Doubt on FCRA act and utilisation account

Hi GKannan,

Regarding your query on the FCRA (Foreign Contribution Regulation Act) and utilization account, here are some clarifications and suggestions:

1. Using Zero Balance FCRA Account for Local Donor Purpose

• FCRA funds must be utilized only for the purpose for which foreign contribution is received.

• If you have used the FCRA zero balance account (which is meant for foreign contribution) for a local donor purpose, it is a violation of the FCRA rules, as local funds and foreign contribution must be kept separate and used only as per the purpose.

2. Consequences of Violation

• Non-compliance with FCRA provisions, such as misuse of the FCRA account, can invite penalties, including fines, suspension, or cancellation of FCRA registration.

• MHA (Ministry of Home Affairs) monitors the utilization of foreign contributions strictly.

3. Remedy for the Violation

• Rectify the mistake immediately by reversing the transaction or transferring the local funds to the correct local donor account if possible.

• Disclose the violation voluntarily in your next annual FCRA return (Form FC-4) and explain the reason, corrective action taken, and steps to avoid future errors.

• If required, seek legal or expert advice to prepare a response or representation to the MHA.

4. Closing a Non-utilized FCRA Utilization Account in MHA Portal

• If an FCRA utilization account (bank account opened for the purpose of utilizing foreign funds) is no longer in use or non-utilized, you generally need to:

  • Ensure no funds are lying in the account.

  • Submit a formal request to your bank to close the account.

  • Update the MHA via the FCRA online portal about the closure of the account.

  • In the portal, there should be an option under the “Bank Details” or “Utilization Accounts” section to mark the account as closed or remove it after necessary compliance is done.

  • You may also attach a bank closure certificate or confirmation as evidence.