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FCRA Registration - Eligibility, Documentation, Prior Permission & Compliance Requirements

Shweta 
on 09 November 2020

LinkedIn


The rise in global interconnectedness has increased and eased the flow of foreign currency to and from a country. It has become easier for institutions, especially civil society organizations, to receive aid and funding from abroad. However, the same has also raised concerns about national integrity and security. In light of these events, a need to regulate foreign contributions was felt and the Foreign Contribution (Regulation) Act was enacted in 1976 and subsequently amended in 2010 and 2020. The FCRA 1976 was repealed after the coming of FCRA 2010.

Before we delve into an analysis of the Act, let us look into some key concepts.

FCRA Registration - Eligibility, Documentation, Prior Permission and Compliance Requirements

What does foreign contribution refer to?

Section 2(1)(h) of FCRA 2010 defines "foreign contribution" as the donation, delivery or transfer made by any foreign source of-

• an article given to a 'person'*

Exemption- an article given as a gift for personal use, if the market value of such article in India, on the date of such gift, is not more than such amount as may be specified by the government from time to time

[As per the Foreign Contribution (Regulation) Amendment Rules, 2012, the fixed sum is INR 25,000]

• any currency, whether Indian or foreign

• any security as defined in clause (h) of Section 2 of the Securities Contracts (Regulation) Act, 1956, and includes any foreign security as defined in clause (o) of Section 2 of the Foreign Exchange Management Act, 1999

*For the purpose of the Act, the term 'person' refers to an individual, HUF, an association, and a company registered under section 25 of the Companies Act, 1956.

 

Explanation 1- A donation, delivery or transfer or any article, currency or foreign security by any person who has received it from any foreign source, either directly or indirectly, shall be considered as a foreign contribution

Explanation 2- The interest accrued on the foreign contribution deposited in any bank or any other income derived from the foreign contribution or interest thereon shall also be deemed to be a foreign contribution

Explanation 3 - Any contribution made by an NRI from their personal savings, through the normal banking channels, is not treated as a foreign contribution. However, a donation from an Indian who has acquired foreign citizenship, a PIO cardholder, or OCI comes under foreign contribution.

Explanation 4 - Any amount received from a foreign source in India as fees (including educational fees) or in exchange for goods or services rendered in the ordinary course of business won't be counted as a foreign contribution. Additionally, any amount received from an agent or a foreign source towards such fee or cost shall also be excluded from the definition of foreign contribution.

Who can receive foreign contribution?

Any 'person' can receive foreign contribution subject to the following conditions:-

  • It must have a definite cultural, economic, educational, religious, or social programme
  • It must obtain the FCRA registration / prior permission from the Central Government
  • It must not be prohibited under Section 3 of FCRA, 2010

Which entities can't receive foreign contribution?

According to section 3(1) of FCRA, 2010, the following are prohibited from receiving foreign contribution-

  • A candidate standing for election
  • Judge, government servant or employee of a corporation or any other body controlled or owned by the government
  • Members of any legislature
  • A political party or its office bearer
  • Organization of a political nature as may be specified under sub-section (1) of Section 5 by the government
  • Individuals or associations who have been prohibited from receiving foreign contribution
  • Correspondent, columnist, cartoonist, editor, owner, printer, or publisher of a registered newspaper
  • Association or company engaged in the production or broadcast of audio news or audiovisual news or current affairs programs through any electronic mode or any other mode of mass communication
  • Correspondent or columnist, cartoonist, editor, owner of the association or company referred to in the above point.

Types of registration under FCRA 2010

There are two ways of obtaining certification/registration for getting foreign funds-

a) FCRA Registration

To attain an FCRA registration, one has to fill and submit Form FC-3A to the Ministry of Home Affairs. Granting registration is solely at the discretion of the MHA.

Eligibility

To be eligible for a grant of registration, an entity should-

  • be registered under the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or section 25 of the Companies Act, 1956 (now Section 8 of Companies Act, 2013), or any other determining statute
  • be in existence for at least three years and undertake reasonable activity in its chosen field for which the foreign contribution is proposed to be utilized
  • have spent at least INR 10,00,000 in the last three years towards achieving its objectives, excluding administrative expenditure
  • submit the audited Statements of Income & Expenditure of the last three years to substantiate that it meets the financial criteria

b) Prior Permission

It is applicable for organizations that are in the formative stage and hence not eligible for registration. Prior permission is granted for receipt of a specific amount from a particular donor and for carrying out specific projects/activities. To file for prior permission, the applicant has to fill Form FC-3B.

