs.1000/- (One Thousand only) in the formof a demand draft or a bankers cheque in favour of the Pay and AccountsOfficer, Ministry of Home Affairs, payable at New Delhi.

Q. 47 What happens after an offence is compounded?

Ans: After payment of the penalty imposed and compounding of theoffence, the person may be granted registration or prior permission, as the

case may be, subject to its fulfilling all parameters.Page 19 of 23

Q. 48 What if the person is unwilling or unable to pay the penalty imposed?

Ans: In the event of failure to pay the penalty, for whatever reason, necessary action for prosecution of the person shall be initiated.

Q. 49 Which are the investigating agencies for investigating andprosecuting a person for violation of FCRA?

Ans. In terms of Gazette Notification S.O. 2446 (E) dated 27.10.2011, TheCentral Bureau of Investigation or the investigating agencies (CrimeBranch) of the State Governments, cause of action which arises in theirrespective States, are the designated agencies for investigating and

prosecuting a person for violation of FCRA.

Q. 50 Can the Government cancel the certificate of registration granted to a person under FCRA?

Ans. Yes. The conditions forcancellation of certificate, as prescribed undersection 14 of FCRA, 2010 are


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14 (1) The Central Government may, if it is satisfied after making suchinquiry as it may deem fit, by an order, cancel the certificate if

(a) the holder of the certificate has made a statement in, or in relation

to, the application for the grant of registration or renewal thereof,which is incorrect or false; or

(b) the holder of the certificate has violated any of the terms andconditions of the certificate or renewal thereof; or

(c) in the opinion of the Central Government, it is necessary in thepublic interest to cancel the certificate; or

(d) the holder of the certificate has violated any of the provisions ofthis Act or rules or order made thereunder.

(e) if the holder of the certificate has not been engaged in anyreasonable activity in its chosen field for the benefit of the societyfor two consecutive years or has become defunct.

14 (2) No order of cancellation of certificate under this section shall bemade unless the person concerned has been given a reasonable opportunityof being heard.

14 (3) Any person whose certificate has been cancelled under this sectionshall not be eligible for registration or grant of prior permission for a

period of three years from the date of cancellation of such certificate.

Page 20 of 23Q. 51 Can the Government suspend the certificate of registration granted toa person under FCRA?

Ans. The conditions for suspension of certificate, as prescribed undersection 13 of FCRA, 2010 are

13(1) Where the Central Government, for reasons to be recorded in writing,is satisfied that pending consideration of the question of cancelling the

certificate on any of the grounds mentioned in sub-section (1) of Section,14, it is necessary so to do, it may, by order in writing, suspend thecertificate for such period not exceeding one hundred and eighty days asmay be specified in the order.

13(2) Every person whose certificate has been suspended shall

a. (a) not receive any foreign contribution during the period ofsuspension of certificate:

Provided that the Central Government, on an application made by suchperson, if it considers appropriate, allow receipt of any foreign contribution bysuch person on such terms and conditions as it may specify;


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made in cash or kind by a foreign source for providing a person with thecosts of travel to any foreign country or territory or with free board,lodging, transport or medical treatment.

Q. 56 Who cannot accept foreign hospitality without prior approval of the

Ministry of Home Affairs?

Ans. Section 6 of FCRA, 2010 prescribes that "No member of aLegislature or office bearer of a political party or Judge or Government

servant or employee of any corporation or any other body owned or

controlled by the Government shall, while visiting any country or territory

outside India, accept, except with the prior permission of the CentralGovernment any foreign hospitality.

Provided that it shall not be necessary to obtain any such permissionfor an emergent medical aide needed on account of sudden illnesscontracted during a visit outside India, but, where such foreign hospitalityhas been received, the person receiving such hospitality shall give, withinone month from the date of receipt of such hospitality an intimation to theCentral Government as to the receipt of such hospitality, and the sourcefrom which, and the manner in which, such hospitality was received byhim."

Q. 57 Whether approval of the Ministry of Home Affairs is required incases where the proposed foreign visit is being undertaken by a person inhis/her personal capacity and the entire expenditure thereon is being met bythe person concerned?

Page 22 of 23

Ans. No. Any person belonging to any of the categories specified inSection 6 of FCRA, 2010 would require such approval only if the personconcerned is seeking foreign hospitality from a foreign source.

Q. 58 How one can seek permission of the Government for receivingforeign hospitality?

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

i. (i) Every application for acceptance of foreign hospitality shall beaccompanied by an invitation letter from the host or the host country, as thecase may be, and administrative clearance of the Ministry or departmentconcerned in case of visits sponsored by a Ministry or department of the

Government.i. (ii) The application for grant of permission to accept foreign


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hospitality must reach the appropriate authority ordinarily two weeks beforethe proposed date of onward journey.

i. (iii) In case of emergent medical aid needed on account ofsudden illness during a visit abroad, the acceptance of foreign hospitality shall

be required to be intimated to the Central Government within sixty days ofsuch receipt giving full details including the source, approximate value inIndian Rupees, and the purpose for which and the manner in which it wasutilized.

