What you should know in FCRA compliance?

KEY POINT FOR CONSIDERATION FOR CONTRIBUTION REGULATED BY FCRA, 2010

HISTORY
The Foreign Contribution (Regulation) Act, 2010 also known as FCRA, 2010 was enacted after it received presidential assent on 26th September 2010. It has replaced its predecessor i.e. the Foreign Contribution (Regulation) Act, 1976.

PURPOSE
The FCRA was enacted to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contribution for any activities detrimental to the national interest and for matters connected therewith or incidental thereto. (Source: Wikipedia)

REGULATORY AUTHORITY
Ministry of Home Affairs is the regulatory authority for Foreign Contribution received in India

mha

APPLICABILITY
The FCRA is applicable to following
• Whole of India
• Citizens of India outside India; and
• Associate Branches or subsidiaries, outside India, of companies or bodies corporate,               registered or incorporated in India

REQUIREMENT
FCRA registration is required by an NGO to obtain any contribution from a foreign source. All the foreign contribution received are regulated by FCRA and the various requirement of FCRA are required to complied with while receiving and utilizing such contributions. This requirement can be meet in following two ways:
• Prior Permission before receiving certain amount of foreign contribution
• Registration under FCRA

KEY CONCEPTS
1. Foreign Contribution

Foreign contribution means the donation, delivery or transfer made by any foreign source:
i) of any article, not being an article given to a person as a gift for his personal use, if the market value, in India, of such article, on the date of such gift is not more than such sum as may be specified from time to time by the Central Government by rules made by it in this behalf. (This sum has been specified as Rs. 25,000/- currently);
ii) of any currency, whether Indian or foreign;
iii) of 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.

2. Eligibility For Receiving Foreign Contribution

eligibity

3. Currency Of Foreign Contribution

There is no restriction on currency of foreign currency. Even Indian Rupee can be termed as foreign contribution.

4. Income Earned Through Foreign Contribution

Any income earned through foreign contribution such as interest earned on foreign contribution should also be considered as foreign contribution. However, such income should be treated as fresh foreign contribution while filing annual return i.e. FC-4 and should be shown under column no. 2(i)(b).

5. Contribution Received From Indian Citizen Not Residing In India

Contribution Received from Indian Citizen not residing in India is NOT considered as foreign contribution. However, copy of passport should be obtained to confirm his/her citizenship.

6. Infusion of Share Capital From Foreign Fund in Section 8 Companies

Infusion of share capital from foreign fund in section 8 companies to be treated as foreign contribution.

7. Foreign Remittance Received From Relative

As per Section 4(e) of FCRA, 2010 and Rule 6 of FCRR, 2011, even the persons prohibited under section 3, i.e., persons not permitted to accept foreign contribution, are allowed to accept foreign contribution from their relatives. However, in terms of Rule 6 of FCRR, 2011, any person receiving foreign contribution in excess of one lakh rupees or equivalent thereto in a financial year from any of his relatives shall inform the Central Government in Form FC-1 within thirty days from the date of receipt of such contribution. This form is available on the website: fcraonline.nic.in

8. Fee Paid by the Foreign Delegates/Participants Attending/Participating in a Conference/Seminar etc.

“Delegate/participation Fees” paid by foreign delegates/participants for participation in a conference/seminar and which is utilized for the purpose of meeting the expenditure of hosting the conference/seminar is not treated as foreign contribution and as such no permission under FCRA is required

9. Foreign Contribution Received From United Nations Or Any Of Its Specialized Agencies, The World Bank, International Monetary Fund, etc.

Such contribution will not be treated as foreign contribution

10. Updation Of Foreign Receipts On Ministry Of Home Affairs/Organisation Website
Details of foreign contribution received in quarter of financial year shall be placed on official website or on website as specified by central government, within fifteen days of end of the quarter in which contribution was received

The details should clearly indicate the following:
• Name of Donor
• Individual/Institute
• Official Address of Donor
• E-mail ID
• Website address
• Block Year in which Donation made
• Purpose of Donation

11. Intimation To Be Given To MHA In Certain Conditions

The Association should intimate through online mode, within 15 days, in Form FC-6 to Ministry of Home Affairs regarding any change in:
1. Name of the Association
2. Aims and Objects of Association
3. Address
4. Bank/Bank Account.

12. Intimation To Ministry Of Home Affairs For Change In Board Of Trustee By More Than 49%

After taking FCRA registration, NGO has to intimate MHA for change in Board Members in excess of 49% of original key members as reported in application of registration. This condition is mentioned in the Foreign Contribution Regulation Rules.

13. Allowed Transfer Of Foreign Contribution

Association who is registered in FCRA can transfer the fund to meet its aim, only to another association who is registered under FCRA, 2010

14. Can Foreign Contribution Be Mixed With Local Receipts?

No. Foreign contribution cannot be deposited or utilised from the bank account being used for domestic funds.

15. Separate Books Of Accounts To Be Maintained

A separate set of accounts and records shall be maintained, exclusively for foreign contribution received and utilised

16. Annual Return Filing

Association registered under FCRA, 2010, Accept foreign contribution are required to submit an annual return which includes details of foreign contribution received during the year, source of contribution received, manner of receipt, purpose and manner in which contribution is utilised

17. Uploading Of Audited FCRA Balance Sheet On Website

Association who has registered under FCRA 2010 is required to place audited statements of accounts of receipts and utilisation of foreign contribution on official website or on website as specified by central government,

18. Limit Of Administrative Expenditure

Administrative Expenditure cannot be more than 50% on any project,
Administrative Expenditure includes following as per Foreign Contribution Regulation Rules, 2011
1. Salaries, Wages, Travel Expenses or any Remuneration realized by the Members of the Executive Committee or Governing Council of the person
2. All expenses towards hiring of personnel for management of the activities of the person and salaries, wages or any kind of remuneration paid, including cost of travel, to such personnel;
3. All expenses related to consumables like electricity and water charges, telephone charges, postal charges, repairs to premise(s) from where the organisation or Association is functioning, stationery and printing charges, transport and travel charges by the Members of the Executive Committee or Governing Council and expenditure on office equipment
4. Cost of Accounting for and Administering Funds
5. Cost of writing and filing Reports
6. Legal and Professional Charges;
7. Rent of premises, Repairs to Premises and Expenses on other utilities

FCRA department may cancel registration if organisation has excessive Administrative and Salary Expenses.

Contributed by : Umesh Nyati (CA Student)

Disclaimer: The write-up has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this write-up without obtaining specific professional advice. Author accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this write-up or for any decision based on it.