FCRA to Check Misutilisation of Foreign Contribution in India

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By Ravinder Singh
Director (M & C), Press Information Bureau, New Delhi

New Delhi, May 30, 2011 (Washington Bangla Radio / PIB India) The Foreign Contribution (Regulation) Act, 2010 has come into effect from May 1, 2011. The Ministry of Home Affairs issued the necessary Gazette Notification on 29th April, 2011 in this regard. Consequently, the earlier Act, viz., the Foreign Contribution (Regulation) Act, 1976 has been repealed.

The Ministry of Home Affairs also issued a Gazette Notification on 29th April, 2011 notifying the Foreign Contribution (Regulation) Rules, 2011 made under section 48 of FCRA, 2010. The FCR Rules, 2011 have come into force simultaneously with FCRA, 2010.

While the provisions of the repealed FCRA, 1976 have generally been retained, the FCRA, 2010 is an improvement over the repealed Act, as more stringent provisions have been made in order to prevent misutilisation of the foreign contribution received by the associations.

New Provisions

Several new provisions have been introduced in FCRA, 2010. No person who receives foreign contribution as per provisions of this Act, shall transfer the same to another person unless that person is also authorized to receive foreign contribution as per rules made by the Central Government.

In terms of new provision, foreign contribution shall be utilized for the purpose for which it has been received and such contribution can be used for administrative expenses up to 50% of such contribution received in a financial year. However, administrative expenses exceeding fifty per cent of the contribution have to be defrayed with the prior approval of the Central Government. Suspension as well as cancellation of registration for violation of the provisions of the Act, is another new provision in the Act.

Another new provision relates to the management of foreign contribution and assets created out of such contribution of persons whose certificates have been cancelled.

Registration made Simple

Modalities for submission of application for obtaining registration or prior permission to receive foreign contribution have been given in detail in the Rules and Forms for filing the applications. The applications for obtaining registration or prior permission shall have to be made electronically on-line, and shall have to be followed by forwarding the hard copy of the on-line application, duly signed, together with the required documents within thirty days of the submission of the on-line application, failing which the request of the person shall be deemed to have ceased.

Any person whose request has ceased shall be able to prefer a fresh on-line application only after six months from the date of cessation of the previous application.

No person would be permitted to prefer a second application for registration or prior permission within a period of six months after submitting an application either for the grant of prior permission for the same project or for registration. The fee for obtaining registration or prior permission would be Rs. 2000/- and Rs. 1000/- respectively.

Registration valid for Five Years

Under the repealed Act, there was no time limit regarding the validity of the registration certificate granted to the associations etc. for accepting foreign contribution. FCRA, 2010 provides that the certificate granted shall be valid for a period of five years and prior permission shall be valid for the specific purpose or specific amount of foreign contribution for which the permission was granted. Further, every person who has been granted a certificate shall renew it within six months before the expiry of the period of certificate.

Any association granted prior permission or registered with the Central Government under Section 6 or under the repealed FCRA, 1976, shall be deemed to have been granted prior permission or registered, as the case may be, under FCRA, 2010 and such registration shall be valid for a period of five years from the date on which the new Act has come into force.

A person implementing an ongoing multi-year project shall apply for renewal twelve months before the date of expiry of the certificate of registration.

Norms for Accounting

No funds other than foreign contribution shall be deposited in the FC account to be separately maintained by the associations, etc. Every bank shall report to such authority, as may be prescribed, the amount of foreign remittance received, sources, manner and other particulars.

Every person who has been granted registration or prior permission shall maintain a separate set of accounts and records, exclusively, for the foreign contribution received and utilised.

Provision has been made for inspection of accounts if the registered person or person to whom prior permission has been granted fails to furnish or the intimation given is not in accordance with law.

Penalty for false Information

A new provision has been introduced to the effect that any person who knowingly gives false intimation and seeks prior permission or registration by means of fraud, false representation or concealment of material fact, shall, on conviction by Court, would be liable to imprisonment for a term which may extend to six months or fine or with both.

A new provision has been introduced to the effect that the assets of any person who has become defunct shall be disposed of in such manner as may be specified by the Central Government.

Any person contravening the provisions of the Act shall be punishable with imprisonment for a term which may extend to five years or with fine or with both.

Organisations of Political Nature

Guidelines for declaration of an organisation to be of political nature, not being a political party have been prescribed in FCRA, 2010.

Any organisation of political nature and any association or company engaged in the production and broadcast of audio or audio-visual news or current affairs programme have been placed in the category prohibited to accept foreign contribution.

