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written by | May 2, 2022

Getting Foreign Funds for NGOs in India: The FCRA Registration Process

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Table of Content


FCRA means Foreign Contribution Regulation Act. It is a law in the Indian Constitution that aims to regulate foreign contributions by regulating the acceptance and use of foreign contributions or foreign hospitality by certain individuals, associations or companies. It also prohibits the acceptance and use of foreign contributions for any activities harmful to the national interest and for matters incidental to those activities. Simply defined, the Foreign Contribution and Aid Regulation Act (FCRA) governs the entrance of foreign donations and aid to India. The Ministry of Home Affairs is in charge of enforcing the law.

Did you know?

According to MHA statistics, 20,664 groups have had their registrations revoked since 2011 due to misusing foreign contributions, failing to file necessary yearly reports and diverting foreign cash for other reasons. There are 49,843 FCRA-registered associations as of September 11th.

Also Read: Top Small Business Ideas to Make You a Successful Entrepreneur

What Is the Foreign Contribution Regulation Act?

During the Emergency in 1976, the FCRA was formed in response to concerns that foreign powers were interfering in India's affairs by injecting money into the country through non-government organisations. These issues were actually far older, having been raised in Parliament as early as 1969.

The law aimed to ensure that foreign donations to individuals and organisations were made in a way that was "compatible with the values of a sovereign democratic republic."

In 2010, the UPA government modified the FCRA to "consolidate the legislation" on the use of foreign funds and "prohibit" its use for "any activity injurious to national interest."

In 2020, the current government changed the law again, providing the government stricter control and monitoring over NGOs' receipt and use of foreign donations.

In general, the FCRA requires that any person or NGO seeking to receive foreign donations to (i) register with the Act, (ii) open a bank account in the State Bank of India, Delhi, for the receipt of foreign funds, and (iii) use those funds only for the purpose for which they were received and as specified in the Act.

They must also produce annual reports and refrain from transferring cash to another NGO.

Candidates for elections, journalists, newspaper and media broadcast firms, judges and government workers, members of legislature and political parties or their office-bearers, and political organisations are all prohibited from receiving foreign contributions under the Act.

Objectives of the FCRA

This law aims to prevent foreign organisations from dominating or even influencing Indian social, political, economic and religious debates. Religious groups conducting conversion programs in India, or organisations sponsoring Indian activists fighting huge dams or nuclear power plants, are examples of such influence.

The Foreign Contribution Regulation Act (FCRA) restricts certain people and organisations from accepting foreign contributions. Political parties, government personnel, print or visual media outlets and other entities fall within this category. Companies that are permitted to obtain foreign capital must first seek a registration. It's worth noting that foreign money that enters the nation as payment for goods or services provided by Indian enterprises is not covered by the FCRA.

Who Can Get an FCRA Registration Certificate?

To be qualified for an FCRA certificate, a non-profit should meet the following requirements:

1. The organisation must be registered as a public charitable trust or under the existing law of the Indian Constitution, such as the Societies Registration Act or the Companies Act.

2. It has to have been around for at least three years.

3. It must have engaged in the process in its desired field for the betterment of society during those three years for which it wants foreign assistance.

4. The organisation should have invested at least ₹10 lakhs to achieve its goal, which does not include administrative costs. 

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Registration Through Prior Permission Route

The prior permission approach is suitable for organisations that are just getting started and want to accept foreign contributions. This is in exchange for receiving a specified amount from a specific donor to carry out certain activities or initiatives.

The organisation must:

  • Be registered under the Societies Registration Act, 1860, the Indian Trusts Act, 1882, or as a Section 8 company under the Companies Act, 2013, or any other applicable law.
  • Submit to the Ministry of Home Affairs a particular commitment letter from the donor that includes the following information:- Amount of donation given and the reason for which it is proposed that it be given is
  • An organisation must meet the following conditions when the Indian receiving organisation and the international donor organisation have common members:
  • The Indian organisation's Chief Functionary cannot be a member of the donor organisation.
  • A minimum of 51% of the members/office-bearers of the Indian receiving organisation's governing body should not be employees/members of the foreign donor organisation.
  • If the foreign contributor is an individual, he cannot be the Indian organisation's Chief Functionary. At least 51% of the beneficiary organisation's office bearers/members of the governing body should not be the donor's family members or close relatives. 

