FOREIGN CONTRIBUTION (REGULATION) ACT, 1976

INTRODUCTION

Foreign Contribution (Regulation) Act, 1976 (FCRA) was enacted in the year 1976 with the prime objective of regulating the acceptance and utilization of foreign contribution and foreign hospitality by persons and associations working in the important areas of national life. The focus of this Act is to ensure that the foreign contribution and foreign hospitality is not utilized to affect or influence electoral politics, public servants, judges and other people working the important areas of national life like journalists, printers and publishers of newspapers, etc. The Act also seeks to regulate flow of foreign funds to voluntary organizations with objective of preventing any possible diversion of such funds towards activities detrimental to the national interest and to ensure that such individuals and organizations may function in a manner consistent with the values of sovereign democratic republic.

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

In order to bring in transparency in the administration of the Foreign Contribution (Regulation) Act, 1976 and the Rules framed there under, improve the functioning, disseminate the information and enhance user friendliness of the various procedures the web-site is uploaded with all the FCRA forms, Citizens’ Charter, list of registered associations, State-wise status of application for registration/ prior permission, etc. In our efforts to bring in further improvements in the system, the following additional charters/ materials are uploaded for information and guidance of all concerned:

• Charter for NGOs/Associations granted Prior permission/Registration under the FCRA.

• Charter for the Chartered Accountants.

• Charter for the Banks.

• Dealing offcers

Citizens Charter

Receipt of Foreign Contribution

The provisions of the Foreign Contribution (Regulation) Act, 1976 regulate the receipt of foreign contribution in the country. The Foreign Contribution (Regulation) Rules 1976 contain the various forms prescribed for this purpose.

What is Foreign Contribution

Foreign contribution means the donation, delivery or transfer, made by any foreign source of any,

1. Article, not given to a person as a gifit , for personal use, if the market value, in India, of such article exceeds one thousand rupees;
2. Currency, whether Indian or foreign; or,
3. Foreign security as defined in clause 2(i) of the Foreign Exchange Regulation Act, 1973.

NOTE: Contributions made by a citizen of India living in another country, from his personal savings, through the normal banking channels, is not treated as foreign contribution. It is advisable to obtain the passport details of the concerned citizen of India before accepting such contributions.

What is a Foreign Source

Foreign source means the government of any foreign country or territory or its agency; international agency; a foreign company; citizen of a foreign country. For more details see section 2(1)(e) of the Foreign Contribution (Regulation) Act, 1976.

Who cannot Receive Foreign Contribution

Foreign contribution cannot be accepted by a candidate for election; correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper; judge, government servant or employee of any corporation; member of any legislature; political party or office bearer thereof.

Who can Receive Foreign Contribution

An association having a definite cultural, economic, educational, religious or social programme can receive foreign contribution after it obtains the prior permission of the Central Government, or gets itself registered with the Central Government.

Forms Prescribed for this Purpose

An application for seeking prior permission to accept foreign contribution is to be made in Form FC – 1A and for grant of registration in Form FC – 8 respectively.

Designated Bank Account

An association granted prior permission or registration under the Act can receive the foreign contribution and subsequently utilise it using a single designated bank account, as intimated in the application form. Do not deposit any local funds in this bank account.

Maintenance of Accounts

An association granted prior permission or registration under the Act must maintain a separate set of accounts and records exclusively for the foreign contribution received and utilised in the prescribed manner. For more details see rule 8 of the Foreign Contribution (Regulation) Rules, 1976.

Receipt of Scholarships etc

A citizen of India receiving any scholarship, stipend or any payment of a like nature from any foreign source is required to give, within thirty days of such a receipt, an intimation to the Central Government as to the amount of the scholarship, stipend or other payment received; the foreign source from which and the purpose for which, such scholarship, stipend or other payment has been, or is being received. The intimation is to be given in Form FC – 5.

Time Taken to Dispose Application

An application for registration is normally disposed within six months. An application seeking prior permission is disposed within 90/120 days. It is advisable to obtain a certificate , in the format incorporated at the end of the application form, from any of the competent authority mentioned therein viz., Any concerned Collector of District; Department of the State Government; Ministry / Department of the Government of India.

