FCRA: Foreign Contribution Regulation Act, 2010

FCRA

Recent data released by the Ministry of Home Affairs highlights a troubling trend regarding the registration of non-governmental organizations (NGOs) under India’s Foreign Contribution Regulation Act (FCRA), 2010. The data indicates that many NGOs are inaccurately describing their operational scopes in their FCRA registrations and engaging in activities that diverge from their stated objectives.

What is the Foreign Contribution Regulation Act?

The Foreign Contribution Regulation Act (FCRA) was introduced in 1976 during the Emergency period in response to apprehensions about foreign influence in India’s internal affairs through financial aid to independent organizations. The FCRA aims to oversee foreign contributions to individuals and associations, ensuring they operate in alignment with the principles of a sovereign democratic republic.

FCRA Registration

FCRA registration is mandatory for organizations seeking to receive foreign donations in India. It is granted to individuals or associations involved in diverse sectors such as cultural, economic, educational, religious, and social programs. The FCRA oversees foreign contributions in these specific areas to uphold transparency and legal compliance.

Entities have the flexibility to register under multiple categories corresponding to their programs, facilitating a broad range of activities.

Applicants are required to establish a designated bank account at a specified branch of the State Bank of India in New Delhi for receiving foreign funds.

Amendments of FCRA

FCRA 2010 Amendment

Introduced to consolidate regulations governing the acceptance and utilization of foreign contributions by specific individuals or associations. It also aimed to prevent the use of foreign contributions for activities deemed detrimental to national interest.

FCRA 2020 Amendment

Prohibits the transfer of foreign contributions to other individuals or organizations. Additionally, it reduces the permissible usage of foreign contributions for administrative expenses from 50% to 20%.

Eligibility for FCRA Registration

To be eligible for FCRA registration, your organization needs clearly defined objectives and activities that align with permissible purposes outlined under FCRA, such as:

• The applicant should be a Trust, Society, or a Section 8 Company.
• The entity must have existed for at least three years at the time of FCRA application.
• The entity should not have received any foreign contribution without prior Government approval.
• The organization must have spent at least ₹10,00,000/- over the last three years on its aims and objectives, excluding administrative expenditure.
• Audited Statements of Income & Expenditure for the last three years must be submitted to substantiate financial parameters.

Documents Required For FCRA Registration

The following documents are necessary for registration under the Foreign Contribution Regulation Act (FCRA):

S. No	Name of the Document	Maximum Size of Document in PDF
1	Registration Certificate of Association	1 MB (PDF)
2	Memorandum of Association/Trust deed	5 MB(PDF)
3	Activity Report for the last 3 years	3 MB(PDF)
4	Audited Statement of accounts for the last 3 years	5 MB(PDF)
5	Associations have to upload affidavits of each key functionary	1 MB(PDF)
6	Chief Functionary signature (140 (Width) * 60 (Height) Pixel)	50 KB
7	Seal of the Association (140 (Width) * 60 (Height) Pixel)	100 KB

Procedure for FCRA Registration

• Access the FCRA online portal.
• Choose Form FC-3A for FCRA Registration or Form FC-3B for Prior Permission.
• Click on “Apply Online” and then “Sign Up” to create a username and password.
• Log in with the created username and password.
• Select “FCRA Registration” from the dropdown list under “I am applying for.”
• Click “Apply Online” and then “Proceed Registration.”
• Go to the FC-3 menu and start the new registration procedure.
• Fill in the association form with relevant details including:
  • Association Address
  • Registration Number
  • Registration Date
  • Nature of the Association
  • Main object of the Association

• Attach required documents (Darpan ID is optional).
• Click “Submit.”
• Select the Executive Committee option from the menu bar.
• Add details of key functionaries using the “Add details of Key Functionary” option.
• Click “Save” after entering all details.
• Enter the bank details including:
  • Bank Name
  • Account Number
  • IFSC Code
  • Bank Address

• Upload all necessary documents in PDF format.
• Enter the place and date.
• Click the final submission button.
• Complete the online payment process.
• Once the payment is made and the form is submitted, no changes can be made.

Prohibitions under FCRA Registration

Under FCRA registration, applicants are prohibited from:

• Representing fictitious entities.
• Involvement in religious conversion activities, whether directly or indirectly.
• Having a history of prosecutions related to communal tension or disharmony.
• Engaging in activities related to sedition.

Additionally, FCRA prohibits candidates, journalists, media companies, judges, government servants, politicians, and political organizations from receiving foreign funds.

Validity and Renewal of FCRA Registration

FCRA registration remains valid for five years, after which NGOs must apply for FCRA renewal within six months before its expiration.

The government holds the authority to cancel an NGO’s FCRA registration for several reasons, including violations of the Act or insufficient activity in their designated field for two consecutive years.

