Every country wants to be rich in foreign exchange to keep a check on the declining price of its currency. The FCRA was enacted during the State of Emergency in 1976, fearing that foreign powers would interfere with the situation in India by investing money in India through independent organisations.
The law sought to regulate foreign donations to individuals and groups to function “consistently with the values of the sovereign democratic republic.“
The revised FCRA was enacted in 2010 to “integrate the law” on the use of foreign funds and prohibit its use in “all activities harmful to national interests“.
What is the FCRA?
FCRA—Foreign Contribution Regulation Act—works to regulate foreign donations as foreign contributions can be used to create a disturbance in internal security, civil disturbance and peace in the country. It also keeps a check on the unrecognised foreign contributions to upholding the internal security of the country.
The FCRA applies to all associations, groups and NGOs that register to receive foreign donations. It is mandatory for all organisations working for the welfare of society to register themselves under the FCRA legislation.
Initially, the registration certificate is valid for five years and can get renewed yearly. Registered associations can receive contributions from foreign sources for social, educational, religious, economic and cultural purposes.
The NGOs are obliged to provide one undertaking to the state that the foreign contributions they will receive will not prejudicially affect the sovereignty and integrity of the country.
What is meant by the Foreign Contribution (Regulation) Act of 2010?
The foreign contribution Regulation Act of 2010 provides the mechanism to regulate the acceptance and utilisation of foreign funding by individuals, associations or companies.
The Foreign Contribution and (Regulation) Act, 2010 defines ‘foreign contribution‘ under section 2(h) of the act.
It states foreign contribution as:-
- Any donation, delivery, or transfer of item, cash, or foreign security made by a person after receiving it from a foreign source—directly or indirectly through one or more people—shall be considered a foreign contribution for purposes of this clause.
- Any income obtained from a foreign contribution or the interest earned on it will also be considered a foreign contribution for the purposes of this clause, as will any interest accumulated on the foreign contribution placed in any of the banks listed in subsection (1) of section 17.
- Any money received by anyone in India from any foreign source as a fee (including tuition fees charged by Indian educational institutions to international students) or as a cost in lieu of goods or services rendered by that person in the regular course of his business, trade, or commerce, whether conducted inside or outside of India, shall be excluded from the definition of foreign contributions.
What is Foreign Contribution (Regulation) Amendment Act 2020?
The Foreign Contribution Amendment Bill 2020 was brought to amend the Act of 2010.
It received the president’s assent on 28th September 2020 and came into force as the Foreign Contribution (Regulation) Amendment Act, 2020.
Here are some essential features of the Act of 2020:
Prohibition: The Act restricted certain persons from accepting any foreign contribution. These include election candidates, editors or publishers of a newspaper, judges, government servants, administrative officers, members of legislatures and political parties, etc.
The Act of 2020 inserts public servants (as defined under the Indian Penal Code) into this list. A public servant includes any person under the government’s service or remunerated by the government for performing any public duty.
Transfer: According to the Act, no foreign contribution may be transferred from one person to another unless the recipient is also registered to accept foreign contributions or has secured previous authorization under the Act to do so.
The term ‘person‘ includes any individual, any association, or any registered company.
- Mandatory Registration: The Act states that a person is eligible to accept foreign contributions if they have:
- Obtained a registration certificate from the Central Government, or
- If not registered, the person must obtain prior government permission for accepting foreign contributions.
Anyone seeking to register (or renew such registration) or obtain prior approval for receiving a foreign donation must submit an application to the Central Government in the manner specified.
The foreigners must provide a copy of their passport or the Overseas Citizen of India card for identification.
Note: A person not having registration or prior approval cannot accept or transfer the foreign contributions.
FCRA account: A registered person must accept foreign contributions only in a single branch of a State Bank of India in Delhi or spcecified scheduled bank.
Under the amendment Act of 2020, foreign donations are to be accepted only through the “FCRA account” of the State Bank of India branch in New Delhi or other scheduled bank accounts notified by the central government. The funds other than the foreign contributions should not be received in these accounts.
Restriction in the utilisation: A person receivingfor eign contribution must use it only for the purpose for which he has received the contribution.
If a person accepting a foreign contribution is found guilty of violating any provisions of the Act or the FCRA, 1976, the unutilised or unreceived foreign contribution can be restricted from utilisation and can be used only with the prior approval of the central government.
The Act inserts that the government may also restrict the usage of unutilised foreign contributions for persons who have prior permission to receive such contributions.
