The Foreign Contribution (Regulation) Amendment Act, 2020
On 28th September 2020 the President of India provided its assent to further amend the original Foreign Contribution (Regulation) Act, 2010. The law provides the framework under which organisations in India can receive and utilise grants from foreign sources. This covers the varied organisation across India including NGOs those promotes projects and research activities.
We have crisped out the Foreign Contribution (Regulation) Amendment Act, 2020 passed by the Government of India and approved by President to amend the provision of the Foreign Contribution Regulation Act, 2010 (FCRA).
You can access the full version of the amendment act here.
What is the FCRA?
- The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.
- First enacted in 1976, it was amended in 2010 when a slew of new measures was adopted to regulate foreign donations.
- The registration is initially valid for five years and it can be renewed.
- Registered associations can receive a foreign contribution to social, educational, religious, economic, and cultural purposes.
- Filing of annual returns, on the lines of Income Tax, is compulsory.
- In 2015, the MHA announced new rules requiring NGOs to grant an undertaking that the acceptance of foreign funds is unlikely to prejudice India’s sovereignty and dignity or to have an effect on friendly relations with any foreign state and does not interfere with communal harmony.
- The FCRA is for all associations, organizations, and non-governmental organizations planning to accept international donations. All such NGOs are expected to register themselves under the FCRA.
How can one receive foreign funding?
- By applying for prior permission
- It is granted for specific activities or projects
- Also, the association should be registered under acts such as the Societies Registration Act, 1860, the Indian Trusts Act, 1882, or Section 25 of the Companies Act, 1956.
- A letter of commitment from the foreign donor is required too
Why are these amendments required?
- The annual inflow of foreign contribution doubled between the years 2010 and 2019, but many recipients of foreign contribution have not utilized the same for the purpose for which they were registered or granted prior permission under the said Act.
- Recipients asked for statutory compliances which led to the cancellation of 19000 registrations of organizations.
- Hence, it was decided to make Aadhaar a mandatory identification document for all the office-bearers, directors, and other key functionaries of an NGO or an association eligible to receive foreign donations.
- Additionally, enhancing transparency and accountability in the receipt and utilization of foreign contributions is another factor.
Before we start, here is a statistics rep:
- Less than 500 organizations hold 50% of cash and 50% of the inflows
- 90% of the cash is held by 2500 organizations and 90% of the inflow is covered by 3600 organizations
- There are not more than 3000 organizations that receive more than Rs 1 crore in annual inflow
Key amendments in the FCRA Bill, 2020
- It regulates the acceptance and utilization of foreign funding by individuals, associations, and companies.
- Foreign funding is the donation or transfer of any currency, security, or article by a foreign source.
- To prohibit any grants from abroad being made to organizations that involve ‘public servants’, or in other words, any organization that is “controlled or owned” by the government.
- The Bill amends the earlier Act and prevents the transfer of foreign funding to any other person.
- Lowered the limit of usable foreign contribution from 50% to 20%, which means anyone who receives foreign funding, cannot use more than 1/5th of the amount to meet administrative expenses.
- The renewal of license every six months will be subject to a government inquiry to ensure the person putting in the application
- is not fictitious
- not convicted for triggering communal tension and
- is not guilty of diversion of funds.
- To expand the power of the Ministry of Home Affairs, GoI to cancel FCRA certificate for more than 180 days;
- To make Aadhaar mandatory for persons who control recipient organizations, and
- To stipulate that foreign grants can only be received at the State Bank of India at New Delhi.
According to the GoI’s FCRA dashboard, there are 22,447 active FCRA registrations in India today. In 2018-19, 21,915 annual returns were filed – a compliance rate of 97.6%.
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About Author:
Nikita is a Software engineer turned into an MBA aspirant. She has 2.6 years of experience as a Software Engineer and is currently pursuing MBA from CIMR, in the Financial specialization. In her free time, Nikita likes to read, write, hike and go on cycling trips.