Following cancellation, an NGO cannot seek re-registration for a period of three years.

FCRA Rules

The Foreign Contribution Regulation Act (FCRA) and its rules have undergone several amendments since its inception in 1976. Below is a yearly breakdown of significant changes and rules:

FCRA, 1976

The Foreign Contribution Regulation Act (FCRA) was enacted to regulate the acceptance and utilization of foreign contributions or foreign hospitality by certain individuals or associations.

FCRA, 2010

The Act was comprehensively amended to introduce more stringent measures. Key changes included:

• Mandatory registration for organizations receiving foreign funds.
• Registration validity set for five years, with mandatory renewal.
• Prohibition of transfer of foreign contributions to other persons unless they are also registered under the Act.
• Annual returns to be filed detailing the receipt and utilization of foreign funds

FCRA, 2011

Rules to support the 2010 Act were notified, specifying procedures for:

• Registration and prior permission.
• Maintenance of accounts.
• Filing of annual returns (Form FC-6).
• Provisions for transfer of foreign contributions with government approval

FCRA, 2015

• Amendments to Registration Rules: Organizations registered before May 1, 2011, were required to renew their registration by October 31, 2015​
• Cancellation of Registrations: The Ministry of Home Affairs (MHA) began canceling registrations of NGOs allegedly violating the Act, such as Greenpeace India

FCRA, 2020

Amendments to FCRA, 2010: Significant changes included:

• Reduction of the cap on administrative expenses to 20% from 50%.
• Requirement for all NGOs to open a designated FCRA account at the State Bank of India, New Delhi.
• Prohibition of sub-granting of foreign contributions to other NGOs

FCRA, 2022

FCRA Amendments: Further modifications were made, such as:

• Organizations to file annual returns in Form FC-4.
• Declaration of details of foreign funds on a quarterly basis was replaced with annual declarations

FCRA, 2023

Latest Amendments: New rules were introduced, including:

• Updated procedures for filing annual returns.
• Inclusion of details about the purchase of fixed assets in the annual return (Form FC-4)

Concerns of NGOs Regarding FCRA

NGOs have voiced several concerns regarding the FCRA:

1. Strict Compliance: The FCRA registration process requires extensive documentation and strict compliance, posing challenges for NGOs. Ambiguities in FCRA interpretations can be used by authorities to target and impose restrictions on NGOs.
2. Administrative Delays: Lengthy administrative procedures for FCRA registration and renewal often delay NGOs’ operations and access to funding.
3. Lack of Transparency: Criticisms have been directed at some NGOs for insufficient transparency in utilizing foreign funds obtained under the FCRA. Concerns arise when the specific purposes and beneficiaries of these funds are not clearly disclosed.
4. Uneven Access to Funding: The complex FCRA registration process results in high denial rates, affecting NGOs’ ability to receive foreign contributions and impacting their work.
5. Potential for Political Influence: There are concerns about political influence in the FCRA registration and regulatory process, potentially influencing the approval or denial of FCRA registrations.

These concerns highlight the operational challenges and regulatory issues faced by NGOs under the FCRA framework.

Criteria for FCRA Registration

Under the FCRA, individuals or NGOs intending to receive foreign donations must:

• Be registered under the Act.
• Open a designated bank account at the State Bank of India in Delhi for receiving foreign funds.
• Utilize the funds strictly for the purposes specified and in accordance with the Act.

FCRA registrations are issued to individuals or associations engaged in specific cultural, economic, educational, religious, and social programs.

Exceptions under FCRA

Under the FCRA, applicants are ineligible if they:

• Are fictitious entities.
• Have been prosecuted or convicted for activities involving religious conversion by inducement or force, directly or indirectly.
• Have been prosecuted or convicted for creating communal tension or disharmony.
• Are engaged or likely to be engaged in propagating sedition.

Additionally, the FCRA prohibits the receipt of foreign funds by candidates in elections, journalists, newspaper and media broadcast companies, judges, government servants, members of the legislature, political parties, or their office-bearers, and organizations of a political nature.

Benefits of FCRA Registration

FCRA Registration offers numerous benefits to non-profit entities registered in the country for charitable purposes. These are as follows:

1. Access to Foreign Funding: FCRA registration allows NGOs and non-profit organizations to legally receive foreign contributions, facilitating financial support for their charitable activities.
2. Facilitates Nonprofit Operations: FCRA registration allows organizations to receive money from foreign sources easily. This helps nonprofits do their work better to make a changes in society.
3. Enhanced Credibility: Registration enhances an organization’s credibility and trustworthiness, both domestically and internationally, by demonstrating compliance with stringent regulatory standards.
4. Tax Exemptions: FCRA-registered entities are eligible for certain tax exemptions under the Income Tax Act, such as deductions under sections 80G and 12A, which incentivize donations and support organizational objectives.
5. Increased Impact: Access to foreign funding enables organizations to scale up their programs, expand their reach, and have a larger impact on their targeted beneficiaries and communities.
6. Networking and Collaboration: Registration facilitates collaboration and networking opportunities with international donors and organizations, fostering knowledge exchange, resource sharing, and strategic partnerships for sustainable development initiatives.