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

*****

AS PASSED BY THE RAJYA SABHA ON 19TH AUGUST, 2010 Bill No. CXII-C of2006

THE FOREIGN CONTRIBUTION (REGULATION) BILL, 2010ARRANGEMENT OF CLAUSES CHAPTER IPRELIMINARY CLAUSES 1. 2. Short title, extent, application and commencement.Definitions. CHAPTER II REGULATION 3. 4. 5. 6. 7. 8. 9. 10. OF FOREIGNCONTRIBUTION AND FOREIGN HOSPITALITY

Prohibition to accept foreign contribution. Persons to whom section 3 shall not apply.Procedure to notify an organisation of a political nature. Restriction on acceptance offoreign hospitality. Prohibition to transfer foreign contribution to other person.Restriction to utilise foreign contribution for administrative purpose. Power of Central

Government to prohibit receipt of foreign contribution, etc., in certain cases. Power toprohibit payment of currency received in contravention of the Act. CHAPTER IIIREGISTRATION

11. 12. 13. 14. 15. 16.

Registration of certain persons with Central Government. Grant of certificate ofregistration. Suspension of certificate. Cancellation of certificate. Management offoreign contribution of person whose certificate has been cancelled. Renewal ofcertificate. CHAPTER IV ACCOUNTS, INTIMATION, AUDIT AND DISPOSAL OFASSETS, ETC.

17. 18. 19. 20. 21. 22.

Foreign contribution through scheduled bank. Intimation. Maintenance of accounts.Audit of accounts. Intimation by candidate for election. Disposal of assets created outof foreign contribution.


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(ii) CHAPTER V INSPECTION, SEARCH AND SEIZURE CLAUSES 23. 24. 25. 26.27. Inspection of accounts or records. Seizure of accounts or records. Seizure ofarticle or currency or security received in contravention of the Act. Disposal of seizedarticle or currency or security. Seizure to be made in accordance with Act 2 of 1974.CHAPTER VI ADJUDICATION 28. 29. 30. Confiscation of article or currency orsecurity obtained in contravention of the Act. Adjudication of confiscation. Procedurefor confiscation. CHAPTER VII APPEAL 31. 32. AND REVISION

Appeal. Revision of orders by Central Government. CHAPTER VIII OFFENCES ANDPENALTIES

33. 34. 35. 36. 37. 38. 39. 40. 41.

Making of false statement, declaration or delivering false accounts. Penalty for articleor currency or security obtained in contravention of section 10. Punishment forcontravention of any provision of the Act. Power to impose additional fine wherearticle or currency or security is not available for confiscation. Penalty for offenceswhere no separate punishment has been provided. Prohibition of acceptance offoreign contribution. Offences by companies. Bar on prosecution of offences underthe Act. Composition of certain offences. CHAPTER IX MISCELLANEOUS

42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54.

Power to call for information or document. Investigation into cases under the Act.Returns by prescribed authority to Central Government. Protection of action taken ingood faith. Power of Central Government to give directions. Delegation of powers.Power to make rules. Orders and rules to be laid before Parliament. Power to exemptin certain cases. Act not to apply to certain Government transactions. Application ofother laws not barred. Power to remove difficulties. Repeal and saving.


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Bill No. CXII-C of 2006

THE FOREIGN CONTRIBUTION (REGULATION) BILL, 2010 (As passed by theRajya Sabha) A

BILL to consolidate the law to regulate the acceptance and utilisation of foreigncontribution or foreign hospitality by certain individuals or associations or companies

and to prohibit acceptance and utilisation of foreign contribution or foreign hospitalityfor any activities detrimental to the national interest and for matters connectedtherewith or incidental thereto. BE it enacted by Parliament in the Sixty-first Year ofthe Republic of India as follows:CHAPTER I PRELIMINARY 1. (1) This Act maybe called the Foreign Contribution (Regulation) Act, 2010. (2) It extends to the wholeof India, and it shall also apply to(a) citizens of India outside India; and Short title,extent, application and commencement.


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2 (b) associate branches or subsidiaries, outside India, of companies or bodiescorporate, registered or incorporated in India. (3) It shall come into force on suchdate as the Central Government may, by notification in the Official Gazette, appoint:Provided that different dates may be appointed for different provisions of this Act andany reference in any such provision to the commencement of this Act shall beconstrued as a reference to the coming into force of that provision. Definitions.

