1. Effective Date

The Foreign Contribution (Regulation) Act, 2010 and the Foreign Contribution (Regulation) Rules, 2011 are applicable from 1st May, 2011. It replaces Foreign Contribution (Regulation) Act, 1976.

2. Object

1. To regulate the acceptance and utilisation of foreign contribution (FC) or foreign hospitality (FH) by certain individuals or associations or companies.
2. To prohibit acceptance and utilisation of FC or FH for any activities detrimental to the national interest and matters connected or incidental thereto.

3. Applicability

It extends to whole of India, and also applies to

1. Citizens of India who are outside India.
2. Associate branches or subsidiaries, outside India, of companies or bodies corporate, registered or incorporated in India.

4. Foreign Contribution

FC means donation, delivery, or transfer made by any foreign source of:–

1. Any article other than personal gifts of market value not exceeding such sum as may be specified by the Central Government.
2. Any currency whether Indian or foreign.
3. Any security including foreign security.

Notes: This will also cover:

1. Contribution received from any person who has in turn received it from a foreign source
2. Interest accrued on FC deposited in the bank

However, any amount received, by any person from any foreign source in India, by way of fee (including fees charged by an educational institution in India from foreign student) or towards cost in lieu of goods or services rendered by such person in the ordinary course of business, trade or commerce, whether within India or outside India, shall be excluded from the definition of foreign contribution.

4.1 Foreign Source

It includes:–

1. Government of any foreign country or any agency of such government;
2. Any international agency except United Nations or any of its specialised agencies, World Bank, International Monetary Fund or such other agency as the Central Government may, by notification in the Official Gazette, specify;
3. Foreign company;
4. Corporation, other than foreign company, incorporated outside India;
5. A multinational corporation;
6. A company where more than 50% of its share capital is held by a foreign government or citizens of a foreign country or foreign entity (includes company, corporations, trusts, societies or other associations of individuals registered in foreign country);
7. A foreign trust or foreign foundation and includes trust or foundation mainly financed by a foreign country and;
8. Citizen of a foreign country.
9. Foreign Trade Union, Society, Club or Other Association.

Note: Amount received from a non-resident Indian citizen in foreign currency, would not be treated as foreign source.

5. Restrictions on Accepting FC

The person having a definite cultural, economic, educational, religious or social programme can accept FC, only if:

1. It is registered with the Central Government under this Act or takes prior permission before receiving each contribution.
2. It receives FC only through one designated bank account.
3. Central Government is kept intimated as to the amount, source and manner in which FC was received and utilised.

5.1 Prior Permission

1. Application for prior approval to be made in Form FC 4.
2. Prior approval to be donor specific, donee specific and purpose specific.

5.2 Registration of the Association

1. Application for registration shall be submitted electronically in Form FC 3. Duly signed hard copy of the same along with relevant documents is also to be submitted within 30 days.
2. Registration granted shall be valid for 5 years from the date of its issue.
3. Application for renewal to be made in Form FC 5, six months before the date of expiry of the certificate
4. Act provides that registration may be granted, ordinarily within 90 days from the date of receipt of application, however practical experience is that the process takes much longer.
5. The Ministry of Affairs has introduced a new facility “FCRA – Online” to facilitate associations to file their applications for registration and submit statutory forms online. Refer fcraonline.nic.in.

6. Accounts & Audit

6.1 Maintenance of accounts

1. Accounts to be maintained on yearly basis from April to March.
2. Every person receiving FC shall maintain an account of any FC received and its utilisation.
   1. Income & expenditure statement, receipt & payment account and balance sheet are to be prepared exclusively in respect of the FC received.
   2. Details in Form FC 7 to be maintained where FC relates to articles.
   3. Details in Form FC 8 to be maintained where FC relates to foreign security.

6.2 Designated bank account

1. FCRA funds can be received and held only in the designated bank account.
2. Besides the designated bank account, operational accounts in one or more banks may be opened for the limited purpose of utilising the foreign contribution. Such accounts are commonly referred to as field accounts. In such cases, intimation on plain paper shall be furnished to the Secretary, Ministry of Home Affairs.
3. Designated or field accounts are strictly prohibited from receiving non-FC funds.
4. Interest earned out of FC funds should be deposited in designated bank account.

