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FCRA Amendment Bill 2020

Highlights        

  • The Bill has added “Public servants” to the list of Individuals who are forbidden from accepting foreign contributions. A public servant has been defined in section 21 of the Indian Penal Code as a government employee, officers in the military, navy or air force; police, judges, officers of Court of Justice, and any local authority established by a central or state Act.
  • Section 7 of the act, allowing FCRA registered entities from passing on foreign contributions to other organization who are FCRA registered, the bill seeks to amend this by barring the passing on of foreign contributions entirely.
  • Administrative expenses have been capped at 20% of foreign contribution as against the previous limit of 50% of foreign contribution.

In this context, administrative expenses include but are not limited to :

  • Salaries wages, travel expenses or any remuneration realized by members of the executive committee or governing council
  • All expenses towards hiring and remuneration of personnel for management of activities and travel for such personnel
  • Legal and professional charges
  • Cost of accounting for and administering funds
  • Expenses towards running and maintenance of vehicles
  • Rent of premises repair and maintenance
  • All expenses related to consumables such as electricity and water charges, telephone etc.

Exclusions from the above have also been specified, these are :

  • Salaries and remuneration of trainers
  • Salaries and remuneration of surveyors and analysts
  • Direct expenses in providing services

In addition the following expenses are not considered administrative expenses :

  • Fund raising expenses
  • Purchase of capital items
  • Insurance
  • Purchase of items for distribution
  • Advertisement and publicity
  • Salaries of non-managerial staff
  • Interest paid to bank etc.

Our view is that in case the expenses are incurred for activities that directly add to the aims of the organization, such as research, development, and advocacy the same should not be counted towards administrative expenses. An in-depth analysis of the cost numbers would have to be carried out to ensure that they are correctly classified and do not breach the 20% of foreign contribution limit.

  • The government can ensure that Foreign contributions  are frozen and their utilization is to be done with the prior permission of the government In case of suspicion of violation of FCRA norms             
  • Application for prior permission can be made only after an designated FCRA account has been set up
  • Before registration can be granted Identification details in the form of aadhar are required to be submitted for all office bearers/directors of the organization
  • In case of enquiries there was a proposed suspension period of 180 days, this has been augmented with another additional suspension period which can extend up to 180 more days
  • The surrender of FCRA registration is now allowed, provided there are no contraventions recorded under the act. Upon surrender, the foreign contributions and assets shall be accorded the same treatment as in the case of cancellation. The funds and the assets shall fall into the control of authorized departments.
  • All FCRA registered entities are required to set up an account with the SBI, New Delhi branch where all FCRA funds are to be henceforth proposed to be received. While there can be multiple utilization accounts, this will be the only collection account that organizations can have. The SBI designated branch will share with the government information on a periodic basis. This information will include but not be limited to :
    • Quantum of funds
    • Source and manner of funds
    • Other particulars as the government may specify. The idea is that the government will use this data to identify violators or entities receiving funds from “undesirable” sources and take action against them.

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