Who is Eligible for Registration under FCRA?
NGO & Trust

Who is Eligible for Registration under FCRA?

5 Mins read

The Foreign Contribution (Regulation) Act of 2010 governs foreign contributions to nongovernmental organizations, trusts, and similar other entities that could be carried out in India. It prescribes the eligibility conditions under which the organization may accept foreign contributions so that such contributions are not misused or used for activities that would go against the interests of the country.

The rules regarding foreign funding have been made more stricter with recent amendments. Therefore, it is imperative that the organizations continue to comply with the same rules.

This blog defined eligibility criteria updated for FCRA registration and major legal provisions, among which all the recent law changes and procedure for application under FCRA registration were included.

Introduction

Any person, association, or company in India, before accepting any foreign contribution or donation from sources outside India, are liable to get registered under the Central Government, according to section 11 of the Foreign Contribution (Regulation) Act, 2010 (FCRA).

Where a person does not obtain registration as above, he may accept foreign contribution only after obtaining the prior permission from the Central Government. Registration under FCRA is governed by Ministry of Home Affairs, Government of India.

Know about FCRA

The FCRA, 2010, was passed by the Parliament in order to unify the laws governing the foreign contributions and hospitality by specific people, organizations, or businesses. It also prohibited the receipt and utilization of foreign contributions and hospitality for any activities which can be prejudicial to the interests of the country, as well as the matters related to or incidental to them.

Objectives of the FCRA

  • Foreign contributions shall not play a role in political processes or in elections as well as sensitive areas like the defence of the nation.
  • To regulate how foreign contributions are accepted and used for national interest initiatives.
  • To stop the misappropriation of foreign funds for purposes that endanger India’s integrity, sovereignty, or public order.

The FCRA Amendment Act, 2020 has brought additional restrictions with even more control over foreign funds. It will increase the levels of transparency and accountability but would also create obstacles for the smaller organizations to follow new and stringent rules.

Eligibility for FCRA Registration

For every Indian organization willing to accept donations from overseas, FCRA registration is a legal requirement. However, not all organizations are eligible. An applicant entity must satisfy certain conditions for getting registered under the FCRA, which has been amended by the 2020 amendment.

Foreign contributions are accepting organizations for cultural, social, economic, educational or religious programs. Foreign contributions may be received through either FCRA registration or prior permission.

Standard Registration

The following conditions must be fulfilled to become a qualified entity for FCRA Registration-

  • The registering entity should be registered as a trust, society, or section 8 company of the Companies Act, 2013.
  • The entity should have spent a sum of Rs. 15,00,000 in the past 3 years to achieve its objectives.
  • The entity must have been in existence for at least three years without ever having received foreign contributions without the approval of the government agency.
  • The Income and expenditure statements, audited by a Chartered Accountant, must be submitted.

Prior Permission Route

The best route for newly registered organizations which would like to accept foreign contributions will be “Prior Permission route”. This is provided upon receipt of a certain sum from a specific donor for the purpose of carrying out specific activities/projects.

  • The applicant must be Trusts, Societies, or Section 8 Companies.
  • The donor must submit a commitment letter to the Ministry of Home Affairs detailing the amount of contribution and the purpose for which it is proposed.
  • Foreign donors cannot be the Chief Functionaries of Indian organizations and mustn’t be family members or close relatives of at least 51% of the members of the governing body.

Restrictions on FCRA Registration

There are numerous organizations in India that can apply for FCRA registration. However, there are certain restrictions also, as follows-

  • People not carrying on Charitable Activity- Those raising foreign funds for personal purposes or for commercial or profit-making activities are not included in this category.
  • Political Parties– Political parties or organizations involved in political activities are prohibited from receiving foreign contributions under FCRA.
  • FCRA Revocation– Government may revoke the registration of an FCRA on its own if the organization is seen to have misused foreign funds or is found to be doing work against national interest.

Application Process for Registration

Registration under the FCRA is open to eligible organizations. The applicant organizations submit an online Form FC-3 giving details about its background, activities, financials, and receipts of foreign contribution. They must also submit relevant documents such as their registration certificate, audited financial statements, and board member details.

The Ministry of Home Affairs (MHA) verify the application, which can take several months depending on the background of organizations and operations complexity. After Approval, the FCRA certificate to be issued to the organization for the term of five years.

Three Master Conditions for Granting FCRA Registration

After submission of the FCRA application in the prescribed form, under the following conditions, the registration is granted.

  1. The applicant must not be fictitious or benami, have not been convicted or prosecuted for conversion activities, communal tension, misuse of funds, sedition, or use of foreign contribution for personal gain.
  2. The acceptance of foreign contributions should not negatively impact India’s sovereignty, security, strategic interests, freedom, fair elections, public interest, friendly relations with foreign states, and harmony within various groups.
  3. The acceptance of foreign contribution should not lead to incitement of an offence or endanger the life or physical safety of any person.

Validity and Renewal

Once registration under the FCRA is allowed, the same is valid for five years, requiring renewal after such period. The renewal application must be filed within six months before the expiry of their registration.

Major Changes After Amendment in 2020

The FCRA Amendment Act 2020 made substantial amendments to the process through which foreign contributions are received in India, thereby strengthening the existing provision. Following are some of the key amendments-

  • Restriction on Sub-Granting of Funds- Earlier, organizations could transfer foreign contributions to other organizations if they could not utilize them fully. After this amendment it has prohibited and registered entity cannot transfer foreign funds to any other unregistered organization.
  • Reduction in Administrative Expenses- It has been reduced from 50% to 20%. Organizations can now only spend 20% of the foreign contributions they receive on administrative expenses, such as salaries, overheads, and office costs.
  • Mandatory Opening of FCRA Account in SBI­- A major change, now all organizations for receiving funds must open a FCRA Account in State Bank oof India, New Delhi Branch.
  • Aadhaar for Key Personals- It introduced the need of providing the Aadhaar number for all the key personals of the organization at the time of application.
  • Cancellation and suspension of Registration- Government can suspend the registration for up to 360 days while it investigates the matter if the organization is considered to be not adhering the FCRA rules or engaging in activities that are harmful to national security.

Conclusion

The Foreign Contribution (Regulation) Act of 2010 plays a very indispensable role in keeping the flow of foreign donations in India transparent. After the amendments in 2020, the rules have become more stringent, requiring organizations to adapt to new compliance measures. Organizations can continue to receive foreign contributions to support their charity missions if they meet the qualifying criteria, follow the new legal provisions, and ensure adequate financial management.

Any organizations that are collaborating with Indian entities and plan to target international funds should get well informed about the details of FCRA including amendments. By remaining compliant, such non-profit organizations will be able to reach for resources all over the world but will also make sure that the resources which they have are applied to the advancement of the people of India in a legal and open way.

Bibliography

The Companies Act, 2013 (Act No. 18 of 2013)

The Foreign Contribution (Regulation) Act, 2010 (Act No. 42 of 2010)

https://fcraonline.nic.in/home/index.aspx

https://www.mha.gov.in

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About author
Advocate by profession, currently pursuing an LL.M. from the University of Delhi, and an experienced legal writer. I have contributed to the publication of books, magazines, and online platforms, delivering high-quality, well-researched legal content. My expertise lies in simplifying complex legal concepts and crafting clear, engaging content for diverse audiences.
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