Receiving Foreign Contribution becoming tougher

Mahamood A P , Last updated: 02 June 2011
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With the enactment foreign contribution (Regulation) Act, 2010, The Government of India has bought major amendment tightening existing rules and regulations. The new act is effective from 1st May 2011. The major changes in the act are summarized below.

A. Every registration granted Under FCRA shall be valid for a period of five years.

Every organization registered under FCRA shall have such certificate renewed within six months before expiry of such registration.

The central Government will renew the registration normally within a period of Ninety days

Every person registered under Old act shall get their registration renewed after 5 years from 1st May 2011, i.e., They have to apply for renewal within six months before expiry of 5 years

Application for renewal of registration is in Form FC-5 and shall be accompanied by a fee of Rs. 500/- by demand draft or banker’s cheque in favor of the “ Pay and Accounts Officer, Ministry of Home Affairs” payable at New Delhi.

B. Restriction on usage foreign contribution.

Every person registered under the act shall utilize such contribution for the purpose for which it was sanctioned.

Such contribution shall not be used for speculative purposes.

Such contribution may be used for administrative purposes only to the extent of not exceeding 50% of total contribution.

Administration expense include

All expenses related to consumables like electricity, water charges and telephone charges, salary, wages and travel expenses of Managing Committee and Employees for management of the activity, Cost of acquiring and administering the fund, expenses towards running and maintenance of vehicles, legal and professional charges, and rent and repairs of premises and other utilities.

C. Intimation of foreign contribution by the recipient.

Every person who receives foreign contribution shall submit return in Form FC-6 accompanied by receipts and payments account, income and expenditure account and balance sheet within nine months of closure of financial year.

Form FC-6 shall be accompanied by a copy of statement of account from the bank where exclusive foreign contribution account is maintained by the person, duly certified by an officer of such bank.

In case of person who has been granted a certificate of registration or prior permission receives foreign contribution in excess one crore rupees, he/it shall place summary of data on receipts and utilization pertaining to the year of receipts as well as for one year thereafter in the public domain.

Every person registered under the act shall maintain separate set of accounts in respect of foreign contribution received and utilized.

D. Provisions Relevant to banks

Every return in Form FC- shall be accompanied by statement of account from the bank duly certified by the bank

Every bank shall send a report to the Central Government within thirty days of any transaction in respect of foreign contribution by any person who was not granted certificate or prior permission, even though he is required to obtain prior permission or registration under the act.

If any person registered or unregistered under the act, receive foreign contribution in excess of one crore rupees within a period of thirty days, the bank shall report to the Central Government.

E. Transfer of Foreign Contribution

No person registered under the act shall transfer such foreign contribution to any other person who is registered or not under the act unless the Central Government permit so.

Any person intend to transfer shall make an application in form FC-10

The Central Government may permit transfer to registered person, unless he is no proceeded against.

In case the recipient is not registered or granted prior permission, the Central Government can allow to transfer a part of foreign contribution not exceeding ten percent of total value of foreign contribution on the application by the person concerned. It shall be countersigned by the District Magistrate having jurisdiction over the place where funds are sought to be utilized.

F. Miscellaneous Provisions

Every person registered under the act can open only one account to receive foreign contribution and may open one or more accounts for utilizing the foreign contribution. No other fund other than foreign contribution shall deposit in such account.