Eligibility for prior permission-

• The association must be registered under an existing statute like the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or section 8 of the Companies Act, 2013

• Submit a specific Commitment Letter from the donor indicating the amount of foreign contribution and the purpose for which it is proposed to be given

• For Indian recipient organizations and foreign donor organizations having common members, FCRA Prior Permission shall be granted to the Indian recipient organizations on the following conditions:

i) The Chief Functionary of the Indian recipient organization can not be a part of the donor organization

ii) At least 51% of the office-bearers/ members of the governing body of the Indian organization should not be members/employees of the foreign donor organization

iii) In case the foreign donor is a single person/individual-

• that person should not be the Chief Functionary or office bearer of the recipient Indian organization

• at least 51% of office bearers/members of the recipient organization's governing body should not be the family members and close relatives of the donor.

NOTE- As per the recently amended FCRA, all NGOs seeking foreign contribution have to open a designated FCRA account at the State Bank of India's New Delhi Main Branch (NDMB), and can accept foreign contributions only in that account. All organizations that have already been granted a certificate of registration or prior permission, also need to open an account at the given SBI branch latest by 31st March 2021. If the applicant has another FCRA account at any other scheduled bank, they can retain and link it with the designated account at NDMB.

Documents required for registration

A) For registration

  • Scanned image of signature of the chief functionary (size: 50kb; format: jpg/jpeg)
  • Scanned image of Seal of Association (size: 100kb; format: jpg/jpeg)
  • Registration Certificate of Association (size: 1MB; format: PDF)
  • Copy of relevant pages of Memorandum of Association/Trust Deed showing aim and objects of the association (size: 5MB; format: PDF)
  • Activity Report citing details of activities during the last three years (size: 3MB; format: PDF)
  • Copies of audited statement of account of last three years reflecting expenditure incurred on aims and objects of the association and on administration (size: 5 MB; Format: PDF)
  • Affidavit of the key functionaries as given in Proforma AA

B) For prior permission

  • Scanned image of signature of the chief functionary (size:50kb; format: jpg/jpeg)
  • Scanned image of Seal of Association (size: 100kb; formate: jpg/jpeg)
  • Self-certified copy of Registration Certificate of Association (size:1MB; format: PDF)
  • Copy of relevant pages of Memorandum of Association/Trust Deed (size: 5MB; format: PDF)
  • Duly signed Commitment Letter from donor organization and agreement. (size: 5MB; format: PDF)
  • Project Report for which foreign contribution will be received. (size:3MB; format: PDF)
  • 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 Registrar of Newspapers for India that the publication is not a newspaper in terms of section 1(1) of the said Act.

NOTE- As per the 2020 amendment to the FCRA, to file for registration or obtain prior permission, the applicant has to submit the Aadhaar number of all its office bearers or Directors or other key functionaries. If any of the key functionaries is a foreigner, a copy of the Passport or Overseas Citizen of India Card is to be submitted.

FCRA Registration Procedure

The process for applying for FCRA has been made quite simple. To view/download the detailed registration procedure, click here

Once the application is submitted, the Central government, after making the relevant inquiry, may grant a registration certificate or prior permission within 90 days from the date of application.

Validity

Once the registration is done, it remains valid for five years. However, a renewal application has to be made six months before the certificate's expiration date. To renew their registration certificate, one may apply online in Form FC-3C.

The prior permission is valid for the duration of the specific purpose/activity or the specific amount of foreign contribution proposed.

 

Annual Filing of Returns

An association permitted to receive foreign funds under FCRA has to submit an annual return certified by a CA. For filing the return, one must fill form FC-4 accompanied with scanned copies of income and expenditure statement, balance sheet, and statement of receipt and payment within nine months from the year's closure, i.e., by 31st December. It is also mandatory to file a 'zero' return, i.e., even if there is no receipt or utilization of foreign funds during the year. If an organization fails to file a return on time, they can either be penalized or their registration canceled.

For the Financial Year 2019-20, the last date for filing the Annual Return is 31st December 2020.

Forms under FCRA

The following major forms are required to be filed under FCRA-

Form Number

Purpose

FC-1

-Intimation of receipt of foreign contribution by way of gift, articles from a relative
-Intimation about the foreign contribution by way of securities
-Intimation of receipt of foreign contribution by a candidate for election

FC-2

Application for seeking prior permission of the government to accept foreign hospitality

FC-3A

Application for FCRA registration

FC-3B

Application for prior permission

FC-3C

Application for renewal of FCRA registration

FC-4

Intimation of Annual Returns

FC-5

Application for seeking permission for the transfer of foreign contribution to persons who are not registered

FC-6

A. Intimation of change of name and address within the State of Association

B. Change of nature/aims/objectives of the association

C. Change of designated bank/ bank branch of designated FC receipt bank account

D. Opening of additional FC utilization bank account

E. Change in original key members of the association


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