The Foreign Contribution (Regulation) Amendment Act 2020 (FCRA Amendment Act) was notified by the Ministry of Law and Justice on September 28, 2020, amending the current provisions of the Foreign Contribution Regulation Act 2010 (FCRA).

The FCRA provides a compliance structure for foreign contributions received in India, which includes, registration, prior permission, and other requirements for receiving foreign contributions, filing of financials, fund utilisation, and prohibitions on foreign contribution receipt.

The FCRA Amendment Act introduces various changes to the FCRA, including limits on the types of organizations that may accept international donations, restrictions on the transfer and usage of funds, additional criteria for obtaining registrations and permissions, and provisions for the extension, revocation, and surrender of a certificate of registration under the FCRA. A summary of key amendments brought in by the FCRA Amendment Act is provided below:

  • Prohibition on receiving Foreign Contribution: Election winners, correspondents, columnists, cartoonists, writers, managers, or publishers of a registered publication, judges, government servants, employees of governmental companies, and others are all forbidden from accepting any kind of foreign donation under Section 3(1) of the FCRA. The FCRA Amendment Act has amended this section and added “public servants” in this list.

Further, The FCRA Amendment Act clarified that employees of government undertakings are also forbidden from obtaining any kind of foreign contribution, amending current Section 3(1) explanations.

  • Transfer of foreign contributions: Previously, foreign contribution could only be transferred to those who were enrolled or had received prior permission to receive foreign contribution under Section 7 of the FCRA. This section was changed by the FCRA Amendment Act, which made it illegal for an individual to pass a foreign donation earned to another person.
  • Requirement of Aadhaar: An individual is permitted to accept foreign contribution under Section 12 of the FCRA if they are registered or have obtained prior permission under the FCRA to accept foreign contribution. The FCRA defines the format and manner in which registration/prior permission applications must be submitted. The FCRA Amendment Act added a new section (Section 12A) that states that the Central Government may require persons seeking registration, prior permission, or renewal to provide the Aadhaar numbers of all office bearers, directors, and key functionaries, or copies of passports or the Overseas Citizen of India card for foreigners.
  • FCRA Account: Previously, Section 17 of the FCRA specified that foreign deposits must be collected in a single branch of any scheduled bank and that multiple accounts could be opened in other banks to use the funds. Section 17 of the FCRA Amendment Act was amended to provide that foreign contributions can only be earned in a “FCRA account” opened with a specified branch of the State Bank of India in New Delhi. Additionally, no funds other than international donations are allowed to be obtained or deposited in the FCRA account. Further, other FCRA accounts may be opened in any scheduled bank for keeping or utilising the received foreign contribution.
  • Restriction on utilisation of funds: Previously, Section 8 of the FCRA stipulated a 50 percent limit on the percentage of foreign contributions that may be used for administrative costs. ‘Administrative expenses’ are classified as salaries, wages, travel expenses, expenses incurred in the hiring of staff, consumables such as water/electricity, telephone and postal charges, charges for rent and repair of premises, costs associated with the operation of the office and vehicles, and costs incurred in legal and professional fees, among other things. By amending Section 8 of the FCRA, the FCRA Amendment Act has decreased this cap. The provision now states that the use of foreign contributions for operating costs is limited to a maximum of 20% of the total.
  • Furthermore, under Section 11 of the FCRA, if an individual receiving foreign contributions was found guilty of violating the FCRA’s provisions, the unutilised or unreceived foreign contribution could only be used or obtained with the Central Government’s prior approval. Section 11 of FCRA Amendment Act allows the Central Government to limit the use of unutilized foreign contributions in those cases where an individual has violated the FCRA’s provisions.
  • Renewal/Suspension of registration: Previously, the Central Government could suspend any person’s registration for a period of 180 days under Section 13 of the FCRA. Section 13 of the FCRA Amendment Act has been amended, granting the Central Government the authority to suspend a person’s registration for an additional 180 days, in addition to the current 180 days.

The FCRA Amendment Act has also granted the federal government several new powers, i.e. to:

  • conduct an enquiry before renewal of registration; and
  • permit a person to surrender their registration, on being satisfied that such person has not contravened FCRA and has vested the management of foreign contribution and related assets in the prescribed manner.

Conclusion

The FCRA Amendment Act is another initiative by the Central Government to control the flow of funds obtained by resident Indians from non-residents. The FCRA Amendment Act aims to improve transparency by requiring Aadhaar, allowing the government to examine the affairs of people enrolled under the FCRA, and requiring a mandatory ‘FCRA Account.’ The FCRA Amendment Act, on the other hand, is expected to be perceived by market participants as an effort to improve oversight of non-profit organisations operating in India that receive funding from abroad.

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