I. When is FCRA Registration required?
Foreign contribution, in layman’s terms means any donation made from a foreign source to an Indian entity. Such entities are required to either receive permission or register with the Ministry of Home Affairs prior to accepting any foreign contribution[1] as defined under the Foreign Contribution (Regulation) Act, 2010 (“FCRA”).
The FCRA does not apply if any consideration (whether monetary, services, or shares etc.) is shared in the lieu of goods or services rendered in India by a person.[2] Such activities may be governed by other applicable laws (such as tax) and may be conducted without acquiring prior permission/registration under the FCRA. To avoid any FCRA implications it is recommended that whenever you receive funds from a foreign source in lieu of goods or services, it should be by means of written contract in which your deliverables and charges are clearly spelled out.
II. Who can receive foreign contribution?
Any “person” can receive foreign contribution under the FCRA, subject to following conditions:[3]
1. It must have a definite cultural, economic, educational, religious or social programme;
2. It must obtain the FCRA registration/prior permission from the Ministry of Home Affairs;
3. It must not be prohibited under Section 3 of FCRA. Such section prohibits certain persons from accepting foreign contributions. Such persons include election candidates, judges and government servants/employees, news correspondents, cartoonists and owner/publisher of registered newspapers.
A “person” under the FCRA means: (i) an individual; (ii) a Hindu undivided family; (iii) an association (i.e. any association of individuals, whether incorporated or not, having an office in India and includes a society[4]); or (iv) a company registered under section 25 of the Companies Act, 1956 (now Section 8 of Companies Act, 2013).[5]
III. How does a person obtain permission to accept foreign contribution?
Anyone desirous of receiving or accepting foreign contribution must seek permission from the Central Government of India. The Ministry of Home Affairs is the authority that grants, suspends, cancels and/or rejects any and all requests for FCRA permissions and registrations. Under the FCRA, there are 2 (two) methods of certification/registration to accept foreign contribution:
1. via FCRA Registration[6]; or
2. via Prior Permission[7].
The requirements and validity of each route is significantly different. In any case, the granting of either a registration or prior permission is subject to the discretion of the Ministry of Home Affairs.
IV. How to obtain an FCRA Registration?
In order to attain an FCRA registration, the concerned person must submit Form FC-3A (Application for FCRA Registration) to the Ministry of Home Affairs. Prior to making the FC-3A filing, please ensure that the following are acquired and/or compliances met[8]:
1. The applicant entity is at least 3 (three) years old and has undertaken reasonable activity in its chosen field for the benefit of the society for which the foreign contribution is proposed to be utilized. For this purpose, the association should have spent at least Rs.10,00,000/- (Rupees Ten Lakhs) over the last 3 (three) years on its aims and objects, excluding administrative expenditure. Additionally, statements of Income & Expenditure, duly audited by Chartered Accountant, for last 3 (three) years are to be submitted to substantiate that the applicant meets the financial parameter;
2. The applicant has opened a separate, dedicated FCR Account with a scheduled bank[9], i.e., a bank such as ICICI Bank, HDFC Bank, etc. This account cannot be used for receiving anything but foreign contribution;
3. The applicant has assigned the key functionaries and chief functionary of the organization. The term “chief functionary” has not been defined in the FCRA, however, the head of the organization may be construed as the chief functionary.[10] The organization may also designate any office bearer as the chief functionary through a general body/governing body resolution, for the purposes of filing the FCRA returns, forms etc.;
4. The applicant has acquired signed affidavits which have been attested by a notary public or 1st Class Magistrate; and
5. A PAN Card for the applicant entity.
The FC-3A form is an online filing, to be made via www.fcraonline.nic.in. As part of completing the filings, the applicant will have to upload scanned copies of the following documents, in the manner provided on the website:[11]
1. Self-certified copy of registration certificate of the Society or a copy of the trust deed or certificate of incorporation of the company (depending on the organization structure);
2. Self-certified copy of the relevant pages of the memorandum of association and/or articles of association, showing aims and objects of association;
3. Activity report for the last 3 (three) years;
4. Copies of the audited statements of the preceding 3 (three) years;
5. Copies of the annual report of the preceding 3 (three) years;
6. Bank Account Details:
7. number of the designated FCR account held with an authorized dealer bank; and
8. bank address and information.
9. Copy of PAN Card of the Society/Trust;
10. Details of the chief functionary;
11. Details of key functionaries;
12. Signed affidavits of each key functionary;
13. Images of chief functionary signature and seal of the association which are saved in JPG/JPEG format and available for uploading;
14. An application made for the grant of the registration shall be accompanied by a fee of Rs. 5000/- (Five Thousand rupees only).
Once uploaded and submitted, the Ministry of Home Affairs responds to the registration application within 90 (ninety) days from date of application[15]. No person shall prefer a second application for registration or prior permission within a period of 6 (six) months after submitting an application either for the grant of prior permission for the same project or for registration.[16] Every registration granted to a person under the FCRA shall be valid for a period of 5 (five) years from the date of its issue.[17]
[1] Section 12, Foreign Contribution (Regulation) Act, 2010.
[2] Rule 9(3), Foreign Contribution (Regulation) Rules, 2011.
[3] Rule 10, Foreign Contribution (Regulation) Rules, 2011.
V. How to obtain Prior Permission?
An organization in formative stage is not eligible for registration, considering that such organization shall not be able to produce the statements and financial documentation needed for registration. Such organization may apply for grant of prior permission under FCRA. Any person that is not registered with the Ministry of Home Affairs may receive foreign contribution only after obtaining prior permission from the Ministry.[12] Such prior permission shall be valid for the specific purpose for which it is obtained and from the specific source from whom the contribution is being accepted. In order to such permission, the concerned person must submit Form FC-3B (Application for Permission) with the Ministry of Home Affairs.
