Foreign Contribution Regulation Act (FCRA) – UPSC GS2

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 FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations.
• It is mandatory for all such NGOs to register themselves under the FCRA.
• The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.

What happens once registered?

• Registered associations can receive a foreign contribution for social, educational, religious, economic and cultural purposes.
• Filing of annual returns, on the lines of Income Tax, is compulsory.
• In 2015, the MHA notified new rules, which required NGOs to give an undertaking that donation is not likely to prejudicially affect the sovereignty and integrity of India or impact friendly relations with any foreign state and does not disrupt communal harmony.

Who cannot receive foreign donations?

• Members of the legislature and political parties, government officials, judges and media persons are prohibited from receiving any foreign contribution.
• However, in 2017 the MHA amended the 1976-repealed FCRA law paving the way for political parties to receive funds from the Indian subsidiary of a foreign company or a foreign company in which an Indian holds 50% or more shares.

How else can receive foreign funding?

• The other way to receive foreign contributions is by applying for prior permission.
• It is granted for receipt of a specific amount from a specific donor for carrying out specific activities or projects.
• But the association should be registered under statutes 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 specifying the amount and purpose is also required.

When is a registration suspended or cancelled?

• The MHA on inspection of accounts and on receiving any adverse input against the functioning of an association can suspend the FCRA registration initially for 180 days.
• Until a decision is taken, the association cannot receive any fresh donation and cannot utilise more than 25% of the amount available in the designated bank account without the permission of the MHA.
• The MHA can cancel the registration of an organisation which will not be eligible for registration or grant of ‘prior permission’ for three years from the date of cancellation.

• The donations received in Indian rupees by the NGOs and associations from any foreign source should be treated as a foreign contribution. Even if that source is located in India at the time of such donation.
• It will include the contributions by foreigners of Indian origin like OCI or PIO cardholders, in Indian rupees(INR).
• As per the existing rules, Banks need to report any receipt or utilization of any foreign contribution, by any NGO, association, or person. Banks should submit these reports to the Central government within 48 hours.
• Rules cover all NGOs, whether they are registered or granted prior permission under the FCRA.
• Any violation by the NGO or by the bank of these rules of FCRA may invite penal provisions under the FCRA Act, 2010.