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Foreign Contribution (Regulation) Act 2011 [FCRA] : Explained

FCRA foreign contribution regulation act explained guide to dollar

There has been significant controversy in the recent days around the alleged receipt of contributions from foreign sources by certain political parties, and by government officials. Such contributions are governed by an act called Foreign contributions (regulation) Act, 2010, commonly known as FCRA.  We have prepared a small guide to the Act to enable lay people and other interested parties to understand the restrictions and covenants of the FCR Act. We hope this would be useful in your endeavors.

Foreign Contribution Regulations Act, (FCRA) : The Genesis

The roots of the Foreign Contribution (Regulation) Act [FCRA] lie in the period of emergency, declared in India during the period between 1975 and 1977. The original version of the legislation was passed in 1976 with the ostensible purpose being regulation of acceptance and utilization of foreign contributions and hospitality by certain category of persons.  In its latest version, which was promulgated in 2010, the  FCR Act addresses some of the key issues of the 1976 legislation without bringing into account any significant changes into the scope or structure of the existing framework.

Being a special act, the FCRA supersedes and prevails over other legislation such as FEMA, therefore even if some transactions are allowed as per FEMA, restrictions, if any, imposed by FCRA shall prevail.

Applicability

The act applies to the whole of India and even covers associates/branches and subsidiaries of Indian companies and bodies registered or incorporated in India. Further it is also applicable to citizens of India outside India.

Foreign Contribution

Since the stated purpose of the act is the regulation of foreign contribution, it is important to understand what the phrase means in the context of this regulation. As per the act foreign contribution means a donation, delivery or transfer made by any foreign source ( a term which we shall delve upon soon) of :

i.            Any article whose value exceeds Rs 25,000, the definition does not cover any article presented as a gift to an individual for his personal use.

ii.            Any currency ( Indian or foreign)

iii.            Any security as defined by the securities contract regulation act.

The act also considers the indirect transfer of any article, currency or foreign security to be a foreign contribution.

When any person receives total foreign contribution in excess of Rs 1 crore in a year then every person in receipt of such contributions would have to provide summary of receipts and utilization of such contributions in public domain for a the relevant year and the year that follows.

Foreign sources

Since the act governs receipts of contributions from foreign sources, it is important to understand what such foreign sources are, the FCR act defines Foreign sources to include:

  • Foreign governments
  • International agencies [ not including agencies as specified by the government]
  • Foreign companies, corporations and MNCs
  • Indian companies with foreign ownership in excess of 50%
  • Foreign trade unions, trusts, foundations
  • Clubs, organisations, societies of Individuals founded abroad
  • Foreign citizens

In order to facilitate work of internationally recognized aid agencies, the government has notified 109 agencies including those affiliated with the United Nations, WHO etc as not being foreign sources for the purposes of this act.

 

Restrictions on accessing foreign contribution

The act also limits and prevents certain individuals from accessing foreign contributions to restrict “foreign influences” on key elements of the administration. Therefore as per the act, entities which cannot access any foreign contributions include :

  • Candidates for elections
  • Correspondents, columnists, editors, owners, printers of News papers
  • Judges, Government Servants etc.
  • Member of legislatures
  • Political parties
  • Any organisation of a political nature
  • Association or company engaged in the business of news broadcast through TV or internet or an individual associated with such organisations

Candidates for elections having received any foreign contribution up to 180 days before his/her nomination for an  election must provide an intimation to the central government in prescribed form giving details of contribution received and its utilization.

However, certain transactions are not covered under the scope of this regulation, such amounts can be received without being deemed foreign contributions under this act, these include:

  • Salaries and wages received from foreign sources
  • Payments for international transactions
  • Payments for transactions with foreign governments
  • Amounts received by way of gifts or presentations made as member of a delegation, provided such gift was accepted in accordance with the standards as set forth by the Indian government
  • Any amounts if received from relatives
  • Any remittance received in the ordinary course of business, subject to the provisions of FEMA
  • Scholarships, stipend etc received

The act places several restrictions upon individuals who may act as conduits between foreign sources and political parties in India. As per the FCRA no person can accepted contributions from a foreign source on behalf of any political party or any other person. Similarly, no person may deliver any monies received from foreign sources to another person. Similarly there are restrictions imposed on the delivery of currency to other persons and political parties.

 

Foreign hospitality

Foreign hospitality is another regulated element forming part of this regulation, foreign hospitality has been described as an offer, not purely casual, made in cash or kind by a foreign source for the provision of cost of travel to a foreign country or territory with free boarding, lodging ,transport, or medical treatment. [su_pullquote align=”right”] foreign hospitality has been described as an offer, not purely casual, made in cash or kind by a foreign source for the provision of cost of travel to a foreign country or territory with free boarding, lodging ,transport, or medical treatment.[/su_pullquote]

The following individuals can receive foreign aid only with the prior permission of the central government

  1. Member of legislature
  2. Office bearer of political party
  3. Judge
  4. Government servant
  5. Employee of government corporation

 

Registration and administration under FCRA

Organisations with a definite cultural, economic , educational, religious or social programme can accept foreign contributions, however to do so they have to register themselves with the central government under section 11 of the FCR Act.  To be so registered with the government the organization must be in existence for a period in excess of 3 years. The funds so received by the organisation must be used only for the purpose for which they were received. Other tenets that the organisation must fulfill include having spent over 6 lakh rupees on its purposes during the period of its existence and ensuring that administrative expenditure does not exceed 50% of contributions received.  Further, the organization must not use the funds for speculative purposes.

To receive registration an application has to be made in the specified format with the Ministry of  home affairs (MHA) as per the specified norms the application is to be either approved or rejected within a period of 90 days. Registration once granted shall be valid for a period of 5 years.

 

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