Prior to making the FC-3B filing, please ensure that the following are acquired and/or compliances met:[13]
- The applicant has opened a separate, dedicated FCR Account with a scheduled bank. This account cannot be used for receiving anything but foreign contribution;
- The applicant has assigned functionaries and designated the chief functionary of the organization;
- The applicant has acquired signed affidavits which have been attested by a notary public or 1st Class Magistrate; and
- A PAN Card for the applicant entity.
The FC-3B form is an online filing, to be made via www.fcraonline.nic.in. As part of completing the filings, the applicant will have to upload scanned copies of the following documents:[14]
- Self-certified copy of registration certificate of the Society or a copy of the Trust Deed or Certificate of Incorporation of the company (depending on the organization structure);
- Self-certified copy of the relevant pages of the memorandum of association and/or articles of association, showing aims and objects of association;
- Commitment letter from the donor organization and agreement for such donation;
- Project report for which the foreign contribution will be received;
- Bank Account Details:
- number of the designated FCR account held with an authorized dealer bank; and
- bank address and information.
- Copy of PAN Card of the applicant entity;
- Details of the chief functionary;
- Details of key functionaries;
- Signed affidavits of each key functionary;
- Images of chief functionary signature and Seal of the Association which are saved in JPG/JPEG format and available for uploading;
- An application made for the grant of prior permission shall be accompanied by a fee of Rs. 3000/- (Three Thousand rupees only).
Once uploaded and submitted, the Ministry of Home Affairs responds to the registration application within 90 (ninety) days from date of application[15]. No person shall prefer a second application for registration or prior permission within a period of 6 (six) months after submitting an application either for the grant of prior permission for the same project or for registration.[16] Every registration granted to a person under the FCRA shall be valid for a period of 5 (five) years from the date of its issue.[17]
VI. Concluding Remarks
The Ministry of Home Affairs has, of late, begun to scrutinize the foreign contribution reception and usage in India. In 2019, the Ministry has cancelled over 1,500 (one thousand and five hundred) FCRA Registrations[18] for violating the provisions of the FCRA and thereby it is in the interest of all persons – whether registered or provided with prior permission, to comply with the FCRA as strictly as possible.
This post has been authored by Darpan Singhi, Associate at Ikigai Law.
References –
[1] “Foreign Contribution” is defined under Section 2(h) of the Foreign Contribution (Regulation) Act, 2010 to mean: the donation, delivery or transfer made by any foreign source,—
(i) of any article, not being an article given to a person as a gift for his personal use, if the market value, in India, of such article, on the date of such gift, is not more than such sum as may be specified from time to time, by the Central Government by the rules made by it in this behalf;
(ii) of any currency, whether Indian or foreign;
(iii) of any security as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956(42 of 1956) and includes any foreign security as defined in clause (o) of section 2 of the Foreign Exchange Management Act, 1999(42 of 1999).
Explanation 1.— A donation, delivery or transfer of any article, currency or foreign security referred to in this clause by any person who has received it from any foreign source, either directly or through one or more persons, shall also be deemed to be foreign contribution within the meaning of this clause.
Explanation 2.— The interest accrued on the foreign contribution deposited in any bank referred to in sub-section (1) of section 17 or any other income derived from the foreign contribution or interest thereon shall also be deemed to be foreign contribution within the meaning of this clause.
Explanation 3.—Any amount received, by any person from any foreign source in India, by way of fee (including fees charged by an educational institution in India from foreign student) or towards cost in lieu of goods or services rendered by such person in the ordinary course of his business, trade or commerce whether within India or outside India or any contribution received from an agent of a foreign source towards such fee or cost shall be excluded from the definition of foreign contribution within the meaning of this clause.
[2] Section 4(a), Foreign Contribution (Regulation) Act, 2010; Section 4(b), Foreign Contribution (Regulation) Act, 2010.
[3] Section 3, Foreign Contribution (Regulation) Act, 2010.
[4] Section 2(a), Foreign Contribution (Regulation) Act, 2010.
[5] Section 2(m), Foreign Contribution (Regulation) Act, 2010.
[6] Section 11(1), Foreign Contribution (Regulation) Act, 2010.
[7] Section 11(2), Foreign Contribution (Regulation) Act, 2010.
[8]Ministry of Home Affairs, “FC-3 Required Documents”, https://fcraonline.nic.in/Home/Fc3_requiredDoc.aspx.
[9] Rule 9(1)(d), Foreign Contribution (Regulation) Rules, 2011.
[10] Financial Management Services Foundation & CPA Services Pvt. Ltd., “Audit & Filing of Return”, http://www.fcraforngos.org/audit.htm.
[11] Ministry of Home Affairs, “FC-3 Required Documents”, https://fcraonline.nic.in/Home/Fc3_requiredDoc.aspx.
[12] Section 11(b), Foreign Contribution (Regulation) Act, 2010.
[13] Ministry of Home Affairs, “FC-3 Required Documents”, https://fcraonline.nic.in/Home/Fc3_requiredDoc.aspx.
[14] Ministry of Home Affairs, “FC-3 Required Documents”, https://fcraonline.nic.in/Home/Fc3_requiredDoc.aspx; See, IndiaFilings, “Eligibility & Application Procedure”, https://www.indiafilings.com/learn/fcra-registration-for-trusts-and-ngos/.
[15] Section 12, Foreign Contribution (Regulation) Act, 2010.
[16] Rule 9(3), Foreign Contribution (Regulation) Rules, 2011.
[17] Rule 10, Foreign Contribution (Regulation) Rules, 2011.
[18] Ministry of Home Affairs, “Registration Cancelled List”, https://fcraonline.nic.in/fc8_cancel_query.aspx.