2. (1) In this Act, unless the context otherwise requires, (a) association meansan association of individuals, whether incorporated or not, having an office in Indiaand includes a society, whether registered under the Societies Registration Act,1860, or not, and any other organisation, by whatever name 21 of 1860. called; (b)authorised person in foreign exchange means an authorised person referred 42 of1999. to in clause (c) of section 2 of the Foreign Exchange Management Act, 1999;(c) bank means a banking company as referred to in clause (c) of section 5 of 10 of1949. the Banking Regulation Act, 1949; (d) candidate for election means a personwho has been duly nominated as a candidate for election to any Legislature; (e)certificate means certificate of registration granted under sub-section (3) of section12; (f) company shall have the meaning assigned to it under clause (17) of section43 of 1961. 2 of the Income-tax Act, 1961; (g) foreign company means anycompany or association or body of individuals incorporated outside India andincludes(i) a foreign company within the meaning of section 591 of the Companies1 of 1956. Act, 1956; (ii) a company which is a subsidiary of a foreign company; (iii)

the registered office or principal place of business of a foreign company referred to insub-clause (i) or company referred to in sub-clause (ii); (iv) a multi-nationalcorporation. Explanation.For the purposes of this sub-clause, a corporationincorporated in a foreign country or territory shall be deemed to be a multi-nationalcorporation if such corporation, (a) has a subsidiary or a branch or a place ofbusiness in two or more countries or territories; or (b) carries on business, orotherwise operates, in two or more countries or territories; (h) foreign contributionmeans the donation, delivery or transfer made by any foreign source,(i) of anyarticle, not being an article given to a person as a gift for his personal use, if themarket value, in India, of such article, on the date of such gift, is not more than suchsum as may be specified from time to time, by the Central Government by the rulesmade by it in this behalf; (ii) of any currency, whether Indian or foreign; (iii) of anysecurity as defined in clause (h) of section 2 of the Securities Contracts (Regulation)Act, 1956 and includes any foreign security as defined in 42 of 1956. clause (o) ofsection 2 of` the Foreign Exchange Management Act, 1999. 42 of 1999.


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3 Explanation 1.A donation, delivery or transfer of any article, currency or foreignsecurity referred to in this clause by any person who has received it from any foreignsource, either directly or through one or more persons, shall also be deemed to beforeign contribution within the meaning of this clause. Explanation 2.The interestaccrued on the foreign contribution deposited in any bank referred to in sub-section(1) of section 17 or any other income derived from the foreign contribution or interestthereon shall also be deemed to be foreign contribution within the meaning of this

clause. Explanation 3.Any amount received, by any person from any foreignsource in India, by way of fee ( including fees charged by an educational institution inIndia from foreign student) or towards cost in lieu of goods or services rendered bysuch person in the ordinary course of his business, trade or commerce whetherwithin India or outside India or any contribution received from an agent of a foreignsource towards such fee or cost shall be excluded from the definition of foreigncontribution within the meaning of this clause; (i) foreign hospitality means anyoffer, not being a purely casual one, made in cash or kind by a foreign source forproviding a person with the costs of travel to any foreign country or territory or withfree boarding, lodging, transport or medical treatment; (j) foreign source includes,(i) the Government of any foreign country or territory and any agency of suchGovernment; (ii) any international agency, not being the United Nations or any of itsspecialised agencies, the World Bank, International Monetary Fund or such otheragency as the Central Government may, by notification, specify in this behalf; (iii) aforeign 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); 1 of 1956.

(vi) 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 countryor territory; (B) the citizens of a foreign country or territory; (C) corporationsincorporated in a foreign country or territory; (D) trusts, societies or otherassociations of individuals (whether incorporated or not), formed or registered in aforeign country or territory; (E) foreign company; (vii) a trade union in any foreigncountry or territory, whether or not registered in such foreign country or territory; (viii)a foreign trust or a foreign foundation, by whatever name called, or such trust orfoundation mainly financed by a foreign country or territory; (ix) a society, club orother association of individuals formed or registered outside India; (x) a citizen of aforeign country;


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4 (k) Legislature means (A) either House of Parliament; (B) the LegislativeAssembly of a State, or in the case of a State having a Legislative Council, eitherHouse of the Legislature of that State; (C) Legislative Assembly of a Union territoryconstituted under the Government of Union Territories Act, 1963; 20 of 1963.

(D) Legislative Assembly for the National Capital Territory of Delhi referred 1 of 1992.to in the Government of National Capital Territory of Delhi Act, 1991; (E) Municipality

as defined in clause (e) of article 243P of the Constitution; (F) District Councils andRegional Councils in the States of Assam, Meghalaya, Tripura and Mizoram asprovided in the Sixth Schedule to the Constitution; (G) Panchayat as defined inclause (d) of article 243 of the Constitution; or (H) any other elective body as may benotified by the Central Government; (l) notification means notification published inthe Official Gazette and the expression notify shall be construedac

the foreign contribution regulation act

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