- License renewal: Under the Act, every person given a registration certificate must renew the certification within six months of expiration. The Act provides that the government may conduct an inquiry before renewing the certificate to ensure that the person making the application:
- is not anonymous or benami
- has not been prosecuted or convicted for affecting communal peace or indulging in activities detrimental to peace
- has not been found guilty of channelling funds through illegal channels or mis-utilisation of funds
Threshold limit in utilising foreign contributions for administrative purposes: Section 8 of the Act of 2010 states that foreign contributions received by the state in a particular financial year can be used for administrative purposes. But a threshold limit applies to utilising these funds in such a fiscal year.
It is pertinent to know that the utilisation of these contributions for administrative purposes should not be more than 20% of the total contributions received in a particular fiscal year. Previously this limit was 50% of the total contribution.
Surrender of certificate: The Act adds a provision allowing the Central Government to permit a person to surrender their registration certificate.
The government may let the person to renounce their registration certificate if it is satisfied that they have not violated any Act restrictions and that the management of their foreign contribution has been delegated to a government-designated authority.
- Suspension of registration: The government is authorised to temporarily suspend the registration of a person for a period not exceeding 180 days. The Act adds that such suspension may get extended up to an additional 180 days.
Eligibility of FCRA registration
Some minimum requirements need to be followed by organisations, associations, companies, etc. to be eligible for FCRA registration:-
- It should get registered under any of the following, i.e., the Societies Registration Act, 1860, the Indian Trusts Act, 1882 or section 8 of the Companies Act, 2013 etc.
- Any person making an application for registration should have an FCRA Account, i.e. a bank account in the State Bank of India branch in New Delhi or any other account of a scheduled bank.
- An association should exist for at least three years and has undertaken activities for the society’s welfare for which the Foreign Contribution is proposed to get utilised.
- An association should spend at least Rs. 15 Lakh over the last 3 years on the activities in the field concerned with the welfare of the society.
The central or state governments that control the registration application may waive this condition of Rs. 15 lakh.
- A person making an application may also include the existing capital investments, like banks, buildings, vehicles, etc., in the computation of its eligibility of minimum spending of Rs.15 Lakh; then such person should:
- Give an undertaking that the assets should be vested with the person till the validity of the certificate.
- The assets should get utilised only for the activities covered under the Act.
- The rules made thereunder should not get diverted for any other purpose till the validity of its registration certificate.
- An association should get registered under section 12A of the income tax Act 1961.
How does FCRA control donations?
FCRA regulates the donations from foreign sources to not compromise the country’s internal security and to avoid any form of illegal and unrecognised funding within the country through foreign sources.
It also prohibits a specific person from accepting foreign donations so that the pillars of democracy, i.e. legislature, judiciary, media, and administration, don’t work under foreign entity’s influence, ultimately disturbing the smooth functioning of democracy.
FCRA restricts certain entities from receiving foreign contributions. These are:-
- Election candidates
- Columnist, cartoonist, editor, owner, and publisher of a registered newspaper
- Public servant, judge, government employee, or worker for any firm or other entity that the government controls or owns
- Member of parliament or legislatures or a political party
- The organisation of a political nature, specified under sub-section (1) of section 5 of the Act
- Association or company engaged in producing or broadcasting audio or audiovisual news through any electronic mode or any other form as per defined in clause (r) of sub-section (1) of section 2 of the Information Technology Act of 2000.
- Owner of the association or company
FCRA legislation provides individuals or organisations to register themselves under the act so that they become eligible to receive funds from foreign sources.
FCRA was mandated so the government could keep an eye on funds utilisation received from foreign sources. Donations received should always be used for the same purpose as they were sent.
There are numerous instances of corruption in granting these registration certificates by the administrative officers against bribes, and the funds received from sources from abroad are then channelled into funding various illegal activities.
To avoid these activities, the agencies under the Central government, like Enforcement Directorate, are on the hunt for the offenders involved in the channelising of foreign contributions illegally.
Is a person prohibited from transferring the donations received from foreign sources to another person?
Yes, a person registered or obtained prior permission under the act cannot transfer the contribution received from a foreign source to any other person under section 7 of the FCRA, 2010.
What is the threshold limit on using the foreign contribution for administrative expenses?
20% per cent of the total contribution amount received in a financial year
Under which bank account is a person permitted to receive foreign contributions?
A person is permitted to receive foreign contributions only in the SBI bank account in New Delhi or other scheduled bank accounts designated as FCRA accounts.
What is the penalty for the contravention of the provisions of the act?
The penalty for receiving foreign funding in contravention of the act's provisions is imprisonment for a term extending up to five years, with a fine, or both.