FCRA 2010 to 2020: Foreign Contribution Act evolution

The Foreign Contribution (Regulation) Amendment Bill, 2020 was introduced in Lok Sabha on September 20, 2020. The Bill amends the Foreign Contribution (Regulation) Act, 2010.

About Foreign Contribution (Regulation) Amendment Bill, 2020

Before we discuss the topic we have to know What is FCRA? It is an act of Parliament enacted in 1976 and amended in 2010 to regulate foreign donations and to ensure that such contributions do not adversely affect internal security.

The Act regulates the acceptance and utilisation of foreign contribution by individuals, associations and companies. Foreign contribution is the donation or transfer of any currency, security or article (of beyond a specified value) by a foreign source. It is applicable to all associations, groups and NGOs which intend to receive foreign donations.

Members of the legislature and political parties, government officials, judges and media persons are prohibited from receiving any foreign contribution. However, in 2017 the FCRA was amended through the Finance Bill to allow political parties to receive funds from the Indian subsidiary of a foreign company or a foreign company in which an Indian holds 50% or more shares.

It is mandatory for all such NGOs to register themselves under the FCRA. The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms. Registered associations can receive foreign contributions for social, educational, religious, economic and cultural purposes. Filing of annual returns on the lines of Income Tax is compulsory.

Key provisions of Foreign Contribution Regulation (Amendment) Bill 2020

Prohibition to accept foreign contribution: Under the Act, certain persons are prohibited to accept any foreign contribution. These include: election candidates, editor or publisher of a newspaper, judges, government servants, members of any legislature, and political parties, among others.

Transfer of foreign contribution: Under the Act, foreign contribution cannot be transferred to any other person unless such person is also registered to accept foreign contribution (or has obtained prior permission under the Act to obtain foreign contribution).

Aadhaar for registration: The Act states that a person may accept foreign contribution if they have: (i) obtained a certificate of registration from central government, or (ii) not registered, but obtained prior permission from the government to accept foreign contribution.

FCRA account: Under the Act, a registered person must accept foreign contribution only in a single branch of a scheduled bank specified by them. However, they may open more accounts in other banks for utilisation of the contribution.

Restriction in utilisation of foreign contribution: Under the Act, if a person accepting foreign contribution is found guilty of violating any provisions of the Act or the Foreign Contribution (Regulation) Act, 1976, the unutilised or unreceived foreign contribution may be utilised or received, only with the prior approval of the central government.

Renewal of license: Under the Act, every person who has been given a certificate of registration must renew the certificate within six months of expiration. The Bill provides that the government may conduct an inquiry before renewing the certificate to ensure that the person making the application: (i) is not fictitious or benami, (ii) has not been prosecuted or convicted for creating communal tension or indulging in activities aimed at religious conversion, and (iii) has not been found guilty of diversion or misutilisation of funds, among others conditions.

Reduction in use of foreign contribution for administrative purposes: Under the Act, a person who receives foreign contribution must use it only for the purpose for which the contribution is received. Further, they must not use more than 50% of the contribution for meeting administrative expenses. The Bill reduces this limit to 20%.

Surrender of certificate: The Bill adds a provision allowing the central government to permit a person to surrender their registration certificate. The government may do so if, post an inquiry, it is satisfied that such person has not contravened any provisions of the Act, and the management of its foreign contribution (and related assets) has been vested in an authority prescribed by the government.

Suspension of registration: Under the Act, the government may suspend the registration of a person for a period not exceeding 180 days. The Bill adds that such suspension may be extended up to an additional 180 days.

Issues and need for such amendments

To monitor Misuse of funds: In Parliament, the government alleged that foreign money was being used for religious conversions. For instance, in 2017, the government barred American Christian charity, Compassion International.

To prevent loss to the GDP: An official report quantifying the GDP losses allegedly caused by environmental NGOs was prepared during NPA period, indicating a foreign conspiracy against India.

To enhance transparency and accountability: The annual inflow of foreign contribution has almost doubled between the years 2010 and 2019, but many recipients of foreign contribution have not utilised the same for the purpose for which they were registered or granted prior permission under the said Act.

To regulate NGO’s: Many persons were not adhering to statutory compliances such as submission of annual returns and maintenance of proper accounts.