The Foreign Contribution (Regulation) Act, 2010 came into effect from May 1, 2011.The FCR Rules, 2011 have come into force simultaneously with FCRA, 2010.
Purpose of the Act
The FCRA was enacted with the primary purpose of regulating the inflow of foreign contributions and ensuring that the received foreign contributions are not utilized for purposes other than those specified under the legislation. All charitable organizations in India receiving foreign contributions come under the purview of this Act.
Salient Features of the Act
1 . While the provisions of the repealed FCRA, 1976 have generally been retained, the FCRA, 2010 is an improvement over the repealed Act as more stringent provisions have been made in order to prevent misutilisation of the foreign contribution received by the associations.
2 . Any organisation of a 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.
3 . A new provision has been introduced to the effect that no person who receives foreign contribution as per provisions of this Act, shall transfer to other person unless that person is also authorized to receive foreign contribution as per rules made by the Central Government.
4 . Another new provision has been made to the effect that 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 to be defrayed with the prior approval of the Central Government.
5 . New provisions have been made for suspension as well as cancellation of registration granted for violation of the provisions of the Act. Such provisions did not exist in the repealed Act.
6 . New provision has also been made for management of foreign contribution and assets created out of such contribution of persons whose certificates have been cancelled.
7. Under the repealed Act, there was no time limit regarding the validity of registration certificate granted to the associations etc.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 the prior permission shall be valid for the specific purpose or specific amount of foreign contribution for which 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.
8 . 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 and manner and other particulars.
9 . 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.
10 . 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.
11 . 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.
12 . 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.
Definition of “Foreign Sources”
FCRA applies to “Foreign Contributions” received from “Foreign Sources”. The definition of “Foreign Source” is a detailed and inclusive definition, with a common thread being that the entity that is the ‘source’ of the funds is established in a foreign territory.
Definition of“Foreign Contribution”
“Foreign Contribution” is defined by FCRA as a donation, delivery or transfer made by a foreign source of:
(i) any article (unless given to an individual for personal use), the value of which ought not to exceed Rs. 25,000/-;
(ii) currency, foreign or Indian, or
(iii) foreign securities including all foreign debentures, bonds, shares, stocks and similar instruments of credit. Any income or interest generated from such contributions is also treated as a foreign contribution under the FCRA.