6.3 Audit

1. Income & Expenditure account, Receipts & Payment account and Balance Sheet, with report in Form FC 6 duly certified by a CA to be submitted to Home Ministry before 31st of December immediately following the end of financial year.
2. Form FC 6 to give details of each contribution received, the source, manner of receipt, purpose of receipt and manner of utilisation.
3. Even Nil report has to be submitted.

7. Total Ban on Acceptance of Foreign Contribution & Hospitality

7.1 Ban relating to FC applies to

1. Candidate for election;
2. Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper;
3. Government servant, judge or employee of any Government corporation;
4. Member of any Legislature;
5. Political party or office-bearer thereof
6. Organisation of political nature;
7. Association or company engaged in production or broadcast of audio news or audio visual news or current affairs programmes through any electronic mode or form;
8. Correspondent or columnist, cartoonist, editor, owner of the above association or company.

7.2 Ban does not apply to FC received by way of:

1. Salary, wages or other remuneration, or
2. Payment in ordinary course of international trade or commerce, or
3. Payment received by an agent of a foreign source in relation to any transaction made by such foreign source with the State or Central Government, or
4. Gift or presentation made to a member of any Indian Delegation, provided the same is in conformity with the rules framed by the Central Government in this regard, or
5. Gift from relative. Gifts exceeding ₹ 1,00,000 per annum requires intimation to the Central Government in Form FC-1 within 30 days from date of receipt of such gift, or
6. Any scholarship, stipend or any payment of like nature, or
7. Remittance received in ordinary course of business through official channels.

7.3 And Foreign Hospitality

1. Member of Legislature or office-bearer of political party or Government servant, judge or employee of any Government corporation, while visiting any foreign country shall not accept any foreign hospitality except with the prior permission of the Central Government in Form FC 2.
2. Such permission is not necessary in case of medical emergency. However, even in case of such an emergency, the Central Government is required to be intimated within sixty days of receiving hospitality.
3. Meaning of Foreign Hospitality – any offer, not being a purely casual one, made by a foreign source for providing a person with the costs of travel to any foreign country or territory or with free boarding, lodging, transport or medical treatment.

8. Restriction on Administrative Expenses

Every person, registered or having prior permission, shall not, as far as possible, incur administrative expenses in excess of 50% of the FC received in that financial year. Rule 5 lays down parameters as to what constitutes administrative expenses.

9. Speculative Activity

Foreign contribution or any income arising out of it shall not be used for speculative business. Rule 4 specifies the activities that will be treated as speculative in nature. For example investment in mutual funds is not permitted. However, debt based secure investment shall not be treated as speculative.

10. Transfer of FC to Other Registered or Unregistered Persons

1. Transfer of FC funds to another person who is not registered or has not obtained prior permission to receive foreign contribution will not be permitted unless pre-approval of the Central Government is obtained. Application for such pre-approval is to be made in Form FC 10.
2. In such case, the transferor may apply for permission to transfer not more than 10% of the total value of FC received.
3. Transfer of FC funds is permitted if the transferee is a registered organisation or has obtained prior permission under section 11.

11. Inspection & Seizure

1. The Central Government has been empowered, to inspect as well as seize the accounts and records if it has reason to believe that any provisions of this Act or any other law relating to foreign exchange has been contravened.
2. Central Government may seize and/or confiscate any article, currency or security in relation to which any provision of this Act has been contravened.
3. The seized records and accounts are to be released if no proceedings are initiated within six months from the date of seizure.

12. Penalty

• A person who has been convicted more than once for offence relating to acceptance or utilisation of FC is prohibited from accepting any FC for a period of 5 years.
• Any person convicted of an FC offence relating to any article, currency or security would also be liable to fine up to 5 times the value of the article or currency or ₹ 1,000 whichever is more, if article or currency is not available for confiscation.
• Compounding of certain offences is now possible.

13. Custody of FC when certificate of registration is cancelled

• If certificate of registration is cancelled then unutilised FC lying in the designated bank account shall vest with concerned banking authority till Central Government issues further direction.
• If person to whom the certificate is granted ceases to exist or becomes defunct then, the assets of such person shall be disposed of in accordance with the provisions of law for the time being in force under which the person was registered or incorporated.

14. FC in Excess of Rupees One Crore in a Financial Year

Any person in receipt of FC in excess of ₹ one crore in a financial year, shall maintain summary data of receipts and utilisation of FC pertaining to the year of receipt and the subsequent year in the public domain. The Central Government shall also display such summary data through its website.