Where should the Application be Sent

An application (one copy only) for seeking prior permission or registration is to be sent by registered post to the Secretary, Ministry of Home Affairs, Foreigners Division, Jaisalmer House, 26 Man Singh Road, New Delhi 110011.

Proper Filing of Application

Please familiarise yourself with the provisions of the Foreign Contribution (Regulation) Act, 1976 and the Foreign Contribution (Regulation) Rules, 1976 before making an application. Please fill the relevant application form with due care. Ensure that you furnish information exactly in the manner stated in the form. An incomplete application will be summarily rejected.

Filing of Returns

An association permitted to accept foreign contribution is required to submit an annual return, duly certifed by a Chartered Accountant, giving details of the receipt and purpose-wise utilization of the foreign contribution. The return is to be filed for every year (1st April to 31st March) within a period of four months from the closure of the year i.e. by 31st July of each year. The return is to be submitted, in duplicate, in Form FC–3. It is to be accompanied with the balance sheet and statement of receipt and payment, duly certifed by a Chartered Accountant, also in duplicate.

Availability of Forms

Please use the correct and current form. The forms can be obtained, free of cost, from the above-mentioned address. The forms are also available on the Ministry of Home Affairs’ web site – http://mha.nic.in/fore.htm

Penalties for Violation

Whoever accepts, or assists any person, political party or organisation in accepting any foreign contribution or any currency from a foreign source, in contravention of the provisions of the Foreign Contribution (Regulation) Act, 1976, or the rules made thereunder, shall be punished with imprisonment for a term, which may extend to five years, or with fne or with both. “All the above services & commitments will be honoured without the citizens having to pay any bribe.”

Charter for Ngos/Associations Applying For Grant of Prior Permission /Registration under the Foreign Contribution (Regulation) Act, 1976.

• Any NGO wishing to receive Foreign Contribution (FC) must have a definite cultural, economic, educational, religious or social programme.

• It shall neither receive nor utilise any FC without obtaining either prior permission or registration from the Central Government.

• Details of FC received prior to obtaining either prior permission or registration should be mentioned clearly at the time of applying for prior permission or registration, as the case may be.

• An application for seeking prior permission to accept foreign contribution is to be made in Form FC– 1A, and for grant of registration in Form FC–8, respectively. The forms can be downloaded from Ministry of Home Affairs Web Site at http:// mha.nic.in/ fcra.htm

• The application should be complete in all respects and no column should be lefit blank.

• Each Prior permission application should be sent for receiving a specific amount, for a specific purpose and from a specific donor. The donor’s commitment letter specifying the amount of FC and copy of project for which FC is solicited should invariably be sent along with the FC-1A form.

• Copies of following documents are required to be sent along with FC-1A and FC-8 form.

1. Copy of certificate of registration issued under the Societies Registration Act, 1860 or Trust deed, as the case may be;
2. Details of activities during the last three years;
3. Copies of audited statement of accounts for the past three years (Asset and Liabilities, Receipt and Payment, Income and Expenditure);
4. If any printed work is brought out by the association, a certificate from the Press Registrar that the publication is not a newspaper in
   terms of section 1(1) of the Press Registration of Books Act, 1867.

Charter for Ngos / Associations Granted Prior Permission or Registration Under the Foreign Contribution (Regulation) Act, 1976.

• An association granted prior permission or registration under the Foreign Contribution (Regulation) Act, 1976 (FCRA) should receive the FC and subsequently utilise it using an exclusive designated bank account, as intimated in the application form. Do not deposit any local funds in this bank account.

• An association granted prior permission or registration under FCRA is required to carry out the activities, for which FC is received, in India only and the amount should not be utilised for purposes other than for which it is received.

• Any fixed asset acquired out of the FC and any article received in kind from the foreign source should be in the name of the association and not in the name of any individual in the association.

• Not more than 30% of the FC shall be defrayed to meet administrative expenses of the association.

