Purpose of FCRA:
- Regulation of Foreign
Funding:
FCRA aims to ensure that foreign contributions do not adversely affect
India's internal security, sovereignty, or communal harmony. It regulates
how NGOs can receive and use foreign donations.
Eligibility and Registration:
- Registration Requirement: NGOs must register under
FCRA to receive foreign contributions legally. They need to have operated
for at least three years with a proven track record in their chosen field
(cultural, economic, educational, religious, or social activities).
- Types of Organizations: Eligible organizations
include societies under the Societies Registration Act, trusts under the
Indian Trusts Act, or Section 8 companies under the Companies Act.
Key Provisions:
- Single FCRA Account: NGOs must open a designated
FCRA bank account at the State Bank of India, Sansad Marg, New Delhi
branch for receiving foreign contributions. No other funds can be mixed in
this account.
- Prior Permission: For new NGOs or for
specific projects, prior permission can be sought if the organization does
not meet the three-year criterion but has a clear project and donor
commitment.
- Annual Returns: NGOs must file annual
returns (FC-4) even if no foreign contributions were received in that
year.
- Administrative Expenses: There's a cap on
administrative expenses from foreign contributions, currently set at 20%
of the total foreign funds received.
- No Sub-granting: NGOs cannot transfer
foreign funds to other entities, which was a significant change introduced
by the 2020 amendments.
Compliance and Monitoring:
- Separate Accounting: NGOs need to maintain
separate accounts for foreign contributions to ensure transparency and
ease of audit.
- Renewal: FCRA registration is valid
for five years and must be renewed six months before expiry.
- Government Oversight: The Ministry of Home
Affairs (MHA) can conduct inquiries into the activities and financials of
NGOs, potentially leading to cancellation of registration if violations
are found.
Challenges and Concerns:
- Complexity and Compliance: The process for
registration and ongoing compliance can be complex, involving stringent
documentation and adherence to changing regulations.
- Impact on NGOs: There have been instances
where FCRA regulations have been used to restrict the activities of NGOs,
raising concerns about freedom of operation and potential political
influence in granting or denying registrations.
Recent Changes:
- 2020 Amendments: Included mandatory Aadhaar
for registration, reduced administrative expense limits, and centralized
FCRA accounts at one SBI branch, among other changes.
For NGOs, understanding and adhering to FCRA regulations is essential to maintain legitimacy and operational continuity when receiving foreign funds. It's also crucial for them to stay updated with any amendments to the law to ensure continuous compliance.
