Upon receipt of President of India’s Assent the Act, comes in to effect from 29th of September 2020. It brings in amendments to the Foreign Contribution (Regulation) Act, 2010.

What all are the Key changes to the FCRA introduced by the Amendment Act?

• Prohibition on “public servant” from receiving foreign contribution.
• Prohibition on transfer of foreign contribution to any other person.
• Reducing the Limit in usage of foreign contribution for administrative purposes.
• Mandatory opening of FCRA bank account in State Bank of India, Delhi.
• Aadhaar is mandatory for registration under FCRA.
• Increase in the maximum limit for the period of suspension by the Central Govt from 180 days to 360 day.
• Restrictions on utilization of foreign contribution.
• Renewal of license.
• Voluntary surrender of certificate.

Why Public Servants are prohibited from receiving foreign contribution?

Previously Members of the Legislature and political parties, judges and media persons are prohibited from receiving any foreign contribution.

The Act adds public servants (as defined under the section 21 of Indian Penal Code) to this list. Public servant includes any person who is in service or pay of the government, or remunerated by the government for the performance of any public duty.

I am a government employee, My Son or Daughter are employed abroad, am I not allowed to receive money from them?

Yes, in case your son or daughter or any relative who is sending your money for personal purpose is a Foreign Citizen (PIO card holders and to Overseas Citizens of India), Rule 6 of FCRR, 2011 provides any gift received from a relative in excess of 1 lakh, per annum, needs to be intimated to the Central Government in Form FC-1 within 30 days.

So, the provision wont apply to any of the prohibited individuals under FCRA including public servant, if the money is received from a Relative for personal purpose who is still an Indian Citizen.

Prohibition on transfer of foreign contribution to any other person?

Previously FCRA allows the transfer of foreign contribution to other registered persons registered under FCRA or having obtained prior permission as defined under FCRA. Funds can be transferred to such persons also who are not registered under FCRA but have prior permission as defined under the provisions of FCRA.

The Act amends this to prohibit the transfer of foreign contribution to any other person. The term ‘person’ under the Act includes an individual, an association, or a registered company.

After the amendment, the Government has put a complete prohibition on the transfer of funds to another person irrespective of the fact that the other person is registered under FCRA or has prior permission or not.

This amendment has put a full stop on the indirect transfer of funds and all the FCRA registered persons will be required to receive funds under FCRA directly from the funding agencies.

NGOs for years have functioned as networks, with smaller ones with grass roots level touch being supported by the larger, better-funded organizations. There is collaboration between small NGOs/ social workers and the large NGOs and this amendment will adversely affect this collaboration and networking.

Reducing the Limit in usage of foreign contribution for administrative purposes?

Until now, recipients of foreign contribution could use 50% of the foreign contribution to Meet administrative expenses like:

• payment of salaries,
• travel expenses,
• consumables like water/electricity,
• telephone charges,
• postal charges,
• rent and repairs to premise(s),
• costs associated with running an office, etc.

This Amended Bill reduces this limit to 20%.

Mandatory opening of FCRA bank account in State Bank of India, Delhi?

Presently FCRA Account for the receipt of funds can be opened at any branch of a scheduled bank anywhere in India.
The Act amends this to state that foreign contribution must be received only in an account designated by the bank as “FCRA account” in such branch of the State Bank of India, New Delhi, as notified by the central government. (Notification is yet to received on this)

Thus, in the future, all the inward remittances covered under FCRA can be deposited in the specified branch of State Bank of India, New Delhi.

The objective of the amendment appears to be to centralize the inflow of foreign contribution into one bank making it easier for the Government to monitor and track the funds received under FCRA.

Generally the government would give time to open the new account and further transfer the existing funds in FCRA account to the new FCRA account.

Is Aadhaar is Mandatory for registration?

Foreign contribution can be accepted only by taking the permission of the Central Government. Such permission can be taken in the following two ways
• Registration
• Prior Permission of Central Govt.
Any person seeking registration (or renewal of such registration) or prior permission for receiving foreign contribution must make an application to the central government in the prescribed manner.

The Amendment adds that any person seeking prior permission, registration or renewal of registration must provide the Aadhaar number of all its office bearers, directors or key functionaries, as an identification document. In case of a foreigner, they must provide a copy of the passport or the Overseas Citizen of India card for identification.

The purpose of this amendment appears to be two-fold,
• The Government to have a database of who are the persons in control of organizations receiving foreign contributions and
• To further promote the popularity and usage of the Aadhaar card.

Restrictions on utilization of foreign contribution?

Previously, The government had the power to restrict a registered person from the utilization of funds or unreceived funds pending inquiry, but the same powers were missing in the case of those persons who had prior permission under FCRA.

The Amendment adds that the government may also restrict usage of unutilized foreign contribution for persons who have been granted prior permission to receive such contribution.

Practical issues NGO’s are going to face due to the FCRA Amendment Act, 2020

  • Generally NGO’s at grass roots level are tied up with larger NGO’s in cities to implement social programmes with the help of their social workers, these NGO’s wont have the bandwidth to reach out to foreign funding agencies directly to procure funds.
  • NGO’s in receipt of FCRA funds now have to look at engaging the social workers directly instead of outsourcing the same to other NGO’s to implement their plans. This can create practical issues like coordination and staffing requirements.
  • Reduction of administrative expenses from 50% to 20% can adversely affect livelihood of many grassroot level social workers, activists, researchers, and other professionals in the social sector who are already underpaid. Lower payments can further drive away from social sector to other lucrative opportunities.

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