The Process of Application

The following are the steps to apply for registration under the FCRA:-

  • The initial step entails visiting the FCRA's internet portal.
  • Click on Form FC – 3A (Application for FCRA Registration) or Form FC – 3B (Application for FCRA Prior Permission).
  • The user will then be given the option to apply online on the webpage.
  • After clicking "Apply Online," the next step is to create a username and password by clicking "Sign Up."
  • The applicant may log in to the account when a username and password are set and a notice is displayed on the screen.
  • Once you've logged in, go to "I'm applying for" and select FCRA Registration from the selection list.
  • "Apply Online" should be chosen next, followed by "Proceed Registration."
  • The user must click the FC-3 menu in the title bar to begin the new registration procedure.
  • This leads to the application form, which requires the applicant to fill out all the required information, and attachments, which contain the following documents:
  • Association Address
  • Registration Number
  • Registration Date
  • Nature of the Association
  • Main Object of the Association 
  • Darpan ID (optional)

The submit button is selected after these details, and the attachments have been filled in.

  • The user must select the Executive Committee option from the menu bar next.
  • The user must fill out the Executive Committee form with the necessary information.
  • The option "Add details of Key Functionary" allows the applicant to update, delete or add information to the Executive Committee.
  • Hit the "Save" button once all the Executive Committee details have been submitted.
  • In addition, the bank information will be required, including the bank's name, account number, IFSC code and address.
  • After you've input your bank information, you'll need to upload all relevant papers in PDF format.
  • The user must supply the location and date before selecting the final submission button.
  • The final step is to complete the online payment by selecting that option.
  • You cannot modify the form after the payment has been paid and the form has been submitted.

The validity of the FCRA registration is five years after it is obtained.

However, remember to apply for FCRA registration renewal six months before expiration.

Important Features of the FCRA Act

The following is a quick rundown of the FCRA 2010's provisions:

  • The Home Ministry can cancel NGOs' registrations if it considers the organisation is political and not impartial.
  • The registration certificate issued to NGOs under the 2010 act was valid for five years.
  • A provision was added indicating that the assets of a defunct individual must be disposed of in a manner determined by the government.
  • The organisations must keep a separate account to deposit the foreign contributions they receive, and no other funds other than foreign contributions should be deposited in that account.
  • Every bank would be required to disclose the number of foreign remittances received and other associated information such as the source, method of receipt, and so on to the appropriate authority.

The FCRA Amendment Bill

The foreign influx has nearly doubled in the last decade, but the government claims that the money is not being used for the intended purpose. Only 20% of foreign funds can be utilised for administrative purposes in FCRA 2020 when the ceiling was 50% in FCRA 2010. This could slow down the operations of several tiny non-profits that rely on such funds.

The new laws aim to improve transparency and accountability in the inflow and use of foreign funding. The bill also requires recipients to have an Aadhaar number (passport or OCI card will be used as the identification document in case of foreigners).

Conclusion

The Central Bureau of Investigation (CBI) searched the headquarters of Amnesty International (NGO) for alleged irregularities in foreign fundraising in breach of the terms of the Foreign Contribution Regulation Act (FCRA) 2010. From thereon FCRA Act came into the limelight. The FCRA act tries to prevent foreigners from influencing Indian political politics, journalists, public workers and other individuals for wrong reasons or harmful actions to the public interest.

We hope that this article has explained to you in detail the FCRA Act, its regulations, rules, registration, benefits, and the FCRA registration process.
Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.

FAQs

Q: Who is debarred from receiving foreign contributions?

Ans:

Following is the list of persons who are not allowed to receive foreign contributions:-

  • A candidate who is contesting in elections.
  • Judges, government servants and employees of any corporation are not allowed.
  • Cartoonists, editors or publishers of a registered newspaper.
  • Any legislator's member.
  • Parties in politics.

Q: Who can accept foreign contributions under FCRA Act?

Ans:

If and only if organisations working for certain cultural, social, economic, educational or religious activities can accept foreign contributions. Organisations with the following structure are also eligible:

  • Registered with the Ministry of the Interior.
  • Maintaining a separate account for foreign donations, having it audited by a Chartered Accountant and presenting it to the Home Ministry once a year.

Q: What is the benefit of FCRA Registration?

Ans:

The goal of the FCRA, also known as the Foreign Contribution Regulation Act of 2010, is to assist non-governmental organisations (NGOs) that work for the benefit and betterment of society.

Q: Which organisations does the FCRA cover?

Ans:

The FCRA applies to all associations, groups and non-governmental organisations (NGOs) who want to receive foreign donations. The FCRA requires all such NGOs to register with the government. The registration is valid for five years at first, and it can be renewed if all requirements are met.

Q: Under the FCRA, who is obliged to get permissions?

Ans:

Under Section 6 (1) of the Foreign Contribution (Regulation) Act, 2010, any NGO, whether in the form of a Trust, Society or Section 8 corporation, that wishes to receive any foreign contribution or donation must first get FCRA registration.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.