Foreign Donations Blocked? The FCRA Rules Your NGO Cannot Afford to Ignore

The Foreign Contribution (Regulation) Act, 2010 (FCRA) governs the acceptance and utilization of foreign contributions by Non-Profit Organizations (NPOs) in India. Amended in 2020 to introduce stricter compliance measures, the FCRA aims to ensure that foreign donations do not compromise national security or public interest.

Non-profits seeking to receive foreign contributions must adhere to strict eligibility, registration, and accounting requirements. Failure to comply can lead to serious consequences, including suspension or cancellation of registration, heavy penalties, and even criminal liability. This article provides a structured overview of FCRA compliance, ensuring that non-profits operate within the legal framework while continuing their impactful work.

Regulation of Foreign Contributions under FCRA

Eligibility to Receive Foreign Contributions

Under Section 3 of FCRA, certain entities are prohibited from receiving foreign contributions, including:

• Candidates contesting elections
• Political parties
• Members of the legislature
• Public servants and government employees

However, Section 4 provides exemptions. Organizations engaged in definite educational, cultural, social, economic, or religious programs may receive foreign contributions, provided they obtain either a Certificate of Registration (COR) or prior permission from the Central Government.

To be eligible, an NPO must:

• Apply via Form FC-3 under the Foreign Contribution Regulation Rules, 2011
• Use Form FC-3A for registration and Form FC-3B for prior permission
• Ensure they are not restricted under Section 3

Once eligibility criteria are met, organizations can lawfully accept foreign contributions while maintaining strict compliance.

Grant of Certificate of Registration (COR) and Prior Permission

To receive foreign contributions, an NPO must:

• Open a designated "FCRA Account" in the State Bank of India, New Delhi (Main Branch), as per Section 17 of FCRA.
• Apply through Form FC-3A (for COR) or Form FC-3B (for prior permission).

Key Differences Between COR and Prior Permission:

COR Validity: 5 years, requiring renewal via Form FC-3C six months before expiry. ? Prior Permission Validity: Valid only until the approved foreign contribution is fully utilized.

Eligibility for COR:

The NPO must be registered under one of the following:

• Indian Trusts Act, 1882 (as a Public Charitable Trust)
• Societies Registration Act, 1860 (as a Society)
• Companies Act, 2013 (as a Section 8 Company)

The NPO must have been in existence for at least 3 years and spent a minimum of ?15 lakh (excluding administrative expenses) in the last 3 years towards its objectives.

Eligibility for Prior Permission:

For newly established NPOs that have not been in existence for 3 years. Must provide a commitment letter from the donor detailing:

• Amount of contribution
• Purpose of the donation
• Proposed social impact

Under Section 12 of FCRA, an applicant may be denied registration if:

• It is fictitious or fraudulent
• It has violated FCRA provisions in the past
• It has misused funds or failed to maintain transparency

Accounts & Financial Compliance Under FCRA

Once registered, an NPO must maintain proper accounting records to ensure compliance with FCRA’s reporting requirements.

Key Accounting & Reporting Obligations:

• Maintain detailed records of all foreign contributions, including their sources and utilization.
• A Chartered Accountant must certify the accounts to ensure accuracy.
• File Annual Returns (Form FC-4) within 9 months from the end of the financial year.
• If no foreign contribution is received in a given year, a ‘Nil’ return must be filed.

Failure to comply with these financial regulations can result in penalties, fines, or even cancellation of FCRA registration.

Conclusion

FCRA compliance is non-negotiable for non-profits receiving foreign funds in India. The registration, reporting, and accounting requirements under the Act ensure transparency while preventing undue foreign influence.

The stringent regulatory framework allows the government to monitor the impact of foreign contributions on Indian society, ensuring that such funds align with the nation’s interests. Non-profits must stay vigilant, maintain meticulous records, and comply with all statutory requirements to continue their mission without legal hurdles.

Staying compliant isn’t just about avoiding penalties—it’s about building trust, maintaining credibility, and ensuring sustainable operations in the long run.

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Knowledge Content Centre