• An association granted prior permission or registration under FCRA should maintain a separate set of accounts and records, exclusively for foreign contribution received and utilised.

iii. In Form FC-7, where the FC relates to foreign securities.

• Every account giving details of the receipt and purpose-wise utilisation of the FC, including the interest earned on the FC amount, should be maintained on an yearly basis, commencing on the 1st day of April each year and every such yearly account, duly certifed by a hartered accountant in Form FC-3 along with a balance sheet and statement of receipt and payment should be furnished in duplicate, within four months of the closure of the year i.e. before 31st July. Even if no FC is received during a year, a ‘Nil’ return is required to be filed with the Ministry of Home Affairs within the prescribed time limit.

• No FC should be transferred to an association, which has not obtained either prior permission or registration under FCRA or to any person or association, prohibited under FCRA from receiving any FC.

• Change of name, address, registration, nature of activities or aims and objectives of an association should be intimated to the Ministry of Home Affairs within 30 days of effecting the change, alongwith the documentary evidence effecting the change.

• Prior permission of Ministry of Home Affairs should be obtained for replacing 50% or more of the office bearers.

• Prior permission of Ministry of Home Affairs should be obtained for changing bank account for valid and convincing reasons.

• The forms can be downloaded from Ministry of Home Affairs Web Site at http//mha.nic.in/fcra.htm.

Charter for the Chartered Accountants

Since the FCRA Act, 1976 is national security legislation; NGOs are required to exercise extreme care and caution in dealing with foreign contribution from the time of its receipt to its final utilization. As the Chartered Accountants (CA’s) audit the accounts of the NGOs and they certify the accounts before being submitted to the FCRA division, CA’s are required to provide meaningful guidance to the NGOs.

• To verify whether the associations are eligible to receive foreign contribution

• To guide the applicant organization to apply to the Home Ministry for necessary registration / prior permission;

• To assist in the proper maintenance of prescribed books of accounts;

• To furnish the required certificate in the prescribed format after careful scrutiny of the accounts of the NGO;

• Before certifying the accounts of an association in FC-3 returns, the CA concerned must ensure that they have been prepared in accordance with the provisions of FC(R) Act, 1976 and Rules framed thereunder.

Charter for the Banks

• No bank should credit any foreign contribution to the account of an association/NGO unless it produces documentary evidence of having obtained registration/prior permission from the Central Government for the same.

• In case any foreign contribution is credited to the account of an NGO/ Association/Trust directly, the bank should not allow utilization of such fund and inform the NGO/ Association/ Trust concerned to obtain necessary permission/registration from the Central Government for the same. Simultaneously, the bank should inform the Deputy Secretary (FCRA), Ministry of Home Affairs, Govt. of India, New Delhi about such receipt.

• Non-compliance of the above by the bank will constitute a violation and will render the defaulting bank liable for appropriate action by the Reserve Bank of India.

Checklist for Ensuring Proper Submission of Applications, Under the Provisions of the Foreign Contribution (Regulation) Act, 1976, for Acceptance of Foreign Contribution

Eligible Category

An association with a definite cultural, economic, educational, religious or social programme.

Types of Permission

(i) Registration under section 6(1)(a); and,
(ii) Prior permission under section 6 (1A).

Application Form

(i) For grant of registration in form FC– 8 and,
(ii) For grant of prior permission in form FC-1A.

Essential Requirements

(A) Bank Account

Open a separate bank account for the receipt and utilisation of foreign contribution in a bank of your choice and furnish particulars of the same at the appropriate place.

Note: Do not deposit any local funds, other than the essential initial deposit specified by the bank for opening an account, in this account.

(B) Documents

Remember to enclose copies of the following documents with your application –

1. Certifed copy of registration certificate or Trust deed, as the case may be;
2. Details of activities during the last three years;
3. Copies of audited statement of accounts for the past three years (Asset and Liabilities, Receipt and Payment, Income and Expenditure);
4. Commitment letter from foreign donor specifying the amount of foreign contribution (only with prior permission application);
5. Copy of project for which foreign contribution was solicited is being offered (only with prior permission application);
6. If functioning as editor, owner, printer or publisher of a publication registered under the Press and Registration of Books Act, 1867, a certificate from the Press Registrar that the publication is not a newspaper in terms of section 1(1) of the said Act.

