Foreign Contribution and Charitable Organizations
The primary objects of Foreign Contribution (Regulation) Act, 2010 is to manage funds received/paid from/to foreign sources. Particularly, funds received by the Charitable Organizations/NGOs are under scanner of FEMA wings of Government. To comply with Govt. regulations, we will see how foreign funds can be received by these NGOs.
The object of FEMA (Foreign Exchange Management Act) is to
- Consolidate and amend the law relating to foreign exchange
- Facilitating external trade and payments
- Promoting orderly development and maintenance of foreign markets.
Accordingly, it can be summarized that the FEMA is targeted to regulate the acceptance and utilization of foreign contribution. It also Prohibit acceptance and utilization of foreign contribution for any activities detrimental to national interest. The Ministry of Home affairs has cancelled registration of numerous charitable organizations due to non-following of FEMA regulations.
To whom the FCRA is applicable?
- Whole of India
- Citizens of India outside India
- Associate Branches or subsidiaries located outside India of companies or bodies corporate, registered or incorporated in India
Therefore, it can be well conclude that FCRA is applicable to charitable organization in India.
Do you want to accept foreign contribution?
If yes, Let us understand the foreign contribution. Foreign contribution means any donation, article, currency or security received from foreign sources.
Any person can receive the foreign contribution if the contribution have definite cultural, economic, educational, religious, or social program with prior permission / obtain FCRA registration from the central government.
How can charitable organization receive foreign funds?
There are two mode of obtaining permission to accept foreign contribution according to FCRA, 2010
- (i) Normal Registration
- (ii) Prior permission
Eligibility criteria to obtain registration
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Normal Registration |
Prior Permission |
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Case 1: if trust has registered with 8 member and 6 or more member are employee or member of donor organization then trust can’t accept the donation. Case 2: if trust has registered with 8 member and 5 member are employee of donor organization then trust can accept the donation.
Case 1: If trust has registered with 8 member and 6 or more member are of those relative of single donor then trust can’t accept the donation from donor. Case 2: If trust has registered with 8 members and 5 members are of those relative of single donor then trust can accept the donation from donor. |
As seems from aforesaid conditions, an organization with less than 3 years of existence is not eligible for normal registration. These organizations may apply for grant of prior permission under FCRA, 2010 for receipt of a specific amount from a specific donor for carrying out specific activities/projects.
Following common conditions are required to meet both in normal registration and prior permission.
The 'person' making an application for registration or grant of prior permission-
- is not fictitious
- Has not been prosecuted or convicted for doing activities aimed at, conversionfrom one religious faith to another by inducement or force, creating communal tension or disharmony, advocate violent methods to achieve its ends.
- Has not been found guilty of diversion or mis-utilisation of its funds for personal gains or undesirable purposes
- Has not contravened, any of the provisions of this Act or prohibited from accepting foreign contribution or, not convicted under any other law
- Any of its directors or office bearers has not been convicted under any law for the time being in force.
- Is not likely to affect prejudicially the sovereignty and integrity of India, the security, strategic, scientific or economic interest of the State, public interest
- Should not affect freedom or fairness of election to any Legislature
- Is not adversely move friendly relation with any foreign State
- Shall not endanger the life or physical safety of any person
Opening Separate/Designated Bank Account
It is pertinent to note that separate FCRA Bank account is mandatory to open for receiving foreign contribution. Any other fund should not be deposited in this FCRA account.
Basic documents for registration
- Scanned image of signature of chief functionary
- Registration certificate of Association / Trust
- Audited financial statements of last 3 years
- Activity report describing objects or activities of Association
- Commitment letter from Donor specifying donation details and its use in case of prior permission for registration.
- Authorities may demand undertaking/declaration to ensure probable utilization of foreign donations as per specified purposes.