FCRA Registration Fees

The government fees for FCRA prior permission is ₹5000  while the Government fees for Fresh FCRA registration is ₹10000. Apart from that, the NGO needs to pay a professional fee of ₹15000 for registering their Trust, society or section 8 Company under FCRA.

Post-Registration FCRA Compliance

As per the law, registered FCRA entities should comply and file annual returns in Form FC-4 along with the balance sheets of the company. It is mandatory to get the balance sheets certified by a registered CA. The form FC-4 should be filed online before 31 December of every year.

Penalties for Non-Compliance with FCRA

The penalties for FCRA registration non-compliance are as follows:

1. Under the FCRA, the government has the authority to impose penalties up to three times the amount of foreign contributions received in violation of the Act.
2. Additionally, if an entity or individual provides incorrect or false information under section 18 or clause (c) of section 9, or attempts to obtain registration or prior permission through misrepresentation, fraudulent means, or concealment of significant facts, the consequences may include:

• Possible imprisonment of up to 6 months, a fine, or both, depending on the circumstances.
• Seizure of foreign investments or contributions.
• Confiscation of the organization’s accounts and documents by the authority.

FAQs on the Foreign Contribution Regulation Act (FCRA)

1. What is the primary purpose of the Foreign Contribution Regulation Act (FCRA)?

   • The Foreign Contribution Regulation Act (FCRA) aims to regulate the acceptance and utilization of foreign contributions to ensure that they do not adversely affect the sovereignty and integrity of India, its public interest, and the harmony between its citizens.

2. Which entities are eligible for FCRA registration?

   • Eligible entities include Trusts, Societies, and Section 8 Companies that have been in existence for at least three years and have spent a minimum of ₹10,00,000 on their objectives, excluding administrative expenses.

3. Can an organization receive foreign contributions without FCRA registration?

   • No, it is mandatory for organizations to obtain FCRA registration to legally receive foreign contributions in India.

4. What are the key changes introduced in the Foreign Contribution Regulation Act (FCRA) 2020 amendment?

   • The FCRA 2020 amendment includes a ban on transferring foreign contributions to other organizations or individuals, reducing the administrative expense cap from 50% to 20%, and requiring NGOs to open a designated FCRA account at the State Bank of India in New Delhi.

5. How does an organization apply for FCRA registration?

   • Organizations must apply online through the FCRA portal by filling out Form FC-3A for registration or Form FC-3B for prior permission, providing necessary documents, and paying the required fees.

6. What are the consequences of FCRA non-compliance?

   • Penalties for non-compliance can include fines up to three times the amount of foreign contributions received unlawfully, imprisonment for up to six months, and possible seizure of accounts and documents.

7. Can FCRA registration be canceled or suspended?

   • Yes, the government can cancel or suspend FCRA registration for reasons such as violations of the Act or insufficient activity in the designated field for two consecutive years.

8. What are the document requirements for FCRA registration?

   • Required documents include the registration certificate of the association, Memorandum of Association/Trust deed, activity reports for the last three years, audited financial statements, affidavits of key functionaries, and more.

9. How long is FCRA registration valid, and how is it renewed?

   • FCRA registration is valid for five years. Organizations must apply for renewal within six months before the registration’s expiration date.

10. What is the significance of the designated FCRA account at the State Bank of India?

    • All foreign contributions must be received in this designated account to ensure centralized monitoring and transparency in the utilization of foreign funds.

11. Are there any prohibitions on the use of foreign contributions under FCRA?

    • Yes, foreign contributions cannot be used for activities that may incite communal disharmony, religious conversion through inducement or force, or any activities detrimental to the national interest.

12. Who cannot receive foreign contributions under FCRA?

    • Prohibited entities include candidates for elections, journalists, media companies, judges, government servants, members of the legislature, political parties, and organizations of a political nature.

13. What are the benefits of obtaining FCRA registration?

    • Benefits include legal access to foreign funding, enhanced credibility, tax exemptions, increased operational impact, and opportunities for international collaboration and partnerships.

14. What kind of activities can FCRA-registered entities undertake with foreign contributions?

    • FCRA-registered entities can engage in cultural, economic, educational, religious, and social programs as specified in their registration documents.

15. How often must FCRA-registered organizations file returns, and what must be included?

    • Organizations must file annual returns in Form FC-4, including details of foreign contributions received and utilized, and audited financial statements, by December 31 each year.