PRESENTATION ON FCRA

OVERVIEW
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FCRA

 History
 Evolution
 Purpose
 FCRA in Other Countries
 Funds
 Formalities
 Concerns
 For Associations
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FCRA - HISTORY
 1956: Niyogi Committee Report
 1967: Newsweek and New York Times
 1967: Debate in Lok Sabha
 1969: Government promises FCRA
 1973: FCRA bill introduced
 1974: Referred to JPC – Joint
Parliamentary Committee
 1976: JPC final report
 1976: FCRA Act passed
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FCRA - EVOLUTION
 Niyogi Committee: focus on missionaries
 Lok Sabha debate: focus on politicians
 1976 law: Focus on politics
 1982-87: Kudal Commission
 1984 amendment: extended to NGOs –
concern: involvement in politics
 2005: FCMC Bill 2005
 2006: FCRA Bill 2006
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PURPOSE

 Prevent Foreign influence on:

 National electoral politics
 National media
 National establishments
 Restriction of terror funds not an
objective

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FCRA IN OTHER COUNTRIES

 27 countries have FCRA or look-alikes

 Most focus on foreign funding of
elections
 USA, UK, Germany,….
 Some extend to regulation of NGOs
 Bangladesh, Russia, Uzbekistan, Peru,
Brazil
 Some control NGOs through alternate
means
 China, Nepal, Pakistan
 Perspective difference between givers
and takers
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FCRA FUNDS

 38,374 registered NPOs/associations

(30-Oct-2009)
 18,796 NGOs filed FC-3 for 07-08
 Reported receipt of Rs.9,663 Crore
 USA: 30%
 Funds growing at 12.8% annually since
92-93

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TOP 3 RECEIVERS

 World Vision of India, Chennai,

TN: Rs.212 Cr.
 Rural Development Trust,
Ananthapur,
Andhra: Rs.125 Cr.
 Believers Church India,
Pathanamthitta,
Kerala: Rs.102 Cr.
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TOP 3 DONORS

 World Vision
International, USA:
Rs.578 Cr.
 Gospel for Asia,
USA: Rs.365 Cr.
 Fundacion Vincent
E. Ferrer, Spain:
Rs.248 Cr.
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WHAT IS FOREIGN
CONTRIBUTION?
 Foreign contribution =
Funds/ material/ shares
received from a foreign
source [Sec 2(1)(c)]
 Manner of delivery / transfer
 Any form – donation, delivery or
transfer
 Any Currency – Indian or foreign
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FOREIGN SOURCE-1

 Defined u/s Sec 2(1)(e)

 Any source under control of foreigners is
a foreign source.
 Some examples of foreign sources (
AccountAble 41)
 Multi-lateral agencies are not a foreign
source (AccountAble 40)

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FOREIGN SOURCE-2
 Individuals of Foreign nationality
(citizenship)
 Concept of NRI/ PIO
 Foreigner living in India
 Government of a foreign country
 International Agencies (except UN Org.)
 Foreign NPOs
 Trusts, Foundations, Societies, Clubs,
Corporations, Trade Unions
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FOREIGN SOURCE-3

 Business Organizations
 Foreign company, Subsidiary of a
foreign company, Foreign corporation,
Multi-national corporation, Company
controlled by foreigners
 Concept of foreign company/ MNC
 Status of Indian organizations registered
abroad
 Determining shareholding pattern
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SIX TYPES OF RECEIVERS
 Categories of Receivers - section 6(1),
(1A)
1. Political parties
2. Organizations of a political nature
3. Individuals in public life
4. NGOs/ NPOs
5. Private individuals
6. Business organizations
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COVERAG
E
 Covers all associations with a definite
program – CEERS
 Association of individuals
 Registered or un-registered
 Office in India
 Includes Society and any other forms of
organisation

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FCRA OPTIONS

 Permanent Registration
 Prior-permission
 Legal Holder?
 Scholarship, stipend or any payment
of a like nature (individuals)
 File FC-5, if fellowship/ stipend >
Rs.36,000 per annum