Information on Contribution of over Rs. One Crore to be Put up in Public Domain

In case a person who has been granted a certificate of registration or prior permission receives foreign contribution in excess of one crore rupees, or equivalent thereto, in a financial year, he shall place the summary data on receipts and utilisation of the foreign contribution pertaining to the year of receipt as well as for one year thereafter in the public domain. Besides, the Central Government shall also display or upload the summary data of such persons on its website for information of the general public.

Unutilised money can be spent with prior approval of Centre

In case the certificate of registration is suspended under the relevant provisions of the Act, up to twenty-five per cent of the unutilised amount may be spent, with the prior approval of the Central Government, for the declared aims and objects for which the foreign contribution was received. The remaining seventy-five per cent of the unutilised foreign contribution shall be utilised only after revocation of suspension of the certificate of registration.

The amount of foreign contribution lying unutilised in the exclusive foreign contribution bank account of a person whose certificate of registration has been cancelled shall vest with the banking authority concerned till the Central Government issues further directions in the matter.

Banks obliged to send report on receipt of Foreign Contribution

Every bank shall send a report to the Central Government within thirty days of any transaction in respect of receipt of foreign contribution by any person who is required to obtain a certificate of registration or prior permission under the Act, but who was not granted such certificate or prior permission as on the date of receipt of such remittance. The report shall contain the details regarding name and address of the donor, name and address of the recipient, account number, name of the Bank and Branch, amount of foreign contribution (in foreign currency as well as Indian Rupees), date of receipt, manner of receipt of foreign contribution (cash/cheque/electronic transfer etc.).

The bank shall also send a report containing the above details to the Central Government within thirty days from the date of such last transaction in respect of receipt of any foreign contribution in excess of one crore rupees or equivalent thereto in a single transaction or in transactions within a duration of thirty days, by any person, whether registered or not under the Act.

Recipient to submit Chartered Accountant certified report every year

Every person who receives foreign contribution under the Act shall submit a report, duly certified by a chartered accountant, in the prescribed Form, accompanied by an income and expenditure statement, receipt and payment account, and balance sheet for every financial year beginning on the 1st day of April within nine months of the closure of the financial year, to the Secretary, Ministry of Home Affairs, New Delhi. The annual return in the prescribed Form shall reflect the foreign contribution received in the exclusive bank account and include the details in respect of the funds transferred to other bank accounts for utilisation. If the foreign contribution relates to articles or foreign securities, the intimation shall be submitted in the prescribed Forms.

Every such return shall also be accompanied by a copy of a statement of account from the bank where the exclusive foreign contribution account is maintained by the person, duly certified by an officer of such bank. The accounting statements referred to above shall be preserved by the person for a period of six years. A ‘NIL’ report shall be furnished even if no foreign contribution is received during a financial year.

Investigative agencies to report on quarterly basis

The Central Bureau of Investigation or any other Government investigating agency that conducts any investigation under the Act shall furnish reports to the Central Government, on a quarterly basis, indicating the status of each case that was entrusted to it, including information regarding the case number, date of registration, date of filing charge sheet, court before which it has been filed, progress of trial, date of judgment and the conclusion of each case.

Any information or intimation about political or speculative activities of a person shall be furnished to the Secretary, Ministry of Home Affairs, New Delhi. Such information or intimation shall be sent by registered post.

Transfer of foreign contribution to another entity

In case the foreign contribution is proposed to be transferred to a person who has not been granted a certificate of registration or prior permission by the Central Government, the person concerned may apply for permission to the Central Government to transfer a part of the foreign contribution, not exceeding ten per cent, of the total value of the foreign contribution received. The application shall be countersigned by the District Magistrate having jurisdiction in the place where the transferred funds are sought to be utilised. The District Magistrate concerned shall take an appropriate decision in the matter within sixty days of the receipt of such request from the person. The donor shall not transfer any foreign contribution until the Central Government has approved the transfer.

Any person intending to transfer the foreign contribution may make an application to the Central Government in the prescribed Form. The Central Government may permit the transfer in respect of a person who has been granted the certificate of registration or prior permission, in case the recipient has not been proceeded against under any provision of the Act. Any transfer of foreign contribution shall be reflected in the prescribed returns by the transferor and the recipient.

Miscellaneous Issues

Activities to be treated as speculative activities have been defined in FCRA, 2010. Expenditure constituting 'Administrative expenses' has been clearly defined.

Foreign contribution received by a candidate for election, referred to in section 21, shall be furnished in the prescribed Form within forty-five days from the date on which he is duly nominated as a candidate for election.

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