Miscellaneous

Furnish information exactly in the manner asked for in the form, especially the names and addresses of the members of the Executive Committee/Governing Council etc. The forms can be downloaded from Ministry of Home Affairs Web Site at http:/ /mha.nic.in/fcra/ intro/forms.htm

Chartered Accountants / Banks

Chartered Accountants, before certifying the accounts of an association in form FC – 3, must ensure that they have been prepared in accordance with the provisions of the Foreign Contribution (Regulation) Act, 1976 and the Rules framed thereunder.

No bank should credit any foreign contribution to the account of an association/ organisation unless it produces documentary proof of having obtained registration/prior permission from the Central Government for the same. Crediting of foreign contribution by a bank to the account of an association / organisation that has not obtained registration or prior permission from the Central Government constitutes a violation and will render the defaulting bank liable for action by the Reserve Bank of India.

Common Ground for Rejection of Application Under FCRA

To remove certain lacunae noticed during administration of the FCRA and the Rules made there under, certain guidelines were laid down for considering applications for grant of prior permission /registration under the Act. Some of the common grounds for rejection of applications are enlisted below as illustrations to bring in transparency and benefit the applicants in taking due care and caution:

• If the association is not registered under the Societies Registration Act, 1860 or Indian Trusts Act, 1882 or section 25 of the Companies Act, 1956.

• If any of the office bearers/trustees, including the chief functionary is a foreign national, other than of Indian origin.

• If the association has a single office bearer/member.

• If the association is found to have been formed for personal gain or for diversion of the funds for undesirable purposes.

• If the association is found to be fictitious or ‘benami’ in nature.

• If the credibility of any member of the governing body is in doubt.

• If the association has close links with another association which has been refused registration under FCRA or prohibited under FCRA or violated the provisions of FCRA.

• If the association has links with any banned organization.

• If the principal office bearers of the association have been convicted by any court of law under any act or if a prosecution for any offence is pending against them.

• If the principal office bearers of the association have been found guilty of diversion or misutilisation of funds of the said association or any other association in the past.

• If the activities of the association are found to be aimed at conversion through inducement or force, either directly or indirectly, from one religious faith to another.

• If the association is found to be propagate sedition or to advocate violent methods to achieve its ends.

• If the association is found to be creating communal tensions or disharmony.

• If the office bearers of the association are also office bearers of another association and one of these association has come to adverse notice.

• If the association’s printed work is not certifed by the Press registrar of India not to be a newspaper in terms of section 1(1) of the Press Registration of Books Act, 1867.

• If the source of foreign contribution is found to be adverse to the interests of the country.

• If the acceptance of foreign contribution by the association is likely to be prejudicial to (a) the sovereignty and integrity of India; (b) free and fair election to any Legislature or House of Parliament; (c) public interest; (d) friendly relations with a foreign state; or (e) harmony between any religious, social, linguistic, regional groups, caste or community.

• If the association has not filed its annual FC-3 returns, of receipt and utilization of foreign contribution received with prior permission, within the stipulated period.

• If the association has violated any provisions of the Act or Rules in the preceding three years and the said violation has not been remedied or rectifed.

Additional Grounds for Rejection of Applications for Registration

• If the association is not in existence for three years at least.

• If the association has not carried on any activity in chosen field during the last three years.

• If the association has not received foreign contribution with prior permission, during the preceding three years.

• If the association has not made any substantial contribution, excluding expenditure on administration, (Rs.6,00,000 over a period of three years or Rs.2,00,000 per year) in its field of interest.

Additional Grounds for Rejection of Applications for Prior Permission

• If the application is not accompanied by the ‘commitment letter’ of the donor.

• If the application is not accompanied by the copy of project for which foreign contribution was solicited/is being offered.