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 18 FCRA FORMALITIES FOR
NGOS-1
 Registration (AccountAble 42)
 Should be > 3 years old
 Takes ~6-8 months
 Apply in form FC-8 (AccountAble 26)
 Presentation on online Filing of FC-8
 Online application for FCRA Registration
http://www.mha.nic.in/fcraweb/fc_login.
aspx

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 19 FCRA FORMALITIES
FOR NGOS-2
 Prior-permission (AccountAble 33)
 Takes 3-4 months
 Apply in form FC-1A (AccountAble 19)
 Must file on-line application
 Presentation on online Filing of FC-1A
 Online application for FCRA prior-
permission
http://www.mha.nic.in/fcraweb/fc_login.
aspx
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KEY LIMITATIONS UNDER
FCRA
 All ‘organisations with a definite
program’ need FCRA to receive
foreign funds.
 FCRA funds always remain FC
 Can be passed on to other FCRA
organisations only
 FCRA organisations cannot engage
in politics or political activities
 Publication of newsletters
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REQUIREMENT FOR NGOS
 Funds in designated FCRA bank
account
 Project/Donor-wise Bank account?
 AccountAble 22

 Maintain separate set of account

books
 Project/Donor-wise Cash Book?
 AccountAble 22
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REPORTING BY NGOS

 Must maintain Form FC-6

 For contribution in kind
 AccountAble 58
 Must file annual return in Form FC-3
by Dec 31
 Whether FC received or Not
 Option for on-line filing of FC-3
 AccountAble 21 Form FC-3
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 MULTIPLE FCRA BANK
ACCOUNTS
 Various practices
 Show-cause notice issued when discovered
 May lead to violation of section 6 (
CROSS case)
 Legal Position:
 Not permitted under present FCRA rule 8(1)(b)
 Permission granted for secondary accounts on a
case-by-case basis, where sufficient reason
shown
 FCRA Bill 2006 allows multiple secondary bank
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 CHANGE OF FCRA BANK
 Is permitted, if supported by reasons
 Use an existing account or a new one
 Need to apply to Ministry for
permission
 Application to MHA
 Fresh letter of registration issued,
with new Bank Account Number
 Takes 1-3 months
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 Detailed procedure in AccountAble 14
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 CHANGE IN NAME &
ADDRESS
 Need to report in the change of
Name and address of Association
 Within 30 days
 Need to apply to Ministry for
permission
 Application to MHA
 Fresh certificate with changed address
and name
 Takes 1-3 months
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 SHADOW-LENDING
 Not allowed under FCRA
 Still in many cases funds passed on
 Discovery leads to show-cause notice
and nuisance
 FCRA rarely cancelled
 More common among networks
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 SHADOW-LENDING - 2

 Methods used:
 Legal holder
 Consultancy agreement
 Transacting in cash
 Showing CF as employee
 Out of innocent error

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 SHADOW-LENDING:
WEAKNESSES
 Legally untenable
 Vulnerability:
 Weak paper-work
 Dissatisfied employees
 Dissatisfied network members
 Ignorance of law

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 SHADOW-LENDING:
AUDIT ISSUES
 Audit of third-party vouchers –
logistical issues
 Sec. 23 of FCRA: whether CA liable as
advisers

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FCRA BILL 2006

 FCRA Bill tabled in Rajya Sabha in Dec

ember 2006
 Bill to replace existing FCRA once
passed
 Current status:
Recommendation/ Report given by P
arliamentary Standing Committee

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 REFERENCE MATERIAL
31

 AccountAble 22: Mysteries of FCRA

 AccountAble 19: Form FC-1A; 33: Prior-permission
 AccountAble 26: Form FC-8; 42: FCRA Registration
 AccountAble 21: Form FC-3
 AccountAble 20: Filling up FC 3 -Basic
 AccountAble 72, 73: Intricacies of FC-3: Part 1 & 2
 AccountAble 84: Foreign Source in FCRA
 AccountAble 35: Fellowship; 27: Form FC-5
 AccountAble 58: Maintaining FC-6; 28: Form FC-6
 AccountAble 29: FCRA Penalties
 AccountAble 116: History of FCRA
 AccountAble 122-126; 127-128: Analysis on FCRA Bill 2006
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Thank you!

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