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Recent Amendment of Foreign Contribution (Regulation) Act, 2010

Foreign Contribution Regulation Act, 2010 (FCRA) was amended through enactment of Foreign Contribution (Regulation) Amendment Act, 2020 (FCRA 2020). Main Object of FCRA was to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto.

Need to change the Law:
In accordance with FCRA 2020 bill, the annual inflow of foreign contribution has almost doubled between the years 2010 and 2019, but many recipients of foreign contribution have not utilised the same for the purpose for which they were registered or granted prior permission under the said Act. Due to Many of them were also found wanting in ensuring basic statutory compliances such as submission of annual returns and maintenance of proper accounts.

This has led to a situation where the Central Government had to cancel certificates of registration of more than 19,000 recipient organisations, including non-Governmental organisations, during the period between 2011 and 2019. The criminal investigations also had to be initiated against dozens of such non-Governmental organizations which indulged in outright misappropriation or mis-utilisation of foreign contribution      

Object of FCRA 2020
The object of the FCRA 2020 is to strengthen the compliance mechanism, enhance transparency and accountability in the receipt and utilisation of foreign contribution and facilitating genuine non-governmental organisations or associations who are working for the welfare of the society

Key changes to the FCRA through FCRA 2020
Prohibition on public servant from receiving foreign contribution (Section 3)
Clause C of Sub-section Section 3 of the FCRA is amended by adding Public servant through which government expands the list of persons who are prohibited from receiving of foreign contribution. Public servant defines in section 21 of the Indian Penal Code. Public servant includes every person in the service or pays of the Government or remunerated by fees or commission for the performance of any public duty by the Government.

Prohibition to transfer foreign contribution to other person (Section 7)
Section 7 of FCRA is substituted that person who is registered and granted certificate or obtained prior permission under this act and receive foreign contribution shall be prohibited to transfer of foreign contribution to any other person.

Earlier, foreign contribution can be transferred to any other persons having valid certificate or prior permission under this act but that has been removed now. This became bigger hurdle for small non-governmental organisation to receipt of amount from a person who has valid certificate or prior permission under the act.

Lowering of administrative expenses (Section 8)
Section 8 of FCRA decreases the cap on administrative expenses upto 20% from existing 50. Until now, recipients of foreign contribution could use 50% of the foreign contribution to defray administrative expenses.

Power to prohibit a foreign contribution recipient from utilising/receiving its funds
Proviso added in Section 11 of the act empowers the Central Government to restrict any recipient of foreign contribution from utilizing / receiving its funds on the basis of any information or report and after holding summary inquiry and reason to believe that a person who has been granted prior permission has contravened any of the provisions of Act and found guilty. This proviso seems to preventive clause by enabling central government for prevention of illegal receipts and utilisation of foreign contribution. Earlier, there was no similar power and Central Government could only restrict recipient of foreign contribution from utilizing / receiving its funds if he has been found guilty.

Mandatory opening of FCRA bank account in State Bank of India, Delhi (Section 17)
For better monitoring and tracking of receipt of foreign contribution, central government mandates recipient of foreign contribution to receive such amount in account designated as FCRA Account opened at State Bank of India, New Delhi Branch. However, it relaxes to the recipient to open another FCRA account in any scheduled bank for the purpose of keeping or utilising the foreign contribution which has been received from his FCRA Account in State Bank of India, New Delhi Branch.

Mandatory Aadhar Card for Indian Nationals (Section 12A)
In accordance with New Section 12A of the Act, an identification document for the purpose of prior permission / approval or registration (including renewal) under FCRA, Aadhaar number for all Office bearer or directors of all NGOs and other organization which is eligible for foreign contribution is mandatory. However, a passport or overseas citizen of India card is required in the case of foreign nationals.

Increase in the maximum limit for the period of suspension
In accordance with Section 13 of FCRA (amended), Government has got the power to suspend registration of certificate or prohibit prior –permission of a person for receipt / utilize foreign contribution up to 360 days from 180 days for pending inquiry for cancellation of FCRA Registration.

Footnotes:
  • http://164.100.47.5/Official_Debate_Nhindi/Floor/95/F09.03.1976.pdf
  • http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/123_2020_LS_Eng.pdf
  • https://www.scconline.com/blog/post/2020/09/22/spotlight-on-foreign-contribution-regulation-amendment-bill-2020-key-highlights/
The content of this article is intended to provide general information to the subject matter. Specialist advice should be sought about your specific circumstances.

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